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What is SAP EDI?

Electronic Data Interchange is one of the well-known ways of exchanging business records and documents in a conventional electronic format (computer-to-computer). It does not require special arrangements, and business partners can share technical documents easily. Even SAP also allows creating EDIs. It is an Application Link Enabling (ALE) used to exchange business data among different systems with the SAP. In this article, you will learn about what SAP Electronic Data Interchange (EDI) is and its process, architecture, and benefits.

What is SAP EDI?

SAP EDI is a paperless electronic exchange of business transactions within different applications of a system. It is an industry-standard method that represents electronic documents. It enables document exchanging for internal transactions. Companies perform such processes where multiple companies are associated with a single parent company, to make the entire process automated. SAP aids EDI functionality through Intermediate documents (IDOCS).

Most EDI component comes with an Intermediate Document (IDoc) Interface that allows us to perform the following tasks:

  • Organizations use it for conveying messages (usually for outbound processing) like confirming and verifying orders through Electronic Data Interchange (EDI).
  • It also helps in receiving messages (usually for inbound processes) like sales and purchasing through EDI.
  • It also comes with an EDI converter responsible for converting Intermediate documents & the EDI format.

Earlier, the traditional approach for sending invoices, cheques, and other business documents, organizations had to use couriers, fax, or emails. With the advent of EDI systems, we can share or transfer documents efficiently over digital mediums from one organization to another organization.

What are outbound and inbound EDI processes in SAP?

There are two different processes in SAP. These are:

  • Outbound process: SAP users use this process for sending messages and data from the SAP system to any external system or individuals like a user, customer, vendor, or any organization. This process includes producing application document(s) and its following transformations into a standard record or document. The process also converts this intermediate document into an EDI-standard document format. This EDI-formatted document is then transmitted to the recipient. The recipient responds backs with a transmission status to the sending SAP system.
  • Inbound process: SAP users use this process for receiving information from any external system or individuals like a user, customer, vendor, or any organization. This process includes producing a receipt of any EDI document, which is again transformed into a standard record or document. This EDI-formatted document is then transformed into the application document that the SAP system processes after receiving it.

Architecture of EDI

The SAP EDI architecture consists of three main components. These are:

  • EDI-enabled applications: This component helps in providing auto-processing of trade and sales transactions.
  • The IDoc interface: It is an open interface that is having IDoc types. Also, it has some functional modules capable enough to structure the application's interface.
  • The EDI subsystem: It is responsible for converting the IDoc types into EDI message formats & vice versa. SAP does not supply this particular component of EDI architecture within the SAP system.

SAP EDI

Advantages of SAP EDI:

  • EDI is also responsible for decreasing the paperwork and expense of processing and storing those data. It is because we will represent the data in electronic documents.
  • It also allows providing more reliable processing cycle time.
  • Some of the EDI works are automated, which helps in completing the business tasks more efficiently.
  • EDI reduces the errors in data entry.
  • Electronic Data Interchange (EDI) facilitates faster actions in delivery with real-time transferring of documents.
  • The appropriation source is managed with the help of past orders and long acquisition agreements. It helps in generating RFQ electronically.
  • EDI also helps in understanding inventory control, by reducing processing errors, manual work, transaction cost, etc.

How EDI works?

There is a series of steps that makes the process of exchanging information between a sender and receiver. It is also essential to have end applications at both the sender and the receiver's end. It will help in processing information transmitted electronically.

  • First, the sender, who is the business partner or any entity, will send the message. On the other side, the receiver, who will be the business partner or any entity, will be the person to whom the message will get delivered.
  • It is mandatory that both the sender and the receiver of the messages will have application programs to receive electronic messages like SAP or other ERPs for generating and processed documents electronically.
  • Since both parties use different application programs to send and receive messages, the system should transmit the message in a standard format that can be easily comprehended at both ends. It can be achieved by the implementation of a translator and a communication standard like ANSI or EDIFACT.
  • After that, the sender will produce a message that he/she has to send by extracting the information and transports the message through the translator system.
  • The translator accepts the message and turns it into another format that is universally accepted as a standard form of reading messages. This format could be EDIFACT, ANSI, etc.
  • Once the message is in a standard format, it is transferred to the destination translator through any conventional communication medium like the Internet, WAN, VPN, etc. That network then links to the business communications channel, which should be reliable & secure. The network should perform the retransmission of documents that failed to come to the destination during transmission.
  • The destination translator on the receiver end will translates the standard EDIFACT message into a system understandable format that is standardized and application program can understand it easily.
  • The translated message is then forwarded to the application program on the receiver's end. At the receiving end, the incoming documents are again processed by conducting a necessary posting in the ERP system.
  • In this manner, the generated message sent by the application program is received at the receiver end and gets interpreted by the receiver's application program.

ALE vs. EDI:

ALE EDI
ALE stands for Application Link Enabling. EDI stands for Electronic Data Interchange.
Application Link Enabling does the memory to memory transfer of files. Electronic Data Interchange performs the data transfer from IDocs document format or intermediate document format to flat files.

We use application links enabling (ALE) for transferring transactional and master data from one method to another.

EDI is basically meant to communicate between partners of a company or a firm.
Application Link Enabling is meant to communicate for bulk volumes of data within a Logical system Electronic Data Interchange deals with small-sized documents and electronic files that do not require much space.

Conclusion:

The concept of EDI is much older than SAP. So, as SAP grew up, it included the benefits of EDI because the files and document transfer system has to be standardized yet secure. EDI is explicitly meant for communicating between partners of a company or a firm. So, if you ever need to send any invoices, statements, bills, or acknowledgments to customers, the EDI system will be the most efficient approach.