Understand the Difference between Vendor-Managed and Self-Managed EDI
October 22, 2020
Are you considering an electronic data interchange (EDI) solution? You'll need to determine whether you want to self-manage your EDI or have a provider manage it for you. We've outlined the difference between each of these options, so you have all the necessary information to make confident, informed decisions on your enterprise's behalf.
Let's start with the basics.
What is EDI, and why is it important?
EDI digitizes and streamlines business documents between business partners. It's a system that replaces mail, fax and email with another kind of electronic approach. It's where you and your business partners (think Walmart, Target and Amazon) exchange pertinent information regarding orders and shipments to ensure that both parties have the necessary information for a successful product shipment.
Why is this important? It's become the standard by which retailers and suppliers communicate and exchange information. For retailers, it's another confirmation that they're getting the right product, at the right time, specifically as they ordered it. It helps to eliminate fines and chargebacks for consumer goods suppliers simply because you know you're checking all the boxes you need to. You're giving the retailers what they need as they need it and providing all the necessary information along the way. It opens the doors of communication.
What do you do now?
As you begin to explore and evaluate the many EDI solutions out there, you'll soon realize a lot goes into that choice. You know your business better than anyone, so it's important you carefully consider which EDI solution makes sense for your enterprise.
The first thing to consider is whether you want to self-manage your EDI or enlist the support of an EDI service provider to manage it for you.
How do you know which EDI solution is best for you and your business?
Let's start by talking about how self-managed and vendor-managed EDI are different. A vendor-managed EDI service provider coordinates and manages everything for you. The vendor is responsible for all of it, including testing and transaction monitoring, creating and managing maps, offering technical support, scaling up or back as needed, and managing the communication network between your business and your vendors. Because you don't have to worry about EDI, using built-in, managed EDI can make you more efficient.
Let's say you work in the home goods industry, and your sales team brings a new account to the table. They may only do business via EDI. You've got one week to get them set up—EDI maps in place, tested and approved—before they plan to submit their first order. Wouldn't it be a huge relief to know that you have an EDI service provider that can onboard a new EDI account at a moment's notice? Similarly, as your EDI customers come out with new requirements, vendor-managed EDI gives you the peace of mind knowing your vendor has the experience and expertise to manage those requirements. It's also worth noting that equipment, licenses, and maintenance and IT staff are included in the managed EDI service package.
It's essential to consider each model's costs, including equipment and resources, as you may realize that self-managed EDI may be more expensive than the vendor-managed alternative. The Aptean Managed EDI model reduces hardware, software and training expenses associated with having the latest EDI technology. You also won't have to add IT or EDI resources as your business grows. Aptean Managed EDI services are based on a fixed payment schedule, meaning you'll know your expenses upfront. This enables you to manage costs and budget more effectively.
Additionally, suppose you've adjusted to this new direct to consumer (DTC) landscape. It's worth having some sort of EDI services as EDI helps you overcome DTC challenges and ensures you're meeting your vendor requirements. In terms of selecting the right EDI partner, it's essential to take the time to research your vendor options.
Depending on which option you choose, there's quite a bit that both self-managed and vendor-managed EDI services packages offer too. Both self-managed and vendor-managed EDI allow for automated data entry and streaming orders directly into the system. Inbound EDI 850 documents, which is basically a new order form, are automatically received into the system, processed, and created. Notifications are automatically sent to customer service teams and account managers to confirm whether or not there's anything they need to review and address. This could include pricing, payment terms or address discrepancy. If EDI 855 documents are a required response, they are automatically generated and sent.
Both self-managed and vendor-managed EDI service packages also improve shipping accuracy. You don't need staff to manually key orders into your ERP, which will increase overall processing and throughput time. Both EDI management solutions are updated with near real-time data, rapidly process information and provide a high level of compliance. Staff members don't have the opportunity to mis-key information because the information required for outbound documents are required to be captured as the orders are being processed through the distribution center, such as PRO/tracking numbers for EDI 856s. It comes down to whether or not you want to do this yourself, in-house, or if you'd like to utilize an EDI vendor's skills and expertise so that you can focus on other aspects of your business.
If you'd like to talk more about implementing EDI in your enterprise or using a managed EDI vendor, reach out to us. We'd love to help you identify the right solution for your company.