Electronic Data Interchange (EDI) is the digital exchange of business documents between two companies. The information exchanged via this standardized electronic format includes purchase orders, invoices, and sensitive business information. Before the advent of EDI, companies needed to mail and fax paper documents as their main way of exchanging needed information. EDI replaces legacy, paper-based methods allowing businesses to improve operational efficiency, process transactions faster, and reduce errors. EDI greatly increases the speed at which information is exchanged.
Due to the rapidly evolving business landscape, it’s important for companies to stay updated with EDI trends. EDI in 2024 will prove to be transformative. Companies need to stay abreast of new EDI protocols and new security practices not only if they want to improve operational efficiency and remain competitive but also to maintain regulatory compliance.
Below we look at trends in EDI that will see continued growth for the industry in 2024.
Enhanced Integration Capabilities
Businesses have put an increased focus on improving their EDI integration capabilities to fully benefit from all that EDI has to offer including more streamlined business operations, access to data in real-time, and improved accuracy of data, all of which cultivate better relationships with trading partners. Improved integration capabilities expand the possibilities for businesses.
Robust EDI integrations are needed for seamless data flow not only to maintain data integrity but also to make informed decision-making based on up-to-date information. These integrations enable sharing data across a number of business applications including Customer Relationship Management (CRM) solutions and Enterprise Resource Planning (ERP) systems. They also improve data sharing in supply chain management systems.
Cloud-based EDI solutions and Managed EDI services contribute to enhanced integration in EDI processes because they allow companies to outsource these capabilities to trusted providers who specialize in EDI integration and maintenance and their associated complexities. Also, Application programming interfaces (APIs), blockchain technology, and data mapping and translation tools are also contributing to enhanced EDI integration.
AI and Machine Learning in EDI
Artificial Intelligence (AI) and machine learning (ML) are revolutionizing EDI processes. Both technologies allow companies to more efficiently handle large transaction volumes. ML models are able to analyze past EDI transaction data and make predictions about future trends and behaviors. AI algorithms can also identify common errors and make corrections leading to improved data accuracy.
Companies can use ML algorithms to analyze historical transaction data in EDI processes and identify patterns in the data mapping process. Data mapping is the basis for a particular company’s internal format to the standardized EDI format. AI can map data fields to the formats used by specific end recipients reducing the need for manual intervention.
Using ML algorithms in AI processes enables real-time error detection including incorrect or missing information. Additionally, ML can help identify the cause of errors to reduce their future occurrence. Predictive analytics can be used to help businesses optimize their cash flow and improve their financial planning.
Advanced Security Measures
According to Harvard Business Review, cyber risk is growing in part because the attack surface to carry out these threats has expanded. Additionally, cyber threats have increased in complexity. EDI systems transmit sensitive customer information and proprietary business information. Data security in EDI is important because companies need to comply with strict data protection regulations. Cyber attacks can lead to disruption, which is why data security is very important in maintaining business continuity.
There are several technologies and protocols being adopted to safeguard EDI transactions. End-to-end encryption is used to safeguard EDI transactions while in transit. Encryption at rest further ensures data is protected both on prem and in the cloud. End-to-end encryption is accomplished by using secure file transfer protocol (SFTP) and file transfer protocol secure (FTPS).
Access control policies coupled with multi-factor authentication (MFA) also help to safeguard EDI transactions. Using strong access control policies along with the principle of least privilege ensures that users only have the minimum level of access to perform their jobs. Individuals who do not need access to certain aspects of EDI processes aren’t granted and those who do need it have to follow up with MFA as an additional layer of security.
Cloud-Based EDI Solutions
There has been a shift towards cloud-based EDI solutions because they offer a more cost-effective alternative to hosting the needed infrastructure on-prem. Companies don’t need to buy and maintain hardware and software when they opt for cloud-based EDI solutions.
In addition, cloud-based EDI offers scalability and accessibility, and they’re also easier to deploy. As companies grow, cloud-based EDI solutions can easily accommodate increased transaction volumes. When companies opt for cloud-based EDI solutions, they no longer have to worry about many of the technical aspects of EDI processes. Cloud services enable improved disaster recovery compared to on-prem solutions. This allows companies to maintain business continuity if there is a system outage or some event resulting in data loss.
Blockchain Integration in EDI
The future of EDI will likely be blockchain-based. Integrating blockchain technology with EDI is an emerging trend that is gaining traction in part because it addresses some of the problems in current EDI systems. Due to its distributed ledger technology, blockchain enables tamper-proof transactions.
Blockchain can improve EDI processes by enabling enhanced security and improved transparency. Blockchain also improves data integrity because the data cannot be altered once recorded. Any employee who has permissioned access to the blockchain can view transaction records, thereby ensuring transparency. Even permissioned blockchains rely on consensus protocol. This further facilitates trust in trading partners involved on each side of an exchange in EDI processes. Smart contracts, which are agreements written into computer code, allow automatic execution of EDI agreements.
Eco-Friendly EDI Practices
EDI processes are green by default, simply due to eliminating the need for paper-based document exchange. Legacy EDI systems required higher operational expenditures devoted to excessive paper and printing.
Businesses are adopting environmentally friendly EDI practices as part of a larger push toward sustainability. One example of this is that businesses are choosing EDI providers who use energy-efficient data centers. Opting for cloud-based EDI solutions is eco-friendly because on-prem solutions have increased energy demands compared to the shared resources utilized in cloud-based solutions.
EDI allows for greater optimization of supply chain management. When inventory management and order processing are improved, waste related to the packaging process is also eliminated. EDI also reduces paper usage by facilitating electronic versions of previously paper-based purchase orders, invoices, and other documents.
Compliance with Evolving Regulations
Data privacy and regulatory requirements evolve regularly, and it’s important for companies to stay compliant with these changes. EDI systems handle sensitive data, which means companies face increased regulatory scrutiny and can be subject to penalties and fines if they fail to comply.
Multiple regulations and standards have an impact on EDI practices including General Data Protection Regulation (GDPR), Health Insurance Portability and Accountability (HIPAA), Electronic Fund Transfer Act (EFTA), and Payment Card Industry Data Security Standard (PCI DSS).
Vendor-Managed EDI Services
There is a growing trend among businesses to outsource EDI management to expert service providers particularly due to the numerous benefits vendor-managed EDI services offer. One important benefit is cost savings. By outsourcing EDI management, companies don’t have to pay a large, upfront investment in hardware, software, and additional staff specialized in EDI processes. Subscriptions also allow companies to scale up or down as needed allowing additional savings.
Another benefit of outsourcing EDI management is the expertise service providers offer. Service providers are staffed with specialists who understand industry standards and security protocols. They also stay informed about the latest industry trends and are knowledgeable about technology development and recent regulatory changes.
EDI and Supply Chain Optimization
EDI plays a vital role in supply chain optimization as it allows for improved communication. It also increases the speed by which documents are processed and overall enables fewer errors.
The increased accuracy and reduced time to exchange information increase the ability to maintain optimal inventory levels, leading to improved inventory management.
EDI processes capture valuable data. Companies can analyze this data using predictive analytics or machine learning to make more accurate predictions about what customer demand will look like in the future.
Conclusion
The key EDI trends expected in 2024 have many important implications for businesses. The upcoming year will usher in an increased shift toward cloud-based EDI solutions. This levels the playing field for smaller businesses who might lack the upfront resources for in-house solutions.
The integration EDI has with other critical business applications will likely improve as well. The use of AI and machine learning will continue. Additionally, blockchain-based solutions will become a more viable option as well. The number of businesses adopting eco-friendly EDI practices is likely to increase as the overall trend toward sustainability grows.
It’s important to stay informed in order to be better able to adapt to these trends to maintain a competitive advantage for your organization in 2024 and beyond.
Contact a REMEDI expert today to explore how our managed EDI services can increase your operational efficiency.
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