Running a B2B enterprise requires that you have a sales and purchasing function. As an engineering head with little expertise in purchasing, you'll want to automate the purchasing procedures to save time and improve efficiency.
There are various terms used in B2B process automation. Unfortunately, these words are closely related, can be confusing, and lead to errors. Therefore, having a deeper understanding of such terms and phrases will help you make the right decisions.
In this article, we will discuss the difference between EDI and eCommerce.We will go through the following:
- What is eCommerce?
- What is EDI?
- Differences between eCommerce and EDI
What is eCommerce?
Electronic commerce is a term used to describe any business transacted electronically. This transaction will include the exchange of information and documents.
The technology goes further to provide a buyer with a shopping experience where they can compare products and prices before sending a purchase order.
Types of Ecommerce
eCommerce is categorized into two based on who is the end user. Here are the two types of eCommerce.
- Business-to-consumer(B2B) eCommerce- B2B eCommerce is used by companies dealing with the last user of the product. It provides a shopping experience that could include selling household goods to the user, drones to photographers, and airline tickets, among others.
- Business-to-Business(B2B) eCommerce- B2B e-commerce is used by businesses that sell to and buy from other companies who will value add before selling to end consumers. B2B is used to ensure there is a smooth flow of information between the two companies.
What is EDI?
Electronic Data Interchange(EDI) is a B2B eCommerce technology geared towards enabling computers from two companies to exchange business documents. The two companies will settle on predetermined formats and digital rules governing how the two computers exchange data. Different types of EDI require various standards that include ANSI X12, EDIFACT, or an XML.
EDI was created to offer a communications solution for companies. Since its inception in the 1980s, it has been adopted in various industries like manufacturing and retail.
For example, when a buyer sends a purchase order to a vendor, they'll receive an EDI Purchase Order acknowledgment confirming the receipt of the order. If their setup allows it, the vendor can also send the buyer an 855 Purchase Order Acknowledgement that enables the vendor to modify the purchase order.
EDI is used across multiple businesses, meaning their systems need to be integrated. Let's look at the two types of B2B integration.
Types of B2B Integration
Data Level Integration
It involves the automation of the exchange of business documents, such as procure-to-pay processes. You and your business partner will settle on secure communications protocols like AS2, SFTP, or FTPS. You'll then exchange the data using an EDI standard format that computers on both ends can understand.
Each business needs to have an EDI translator to translate the EDI data to the format of each company's in-house system.
People Level B2B Integration
Apart from exchanging business documents with vendors and business partners, you'll require to integrate at the people level. Having the workforce from both sides collaborate helps them resolve misunderstandings faster and improves the partnership.
People-level integration offers a central repository of important information about businesses. This important information includes regulatory compliance, supplier diversity programs, eCommerce readiness, and consumer product safety.
Other advantages of having a central repository include:
- Allow business partners to maintain their business and contact profiles, meaning the information is always up to date.
- Leverage technology for mass communication to the right department of business associates.
- Audit the various initiatives to check if the other business is compliant.
- Access and share performance-related data to quickly resolve multi-party misunderstandings with traceability and audit control. For example, it could help resolve a dispute on the pricing if one party makes an error.
- Undertake compliance initiatives for the whole partnership or a section. For example, you can send questions to the manufacturing department on their greenhouse emissions.
Differences Between EDI and eCommerce
The table below summarizes the differences between EDI and eCommerce.
Key Takeaways
- Both EDI and eCommerce are used to streamline the exchange of information with business partners
- EDI is used to exchange data, while eCommerce helps exchange data while providing a shopping experience.
Summary
B2B process automation uses terms that can confuse an engineer. You will want the process to go on smoothly as you concentrate on designing the following explosive hardware.
When deciding what system to use, it is better to find an expert who understands the different terms. That way, you are sure your purchasing function is efficient and can return to engineering.
