by Oliver Schmid / 4954 IT Consulting, LLC

Outsourcing EDI  is increasingly being chosen by companies of all sizes who engage  in EDI.   Suppliers are put under pressure from their customers to adopt EDI, but find that they are investing resources and money into, which may for the organizationa non-value-adding activity, while negatively impacting  the core business.  Even companies who come willingly to EDI are often put off by the extra resources and technical expertise it demands.

There are EDI Standards that have to be learned like ANSIX12, EDIFACT or XML and knowledge has to be maintained, since structure of these EDI standards changes all the time, as well as customers often change their internal standards and usually is your responsibility to stay up-to-date on these changes.  In addition EDI translation maps for your various trading partners (TP) need to be developed and maintained.

Learning and maintaining those standards, developing and maintaining TP maps on an ongoing bases,  plus the acquisition of an internal EDI Solution (Translator, Hardware) can be expensive.  To setup an in-house EDI System you need:

  • EDI Translation Software – The low end packages are a few thousand dollars and they go up from there. And usually you get what you pay for.
  • EDI VAN Services – A few hundred dollars to set up and monthly charges based on volume. And volume may go up quick, since a trading partner not only sends you an order (ANSIX12 – 850), but wants in return a “Functional Acknowledgement (ANSIX12 – 997). These are already two transactions for one order. The next thing a TP usually will require from you to be send is an EDI Invoice (ANSIX12 – 810) and you will in return receive a Functional Acknowledgement back. And already we are at four transactions just for one order. Transactions that may follow down the road are Advanced Ship Notices  (ANSIX12 – 856) (which are by the way one of the most difficult transactions to setup and to satisfy), Change Order Request (ANSIX12 – 860), etc.. And anytime you are not able to trade these documents in a timely and for your customer satisfactory condition you will get hit  with a Charge-back, which someday will be a complete Blog Subject of its own.
  • EDI Integration with your Business Software (Your ERP Solution or accounting package)  and this can be expensive. Even most EDI Packages today claim to seamlessly integrate with the major back-end systems, some customization is usually required and depend on your needs and your customers requirements.
  • EDI Technical Staff – You will need at least one technical person to set up the EDI Translation Software and integrate with your back-end system. This person will not only need to understand the technical challenges your business has on top of all the EDI requirements from your trading partners and of course the systems and software involved.
  • EDI Coordinator – At least one person, which will oversee the day to day operations of your EDI system to insure all your documents are flowing in and out of your systems  correctly and in a timely manner. This person is usually also the direct contact for your trading partners in case anything goes wrong on your end or your trading partners end and coordinates the resolution.

Summary: There will be some significant upfront cost and investments, as well as some ongoing investments in staff and operations to maintain an In-house EDI System.  This does not mean that you should outsource your EDI Operations at all cost, but you definitely should perform a detailed cost benefit analysis to see what makes most sense to you.

email: oliver.schmid@4954itc.com

Phone: +1-770-776-6182

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