3PL EDI 101: EDI Basics for 3PLs and 4PLs, Plus EDI Advantages for Business

Learn how EDI works for 3PLs and 4PLs, and why companies within the retail and retail supply chain industry use it to help automate, improve and speed up their order management and other processes. Explore the benefits of EDI for your 3PL business, how it can help you work better with other businesses use it and browse the types of documents that EDI automates.

What is EDI?

EDI Connection Concept

EDI is an abbreviation for electronic data interchange.

Using EDI, 3PLs and 4PLs can send information digitally from one business system to another using a standardized format. Some of the types of business systems that EDI can connect together include ERP, WMS, accounting software, shipping solutions and more.

With EDI, you can exchange digital information and document with your retailers, suppliers and other partners for exceptional accuracy and speed of communication. For example, you can send and receive purchase orders, invoices, advanced ship notices, inventory inquiries and other transactions digitally through EDI.

EDI transforms order processes, transactions and communications that have previously been accomplished with paper, fax or email into a digital operation. It’s a crucial step toward automation of important business processes.

How does EDI work for 3PLs? Why is it important in today’s retail landscape?

EDI eliminates the need for faxing, phoning and emailing about orders and transactions for greater speed and accuracy. It also ensures that all of your business systems (and those of your trading partners) are speaking the same language.

EDI Exchange Example

An example of how EDI works for 3PLs:

The customer creates a digital purchase order in whichever system they usually use. The EDI solution works behind the scenes then to create an EDI version of that purchase order (EDI 850) and sends it to you automatically.

Even though your customer is likely using different technology than you are, your order system will be able to accurately decipher and quickly receive the order information, since it’s all been translated into a standardized format.

You can then send back a purchase order acknowledgment that the order was received (EDI 997). After the order is ready to ship, you can send an advanced shipping notice (ASN or EDI 856). Once the transaction is wrapped up, you do your usual process for invoicing, and EDI will translate it into a digital invoice (EDI 810) requesting payment for the retailer’s order.

Benefits of EDI for 3PLs and 4PLs

EDI provides the foundation for third-party logistics and fourth-party logistics providers to pursue the automated order processing and inventory management capabilities that help their business scale and thrive. It’s worth noting that more and more retailers and suppliers are asking all of their trading partners to be EDI capable. It’s for good reasons all around, though – EDI is proven to streamline workflows within an organization, improve trading partner relationships and enhance supply chain predictability.

Reduce manual processes and errors.

Every manual data entry point slows down your processes. Additionally, every keystroke performed by human hands is a chance for potentially expensive errors. EDI can reduce or eliminate manual data entry needs.

EDI is cheaper than paper.

Each transaction conveyed by email, fax or phone calls can cost $70 or more per transaction. Electronic transactions via EDI can cost less than a dollar to process, without the errors.

Increase predictability and performance.

Once you’re able to more accurately scrutinize your business needs thanks to the clarity offered by EDI automation, you can use the knowledge to make positive changes to internal processes.

Improved forecasts from precise data.

When the data in the documents you’re using to create forecasts paint a more accurate picture of what’s going on in your business, you can make better choices and service offering decisions.

Better control your margins.

Manual processes can be hard to anticipate; automation is predictable and reliable. Automation not only helps you control margins, but it can also be monetized as part of the services you offer to your customers.

Free up valuable resources.

After more of your processes have been automated via EDI solutions, you tend to end up with staff and resources that can be redirected to more strategic efforts that could help your business grow.

Gain the ability to say “Yes”

“SPS is the solution behind the streamlined processes and automated accuracy that make our customer experiences so exceptional. They also give us the flexibility to grow our customer relationships to embrace new retail opportunities, such as the drop shipping capabilities, that we quickly made part of our offering.”

Lynn Schwartz, Director of Account Management, Christopher Morgan

Getting started with EDI?

If you’re new to EDI, you can either outsource your EDI operations to a provider or invest in your own on-premise system. It’s clear by the table below that outsourcing to the right EDI provider takes most of the work off your shoulders – and much of the costs, too.

Onsite In-House EDI

Q

Requires software installation and updates

Q

Requires hardware installation and updates

Q

Requires knowledgeable staff in-house for maintenance and updates

Q

Requires ongoing support and investment to preserve EDI capabilities as the business evolves

Q

You must develop and maintain maps and requirements for each trading partner connection

Outsourced Cloud-Based EDI

R

Requires no software on your end.

R

Requires no hardware on your end.

R

Dedicated staff maintains the system and updates for you

R

Your managed service provider carries out all ongoing support to preserve your EDI capabilities as your business evolves

R

When your trading partner EDI maps or specifications change, your EDI provider makes all the changes so there’s no disruption to your workflow.

How can SPS Commerce help your supplier, vendor or distributor business reach its goals?

SPS is more than an EDI provider. Our retail supply chain technology solutions can help your business automate, scale and grow with four key components:

Fulfillment EDI

Fulfillment (EDI)

Break down the silos between your different business systems, including e-commerce solution, ERP, WMS, accounting software and more to speed up processes and reduce manual data entry with Fulfillment.

Learn More

Assortment

Assortment

Meet customers’ and consumers’ growing demand to access more product information across all shopping channels. Exchange accurate and detailed product information with the SPS Assortment solution.

Learn More

Analytics

Analytics

Turn data into meaningful insights so you can win across all your channels. Uncover the insights you need to optimize inventory and trading partner performance with Analytics.

Learn More

Sourcing & Retail Network

Sourcing & Retail Network

Easily find, evaluate and onboard high-quality suppliers and brands to grow assortment. Get the right products from EDI-enabled trading partners in the industry’s leading Retail Network community and Sourcing platform.

Learn More

Serve multiple channels, faster and easier

“The mix has certainly changed. We still do a lot of brick- and-mortar-based order fulfillment, but along with that we are doing a lot of ship to store and drop shipping. Having SPS as a partner has really enabled us to serve all those different channels without having to reinvent the wheel.”

George Hynes, President at Logistic Edge

Additional 3PL EDI Resources

Enter a virtual library of information about EDI for 3PLs, 4PLs and carrier service providers to give you with the product knowledge you need to power your business.

Ultimate List of EDI Transactions

Here are some of the most common documents and transactions that are supported through EDI automation.

See the Ultimate List

EDI Glossary

Terminology including retail definitions, order management models, supply chain roles, software and distribution channels.

What’s the Word

Free EDI RFP Template

Use our EDI request for proposal (RFP) template to identify your company’s requirements for an EDI solution and evaluate potential solution providers.

Get My Free Template

EDI for 3PLs, 4PLs and Carriers

Discover how leading 3PLs are serving their customers better with 3PL EDI solutions from SPS Commerce.

EDI for 3PLs

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