What is EDI, and When should you use it?

Many food and beverage brands begin their journey in the direct-to-consumer (DTC) space. It's an ideal starting point—a streamlined environment where brands can rapidly test and refine their go-to-market strategies while maintaining full control. However, significant growth often means expansion into retail channels.

When an emerging brand catches the eye of a major retailer or distributor, it enters a new phase of business operations. Suddenly, these brands must adapt to the practices of industry giants and master an entirely new business vocabulary. At the center of this new world stands EDI (Electronic Data Interchange) – an acronym that represents a critical turning point in a brand's growth journey. For many up-and-coming brands, EDI embodies both exciting opportunities and formidable challenges, marking their transition from small-scale operations to the big retail landscape.

What is EDI, and Why Should Brands Care?

EDI stands for Electronic Data Interchange. In simple terms, it's a standardized way of exchanging business documents electronically between trading partners. It can be thought of as a fancy email with more steps.

Imagine being a buyer at Whole Foods or Target, dealing with thousands of brands and managing countless products. They need a standardized, efficient way to communicate with all their suppliers. That's where EDI comes in.

With EDI:

• Retailers can place orders electronically.
• Brands can confirm orders quickly, allowing buyers to plan accordingly.
• Brands can send advance shipping notices (ASNs), helping retailers prepare for incoming deliveries.
• Invoicing and payment processes are streamlined.

While order automation solutions like EDI offer valuable benefits, they also come with high upfront costs and complex setup requirements, making them a significant investment for emerging brands. That being said, it’s still important to have a baseline understanding of EDI so you can determine when it may be the right choice for your business.

Navigating EDI as a Small Brand

1. Understand the Requirements: Each retailer has their own rulebook for EDI. These specifications guide how they want to do business with you, from the type of information they need to how they want items shipped and labeled.
2. Plan for Evolution: Retailer processes are always changing. They might update how they want products packed or labels placed. Stay flexible and prepared for these shifts.
3. Consider Your Options: EDI is a form of order automation, and order automation as a whole unlocks an entire new world of efficiency. While there are multiple EDI providers out there including SPS Commerce, Orderful, and Truecommerce, it’s important to consider all your order automation options.
4. Start Simple, Then Grow: Adopt a crawl-walk-run approach. Begin with what you need to be compliant, understand how it works, and then look for ways to optimize.
5. Look for Integration Opportunities: As you grow, consider integrating EDI with your inventory management systems for even greater automation.

The Benefits of Embracing Order Automation

Investing in order automation solutions, whether it’s EDI or an alternative like Pantry—which requires a lower upfront cost and is much more user-friendly—brings certain expectations. These are the 4 basic things you can expect from order automation:

1. Improved Supply Chain Visibility: Streamline your orders and inventory management in one place.
2. Stronger Sales Relationships: Use your EDI data to showcase your performance and pitch to new retailers.
3. Efficiency: Automate manual processes, reducing errors and saving time.
4. Faster Payments: With a clear digital trail, invoices can be processed and paid more quickly.

A Recap on EDI and Order Automation

While EDI is a powerful tool for streamlining operations with major retailers, it isn’t always the best choice in terms of cost, implementation, or ecosystem compatibility, especially since many DSD networks and distributors do not utilize EDI.

Fortunately, alternative solutions exist to bridge the gap, with email order processing tools like Pantry leading the way.

Many brands, particularly those working with independent retailers or traditional distributors, often receive orders via email. Automation solutions such as Pantry can significantly streamline this process by offering several key features:

• Automatic extraction of order information from emails
• Standardization of order data across various formats
• Integration with inventory management systems
• A centralized dashboard for efficient order processing

These alternative tools provide valuable efficiency gains for brands who have a large-volume of customers that don't use EDI. If you want to learn more about how Pantry can help you, click here.