Business Central EDI Whitepaper | Understanding EDI in ERP

By Rob Jolliffe | December 8, 2020
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Dynamics Business Central Manufacturing EDI explained

Download the PDF of the business central EDI white paper here.

A common feature requested as part of a Dynamics Business Central project is EDI. Business Central EDI is somewhat misunderstood by customers, as is EDI in general. This blog attempts to explain what EDI is, how it is both part of Business Central and completely separate from the ERP, and the various “parts” that are needed to make it work.

What is Dynamics Business Central EDI

Microsoft Dynamics 365 Business Central is a full-featured ERP system, designed for use in a variety of industries. Some customers don't understand why Business Central EDI isn't an intrinsic part of the software.

EDI stands for Electronic Data Interchange and was a technology that evolved from booking systems in the airline industry. As a mainstream ERP requirement, it was introduced primarily for the automotive industry and entered widespread use in the 1980s.

It is important to understand that EDI was designed to work on very low-speed modems, prior to the introduction of the Internet. It is therefore a very old technology. It involves sending and receiving special EDI “Files” that are intended to transfer data between companies.

ERP Systems like Microsoft Dynamics NAV / Dynamics Business Central EDI tend to fall into 2 categories. Those with built-in EDI, and those that have EDI as an addon provided by robust add-on vendors.

EDI Has no real "Standards"

When EDI began to be adopted around the world, different organizations tried to create “standards” to be used. For instance, a standard 850 Purchase Order sent from your trading partner (customer) to you was to be standardized.

What actually happened in real life is that every company adapted and “changed” the standard to suit their business. What this has meant is that handling a purchase order from one customer can still result in significant setup costs to be able to handle a purchase order from a second customer.
This is one of the big “problems” with EDI.

EDI Definitions

Trading Partner
Any company that expects EDI documents as part of doing business with You is considered a Trading Partner. Usually, for the SMB manufacturing company, their customers are their trading partners. For large Manufacturing companies, the supplier base and customers would be trading partners.

The VAN
The VAN or Value Added Network is a legacy business process that is still in use today. A VAN transfers EDI documents between Trading Partners. Technically a VAN is a provider of a form of secure, private Email.

Documents
Business Central EDI is driven by the idea of exchanging documents electronically instead of via paper, fax, or PDF. The most frequently exchanged documents are the: 850 Purchase Order, 810 Invoice, and the 856 ASN or Advance Shipping Notice.

These documents are defined by a special “flat-file structure” that is supposed to be universally used but varies so dramatically that they really only serve as broad guidelines.

business central EDI 6 steps explained

EDI Components

The EDI flow shown above has 6 steps (arrows) that flow the data between two trading partners.

EDI starts with an ERP like Microsoft Dynamics Business Central. In the case of an inbound document (being sent to you) your customer’s ERP will export a Flat File which is in-turn picked up by a translator (the EDI Translator software shown in the diagram to the right).

The EDI Translator is often provided by a VAN and is the software that allows the mapping of your ERP data into a format acceptable by your trading partner. The EDI document is transferred through a VAN or sometimes directly sent via FTP to a trading partner.

When the document arrives, it needs to be “decrypted” into a format that your Business Central EDI system can handle. Therefore the receiver must have the EDI Translator software. Very high-end ERP systems will have a native EDI Translator module, but very few mid-market systems have these built-in.

There was a large community of products available for Dynamics NAV and most have been translated to work with Dynamics Business Central EDI. This includes specific products from most VAN.

Once the file is decrypted into a standard flat file, that can be imported into your Dynamics Business Central system with whatever import technique is normally used. Some Translator products will combine the Import and Translation/Decrypting process, while some will rely on the ERP to handle importing the flat file. Many ERP systems have a base EDI Flat File importing built right in.

EDI Cost

As a rule of thumb, Dynamics Business Central EDI setup and installation will cost in the $15,000-$20,000 USD to implement for your first trading partner and document set, and $3000-$5000 for each additional trading partner and set of documents. The software can be on top of that, although software that is more costly sometimes has lower setup fees.

Cloud solutions can lower this cost somewhat, although usually at the expense of higher per-transaction fees. Monthly EDI pricing varies and is often higher if there is no per-transaction fee, and lower if there are per-transaction fees.

Conclusion

This document tries to explain how Business Central EDI works, what the basic costs might be, and how data flows between two ERP systems with EDI. In general, EDI is well worth it when you have clerical staff spending a large amount of time (hours at least) daily trying to keep up. The inevitable error rate of manual data entry, as well as the hourly cost, adds up. With Business Central EDI the cost savings and error reduction can be well worth it.

Need some help?

Looking for more information about Business Central or other Dynamics 365 products? If you are looking for EDI solutions you can find them on Microsoft AppSource.

Are you an existing Business Central or Dynamics NAV user thinking about getting or adding EDI? If you need help with a Microsoft Dynamics manufacturing implementation, either Business Central or Dynamics NAV, either EDI or just general use, give us a call at: (519) 585-7524 x.45 or contact our team, we're excited to talk with you soon!

Rob Jolliffe

Robert has been an ERP consultant in the Manufacturing space for over 25 years, starting immediately after graduating University of Toronto Engineering. In addition to a deep knowledge of Manufacturing (including teaching MRP at the Supply Chain program at Conestoga College in Kitchener, Ontario, Canada) Robert holds a Microsoft Systems Engineer designation and is much less of an expert in Networking and IT infrastructure than he thinks, but is still pretty good. He also has applied his engineering skills to learning programming, and is warned frequently by the professional developers who work for him that he is pretty good, but don't write any code for customers without letting them check it.

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