HOW DOES EDI WORK?

In addition to typical exchange of invoices and orders between companies, EDI can be used to notify customers about the delivery execution dates and, at the same time, to update the production schedule for a particular customer in full integration with the production planning department.

Electronic Data Interchange tools have been used by companies for many years to support the flow of business information. Thanks to implementation of appropriate solutions, data can be effectively exchanged between the company’s departments and branches and additionally recorded in the IT system. Such an approach saves effort and time. The EDI tools can be used within a single company, but equally well can support the sending of orders, invoices and other documents between two business partners. SAP EDI (Electronic Data Interchange) is one of such solutions.

A sea of opportunities
SAP EDI is an open and flexible solution which can be freely customized to meet even the most non-standard needs. In addition to typical exchange of invoices and orders between companies, the solution can be configured to notify the users about delivery dates, production dates and production volumes, updating the production schedule for a particular customer in full integration with the planning department. Below find a description of the standard EDI application.
 

How does EDI work?
When EDI is used, the sales of products to customers is based on scheduling agreements. Each client regularly submits an updated order schedule, most often covering a one-year scheduling horizon. On the basis of the submitted schedule, goods are shipped to the customer and shipment invoices are generated.

1. Creating a scheduling agreement
In the proposed process scenario, scheduling agreements have to be initially created manually in SAP by the Sales/ Logistics Department staff. While creating the agreement, the employee enters the client details, scheduling agreement number, numbers of materials covered by the agreement and the agreement duration.

2. Update of the delivery schedule – DELFOR IDoc
Subsequently, via the EDI interface, the existing, valid scheduling agreements are automatically populated and periodically updated with information from an order schedule in the form of a DELFOR type electronic document (IDoc) sent by the customer. For each incoming message from the customer, the matching open scheduling agreement covering the material in question is found and updated with customer’s information about shipping dates and quantities.
For each agreement, it is possible to compare the changes which occurred in the updated delivery schedules (comparison of the historical and current delivery schedules for a scheduling agreement).
Each incoming DELFOR message triggers a notification of an employee in charge of the respective client, in the form of an email about correctly posted EDI message, a message accepted by the SAP system or an error in the message processing. In the event of an error in the posting of an IDoc e.g. when the relevant scheduling agreement is missing in the SAP system or the material number has not been properly assigned to the client, the sales department staff will be able to supplement the missing data, make a manual posting and re-process the IDoc.

3. Delivery creation and posting
Creation of shipment deliveries is possible only for confirmed dates and quantities in the delivery schedule. Delivery document is created manually by the Sales/ Logistics Department employee with reference to a particular scheduling agreement. During creation of an agreement, the available stock of the shipped material can be checked. It is possible to merge a number of scheduling agreements into a single delivery to the same customer. When the delivery is created in SAP, goods issues are posted by the Sales/ Logistics Department staff.

4. Outbound delivery confirmation with the Client – DESADV IDoc
Posting of a delivery automatically triggers sending a message to the customer via the EDI interface with shipment notification (DESADV message). The message is defined in SAP as standard outgoing information from the delivery document header (in the same way as standard print-offs e.g. GI documents) and contains all details included in the delivery document.

5. Invoice
Invoicing in SAP consists in manual creation of the invoice document with reference to the posted delivery. The creation and posting of an invoice triggers an outbound EDI message in the invoice header i.e. an INVOIC message. Upon the issue of the invoice, the prices will be updated again for the specified pricing date which by default is the actual date of goods issue from the warehouse set out on the posted delivery document.

6. Dispatch of an electronic invoice – INVOIC IDoc
The dispatch of an electronic invoice is triggered manually after posting the invoice, to ensure an opportunity of making corrections or reversing the document prior to sending it to the customer, in the event of incorrect posting or price calculation.

How to implement EDI?
SAP EDI is based on standard technologies supplied by SAP:
- Standard SAP R/3 system interface, the so called IDoc interface, ensuring uniform processing of inbound and outbound system documents in a universal format,
- SAP Business Connector application, a universal EDI subsystem (the license is free of charge for users of SAP R/3 system).
Each company which has implemented an SAP system can use EDI without spending money on the purchase of additional licenses.

The only requirement is the configuration of SD documents flow ensuring execution of scheduling agreements:
- Scheduling agreement –> outbound deliveries in accordance with the delivery schedule -> invoicing
- Configuration of baseline information for the purpose of EDI
- Review of master data from the point of view of the scheduling agreement requirements: supplier/ customer linkage, customer/ goods data
- Implementation of EDI messages:
A. DELFOR - Delivery schedule for component supplier
B. DESADV - Delivery: Shipping notification
C. INVOIC - Invoice/Billing Document

Multiple benefits
A successful implementation of an EDI solution can bring the following business benefits:
- Ongoing, automatic data interchange (without the need for data replication or user involvement)
- Optimized logistic chain
- Unification of the purchase/ sales processes between partner companies
- Reduced time spent on purchase/ sales transactions processing
- Reduced number of errors in the service of transaction documents
- Elimination of part of the documents created in a hardcopy format
- Improvement of the trading procedures
- Less time spent on order processing due to quick exchange of information and business data