E-commerce and EDI: What’s the difference?

There are lots of different terms used to describe B2B process automation. These terms can be confusing, partly because they are so inter-related. This article will go into detail on these terms to dispel some of the confusion and explain common terms used within B2B process automation, including the differences between Ecommerce and EDI.

First, electronic commerce (e-Commerce) is a very common term that refers to the exchange of information via electronic media such as the Internet and private communication networks.

What are the two types of Ecommerce?

• Business-to-Consumer (B2C) Ecommerce – this is the term that most people are thinking of when Ecommerce is mentioned. Every day, we experience B2C Ecommerce, whether it is booking airline tickets and hotel reservations or buying books, shoes and clothes online.
• Business-to-Business (B2B) Ecommerce – as its name implies, B2B Ecommerce is the electronic exchange of information between two businesses, rather than between a consumer and a business.

What is EDI?

Electronic data interchange (EDI) is the most commonly used B2B Ecommerce technology today. It is the computer-to-computer exchange of business documents, such as purchase orders and invoices, in a standard electronic format between business partners. You can use standards such as ANSI X12, EDIFACT, or an XML-based standard such as RosettaNet in the high tech industry. There are many different types of EDI that utilize different standards.

EDI has been in use across many industries, including retail, banking, manufacturing, high-tech and services, since the 1980s and it remains a game-changer. In order to achieve the benefits of EDI, the businesses involved must aim to be as tightly integrated as possible with each other.

Twenty-first century corporations expect a network of business partners – their suppliers, their customers, their logistics providers, their banks – to function in a way that enables digital integration.

What are the two types of B2B Integration?

1. Integration at the data level –automation of the exchange of business documents between business applications, such as automating the exchange of all the documents in the procure-to-pay process.
2. Integration at the people level – enabling B2B collaboration between the people in different companies during business processes such as dispute resolution and new vendor registration.

Learn more about B2B integration solutions, as well as the many features and benefits of B2B managed services.

B2B integration at the data level

For two businesses to tightly integrate at the data level, they need to automate the following tasks:

• Connect electronically – usually via the internet using a secure communications protocol, such as AS2, SFTP, or FTPS
• Exchange data electronically in a format that can be understood by the computer systems at each company – usually via an EDI standard format, which can be immediately understood
• Translate the EDI data to the format of each company’s in-house system – typically accomplished by using special EDI translator software

B2B integration at the people level

For two businesses to tightly integrate at the people level, and truly collaborate to resolve issues or plan new initiatives, they need a central repository of critical information about business partners, such as details related to Ecommerce readiness, regulatory compliance, consumer product safety, supplier diversity programs and environmental responsibility surveys.

Furthermore, they need the information management tools to simply and easily:

• Enable business partners to maintain their own company and contact profiles, thus keeping partner information fresh and up-to-date
• Perform mass communications to appropriate segments of the trading partner base without relying on out-of-date spreadsheets on various employees’ computers
• Roll out compliance initiatives (e.g., send a 20-question survey to suppliers regarding the greenhouse gas initiative) to all or a subset of your partner community
• Audit business partners’ compliance with various initiatives
• Capture, share, and collaborate on performance-related data that helps to rapidly resolve multi-party disputes and discrepancies with full traceability and audit control. For example, this can result in improvements like a reduction of over-payments resulting from unprocessed or poorly negotiated shipping, pricing or claims disputes

What are 3 different approaches to data-level and people-level B2B integration tasks?

1. A “Do-It-Yourself” approach, in which you are responsible for purchasing and maintaining all of the connections and software systems that address both types of integration.
2. A “Managed Services” approach, in which you outsource the responsibility for all the B2B integration tasks.
3. A combination of both 1 and 2.

If you’d like to learn more about why B2B integration is such a hot topic and its many benefits for businesses of all sizes, read our latest integration blog.