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What is SAP EDI

Electronic Data Interchange (EDI) is a widely recognized method for exchanging business documents in a standard electronic format, facilitating seamless computer-to-computer communication. It eliminates the need for specific setups, enabling easy sharing of technical documents among business partners. SAP also supports the creation of EDIs through Application Link Enabling (ALE), facilitating the exchange of business data across diverse systems within the SAP framework. This article provides insights into SAP EDI, covering its process, architecture, and associated benefits.

What is SAP EDI?

SAP EDI involves the electronic exchange of business transactions across various applications within a system, eliminating the need for paper. As an industry-standard approach, it signifies electronic documents and facilitates the exchange of documents for internal transactions. This process is particularly beneficial for companies with multiple associations under a single parent company, streamlining and automating the entire operation. SAP supports EDI functionality through Intermediate Documents (IDOCs).

The majority of EDI components include an Intermediate Document (IDoc) Interface, enabling us to execute the following actions:

  • Organizations utilize it to transmit messages, typically for outbound processing, such as confirming and verifying orders through Electronic Data Interchange (EDI).
  • It also facilitates the reception of messages, typically for inbound processes, such as sales and purchasing through Electronic Data Interchange (EDI).
  • It also includes an EDI converter that is responsible for transforming Intermediate documents into the EDI format.                    
  • In the past, organizations used traditional methods such as couriers, fax, or emails to send invoices, cheques, and other business documents. With the introduction of EDI systems, the efficient transfer of documents between organizations is now possible through digital mediums.

What are outbound and inbound EDI processes in SAP?

There are two different processes in SAP. These are:

Outbound process in SAP involves users sending messages and data from the SAP system to external entities such as users, customers, vendors, or organizations. This process includes generating application documents, transforming them into standard records or documents, and converting the intermediate document into an EDI-standard format. The EDI-formatted document is subsequently transmitted to the recipient, who responds with a transmission status back to the sending SAP system.

Inbound process in SAP involves users receiving information from external systems or entities such as users, customers, vendors, or organizations. This process includes acknowledging the receipt of any EDI document and transforming it into a standard record or document. Subsequently, this EDI-formatted document is converted into the application document that the SAP system processes upon receipt.

Architecture of EDI

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

EDI-enabled Applications: This component facilitates the automatic processing of trade and sales transactions.

The IDoc Interface: It is an open interface that includes IDoc types and functional modules capable of structuring the application's interface.

The EDI Subsystem: It is responsible for converting IDoc types into EDI message formats and vice versa. SAP does not provide this specific component of the EDI architecture within the SAP system.

Advantages of SAP EDI-

EDI also reduces the paperwork and processing expenses associated with storing data, as it allows the representation of data in electronic documents,
It also ensures a more reliable processing cycle time.

  • Certain EDI tasks are automated, enhancing the efficiency of completing business tasks.
  • EDI minimizes data entry errors
  • EDI speeds up delivery actions by transferring documents in real time.
  • Past orders and long acquisition agreements are used to manage the appropriation source, facilitating the electronic generation of RFQ.
  • EDI contributes to improved inventory control by minimizing processing errors, reducing manual work, and lowering transaction costs.

How EDI work?

The process of exchanging information between a sender and receiver involves a series of steps. It is crucial to have end applications at both ends to facilitate the processing of electronically transmitted information.

  • Initially, the sender, which can be a business partner or entity, sends the message. Conversely, the receiver, also a business partner or entity, is the recipient of the delivered message.
  • Both the sender and receiver of messages must possess application programs capable of receiving electronic messages, such as SAP or other ERPs, to generate and process documents electronically.
  • As both parties utilize different application programs for sending and receiving messages, the system needs to transmit the message in a standard format understandable at both ends. This can be accomplished by implementing a translator and a communication standard such as ANSI or EDIFACT.
  • Following this, the sender will create a message by extracting the necessary information and then transmit the message through the translator system.
  • The translator receives the message and converts it into a standardized format, such as EDIFACT or ANSI, which is universally accepted for reading messages.
  • After converting the message into a standard format, it is transmitted to the destination translator through conventional communication mediums such as the Internet, WAN, VPN, etc. The network is connected to a secure and reliable business communications channel, which includes the retransmission of documents in case of transmission failures.
  • The destination translator at the receiver's end converts the standardized EDIFACT message into a format that the system can easily understand, following standardized protocols for application program comprehension.
  • The translated message is subsequently sent to the application program on the receiver's end. Upon reception, the incoming documents undergo further processing, including necessary posting in the ERP system.
  • In this way, the transmitted message generated by the application program is received at the receiver's end and is interpreted by the receiver's application program.

EDI predates SAP, and as SAP evolved, it incorporated the advantages of EDI due to the need for standardized and secure file and document transfer systems. EDI is specifically designed for communication between a company or firm and its partners. Therefore, when sending invoices, statements, bills, or acknowledgments to customers, the EDI system proves to be the most efficient approach.