A Guide to EDI Protocols

Over 59% of businesses utilise some form of EDI. This number is only expected to grow in this global economy, as supply chains are rarely limited to just one region. There needs to be a unified form of EDI, and how your business implements EDI will depend on your chosen protocol. 

Your business’ needs, and the size and functionality of your supply chain, will largely influence this. It can be difficult — and confusing — to understand these differing protocols, as well as the strengths or weaknesses of each. Leveraging the benefits of EDI avoids the need to hire and train an in-house engineering team, saving you time and money. 

While EDI is critical to global supply chain management, implementing an EDI strategy has never been more complex — global supply chains and incompatible systems expose businesses to international and local risks, price shocks and logistical strain. 

A lack of an EDI strategy can lead to the following:

• Wasting time with inefficient data processes
• Exposing your business to multiple avoidable failure points  
• Increasing the chances of errors 
• Increasing the chance of missed or incorrect orders

This can impact your business’s revenue, reputation and future opportunities. 

EDI is essential to effective supply chain management, but the increasing complexity of EDI systems has only added additional complexity to global supply chains, costing your business time and money. Partnering with a third party, such as Data Interchange, effectively gives you a shortcut to this knowledge and experience, with over 30 years of experience working with messaging protocols, communication protocols and document exchange. This gives your business the benefits of a modern, consistent EDI strategy — without any learning or training required. 

Suggested reading: Check out our eBook, Agile Supply Chain, to learn more about how EDI can streamline your business.

Why should you rely on EDI? 

Electronic Data Interchange, or EDI, is crucial in any large-scale business operation, streamlining and automating processes to maximise output and reduce the risk of human error. EDI can streamline the transfer of sensitive information, such as invoicing or purchase orders. Over the last few decades, various EDI systems have standardised international trade. Using standardised protocols and best practices makes it possible to share information internationally without the need for local adaptation. 

There are four critical components to any EDI strategy:

• A translator or web form on the supply side.
• Data mapping between the translator and EDI system.
• A secure and reliable network or connection.
• Support and maintenance – with an understanding of the whole system. 

A shortfall of any EDI strategy takes the form of each step provided by a different company or service, introducing potential failure points to the system. Issues can arise if, for example, the support team needs to be re-trained when the data mapping software is updated. This can cost you valuable time and money in the search for consistency, making your supply chains less efficient and thus affecting your ability to respond to ever-rising customer expectations. A single provider like Data Interchange can cover the entire system from end to end, saving you money and providing a single contact point for all support and solutions.  

EDI effectively removes human ambiguity from data exchange, allowing computers across markets to communicate directly. Computers must use the same standard (some of which we’ll get into here) to exchange with each other, meaning the chosen protocol determines the success of any EDI implementation. Many businesses could streamline their relationship with trading partners by introducing EDI — making supply chains and the exchange of data more secure, reliable, and efficient. 

Pro tip: You can understand more about how EDI is transforming supply chains in our blog, 4 Challenges Facing the Logistics Industry and How to Overcome Them.

Types of EDI protocols

There are many EDI protocols suitable for any business. Choosing the correct type of protocol for your business use case is critical to the success of any EDI implementation. Let’s get into some of the main types of EDI protocol, and how to know if they’re right for you.

AS2

Walmart — the largest revenue earner in the United States¹ — uses AS2 across all retail. An evolution of the first AS protocol, AS2 allows messages to be sent across the internet using HTTP or HTTPS, and is one of the most widely deployed protocols. Using the same signing, encryption and MDN conventions as AS1 allows for maximum compatibility and offers many advantages as compared to standard HTTP, such as:

• Improved verification, as you can apply digital signatures to AS2 messages without using an HTTPS encryption.
• Heightened security, thanks mainly to its use of digital signatures and receipts. 
• Increased efficiency, as AS2 transactions and acknowledgements occur in real-time. 

Did you know? We’ve been predicting that digital signatures would be a major trend for EDI since 2021!

FTP

File Transfer Protocol — “FTP” — is a standardised network protocol for exchanging and manipulating files across the internet. Built on client-server architecture, it’s often used as an application component to transfer files for internal functions within a program. It is also a universal language for file transfer between computers and is often used privately for server hosting. FTP can be used with password authentication or allow anonymous access. There’s also an extension of FTP, known as FTPS, that adds support for additional security protocols. 

HTTP

HyperText Transfer Protocol — “HTTP” — is used primarily to request and transmit files, most often web pages or web page components. HTTP is part of the foundational backbone of the internet, allowing web browsers to act as clients while an application on the computer hosting the website acts as a server. It’s most often implemented across TCP or IP but can also be implemented on top of any other protocol. An evolution of this standard, HTTPS, combines HTTP and SSL protocols, providing encryption and secure identification of servers. HTTPS connections are helpful for payment transactions or for exchanging sensitive information between corporate systems. 

OFTP

Odette File Transfer Protocol or “OFTP” was developed as a standard communication platform for the European automotive industry in the 1980s. It’s subsequently been adopted across retail, manufacturing, transport and even some government operations. Comprising only 14 commands, OFTP is a simple-to-use EDI communications system, and its efficiency allows for large transmission windows. It does this by utilising file restart, data compression and security across point-to-point connections. OFTP2 is the latest version of this standard and has been designed to be used across the internet. While used primarily in Europe, this newest standard supports Chinese and Japanese character sets, helping it secure its place in international commerce with the potential to grow. 

Using the correct protocol for your organisation 

Identifying and implementing the correct protocol that matches the needs, scale and use case of your organisation can be difficult and even lead to a trial-and-error approach, where different systems are implemented that may negatively impact supply chains and workflows. When the right EDI process is implemented, your supply chain, data security and productivity can all run smoothly, but even the best tools still benefit from an expert operating them.

Ultimately, the benefits of EDI are too often obfuscated by complicated systems and an inaccessible set-up process. Global leaders depend on Data Interchange EDI solutions, including Volkswagen, Mitsubishi and others. We combine industry-leading products with the ease and simplicity of the cloud, reducing complexity and mitigating risk, enabling supplies to exchange standardised orders, invoices, and dispatch notifications using only a web browser. 

We enable you to integrate your supply chain partners — big or small — and quickly trade with thousands of global businesses, all while maintaining agility and the ability to scale. We simplify the onboarding of trading partners, and even migrate any existing EDI flow on your behalf so that you can focus on your business, allowing you to deliver on the simplicity of a modern and streamlined EDI strategy. To find out more, talk to an expert today and take the first step to seamless data transfers.

¹  The Biggest Employer in Every State | Nasdaq