In Mexico, Electronic Data Interchange or EDI is a methodology with growing acceptance, adopted in the business strategies of companies. The main objective is to open or increase the electronic channels of marketing for their goods or services with their business partners.
EDI methodology enables the business relationship between two or more entities to send and receive standardized electronic documents. These documents contain business information such as:
- Purchase order
- Advanced Shipping Notice / ASN
- Demand Planning / Forecast
among other business transactions that are basic and necessary to accomplish E-Commerce between companies.
The main characteristic and strength of EDI relies on the standardization or normalization of transactions, since the use of predefined messages to enable transactions between business partners, facilitates the implementation of EDI methodology. However, some companies that venture to EDI integration, use or create customized messages or transactions without knowing or adopting the standardized choices, which hinders their integrations and easy market adaptation.
The key to a correct integration is the analysis and selection of the right standard to use in the electronic messages. There are countless EDI standards whose regulations and effectiveness are widely supported by international organizations in the EDI world. Two of the most widely used standards worldwide are:
In Mexico, retail and automotive industries lead the business process automations and use the EDI as an ally. To establish a business relationship, international automotive companies operating in our country, request their providers an EDI integration. From 2014 to date the automation in the automotive industry has been considered optional, however, as time passes and processes mature, EDI integration becomes more necessary to such a degree that in a few years from now, it will be mandatory for integrating new providers.
The advantages of the automotive industry are its maturity, the very little variation in the EDI standard they use, as well as its transactions. For example, he most common transactions between business partners in the sector are:
- Firm Order
On the other hand, in the retail sector one of the business processes with most demand is, in fact, EDI integration. Business chains from this sector operating in Mexico use X12, EDIFACT and some of them even began with customized messages as their standards.
Message group and transactional set are also highly customizable, some retailers are able to automate up to 11 business transactions with Electronic Data Interchange, while others only automate the essential business transactions to perform E-Commerce.
The essential transactions for B2B/EDI in the retail sector are:
- Purchase Order
- Receiving Advice
- CFDI (electronic invoice)
Retail sector suppliers are facing a certainly difficult challenge since, generally each retail company carries out a customization of their messages, which requires them to have an EDI expert for a correct implementation.
Other sectors that use EDI integrations are:
- Shipping/Parcel services
- Customs and logistics processes
EDI Service Bureau (EDI Integration and Services provider)
EDI service bureaus are third party companies that provide electronic transaction and integration automation services.
EDI Integration via service bureau is a viable option for companies that don’t have the operative strategy of allocating resources to develop the Electronic Data Interchange themselves.
The correct use of EDI implementation through outsourcing is an increasingly common strategy among national companies. The key to a well used outsourcing is in the adequate dimensioning of the integration.
Starting with integrations which are more valuable to the company and gradually integrating the rest of the business partners, allows the outsourcing to be a more viable integration option that adds even more value, both economically and operationally.
Communication channels for electronic file transmission between companies.
Communication process and Workflow represent the 50% in an EDI Integration. Integrations are divided into two main processes:
- Interpretation / File Mapping
- Process of interpreting the electronic messates that are sent and received by business partnerss
- Communication Channel / Workflow
- Communication Channel and Workflow that the interpreted information will follow in the electronic interchange
Now, regarding the communication channel, we can affirm that it plays a very important role in the work methodology, since choosing the communications, establishing a good operative and support plan to communicate with their business partners is vitally important for the EDI to succeed.
The most common communication methods are:
Companies must bear in mind that both the interpretation of a document, as well as the fact of keeping a communication channel open all the time, take on the same level of importance.
In addition to establishing a communication channel we have the document workflow, this workflow represents an important technological process in the integration of the EDI methodology; this is where it is indicated what is going to happen with a transmission within the operating process, for example, if a backup or a copy of a certain file is desired, we must define whether the information will be inserted into a database; if an extraction process is created to the system to create the document, as well as establishing if a process of uploading information to the system is created, and so on. This workflow represents the information sent or received through the operational process and this is achieved by connecting the systems or satellites involved in the process.
VAN / Value Added Network
VANs or Value Added Networks are a interesting option for companies when performing EDI with a significant volume of transactions with their business partners. These networks are communication services provided by third parties that enable the companies to create stable communication channels and scalable, robust and simple transactions with their business partners.
The communication service is outsourced by delegating the responsibility of communicating and transacting with business partners to a third party. The VAN provider has the infrastructure, systems, and even the staff to carry out communications and document transfers. This option is also very attractive when you do not want to grow the infrastructure or the internal personnel that support and operate the company’s communication channels; it also helps to standardize the incoming and outgoing means, due to the fact that the only communication between the company and its business partners is through said provider, who is in charge of connecting the company with all business partners through a “virtual mailbox” in which companies leave and take electronic files to exchange.
In short, a VAN optimizes connections and collaboration with business partners for all B2B transactions exchange. Its supporting technology includes X12, EDIFACT, XML and WS. One of the most widely accepted and supported VAN options worldwide is Sterling B2B, IBM’s VAN
Current situation of EDI in Mexico
By 2005, the methodology began to gain relevance and occupy a place at the work table of Mexican companies, which opened up new operating options in their processes. The companies that were in the dilemma of joining the EDI / B2B wave or not were those that did business with international companies, and the decision was made based on the economic investment to be made, combined with the number of business integrations to be achieved.
This type of company, that had the vision to be the spearhead in technological innovation, jumped on the EDI wave without hesitation and set the trend to those who didn’t want to fall behind; however, a large number of companies didn’t accept the challenge and kept the traditional operations in paper or electronic format and office tools. Pioneering companies in this area are, in short, those that currently set the standard in terms of standards and communication channels, in addition to already having robust EDI/B2B systems and, not least, they opened the doors to the international market with these capabilities.
In the third quarter of 2020, the global situation of the pandemic has forced many companies to seek new alternatives to their transactions, and they find in the EDI / B2B integration a very important ally, which allows them to continue with their operations with the same or even greater efficiency in their business processes, so the standard has become a must in their short-term strategies. Now, convinced of the benefits and operational benefits of EDI / B2B integrations, they have realized many competitive advantages such as the elimination of interruptions and failures in communication, a total independence of human resources since the entire flow is automated from end to end, which as well guarantees the reliability of the information and the integrity of the data.
It should be noted that EDI or B2B is not coming to replace the management of the human relationship in the process. Quite the opposite, the B2B wants to facilitate and support with its technology the commercial and operational process, with new marketing channels and business processes more robust and efficient.
The challenge for companies still is the scarce knowledge of EDI in the market, the lack of guidance and human resources with expertise on the topic. All of these make internal exploration difficult for companies, which forces them to seek external support, but today companies have more options to integrate it, supported by companies or external service bureaus that have robust and reliable B2B systems.
Companies have more options to decide whether to make or buy in an EDI/B2B integration and whatever the decision they make to carry it out, they are concerned knowing that by 2025 more than 65% of the market will be operating assisted with commercial EDI / B2B technologies.
The last decision they took in 2005 to ride the wave or not changes importance and now the ultimate question is: When do I get on the EDI/B2B wave?