The Relationship Between EDI and B2B eCommerce

December 13, 2018

Category: Best Practices

This post was updated on December 13, 2018, to reflect current trends and information. 

It’s no secret that eCommerce is one of the most talked about strategies for B2B companies today.

When we talk to enterprise customers, we often get questions about the difference between Enterprise Data Interchange (EDI) and B2B eCommerce. Typically, people wonder if EDI will be replaced by B2B commerce, and which is the right option for their business.

The reality is that EDI and B2B eCommerce are not mutually exclusive.

It’s important to know that EDI and B2B eCommerce are different types of solutions that solve different types of problems within an organization.

In this article we’ll explore the two questions we hear most in regards to EDI and B2B eCommerce:

  • What is the difference between EDI and B2B eCommerce?
  • Why are EDI-focused businesses adding B2B eCommerce to their sales and distribution strategies?

First, what is the difference between EDI and B2B eCommerce?

What is EDI?

Electronic Data Interchange (EDI) is the electronic transmission of structured data by agreed message standards from one computer system to another without human intervention.

In other words, EDI is simply the transfer of information from computer to computer. EDI is generally used to place large recurring orders.

A lot of large enterprises and their suppliers have made significant investments over the years to set-up EDI, and the technology still does what it’s supposed to do. You see EDI used most for large, recurring orders in a supply chain where products are predefined and known.

EDI allows organizations to transact with each other based on tightly defined standards. These standards define how business documents (invoices, purchase orders, ship confirmations) are transferred and keeps the flow of supplies moving steadily in the supply chain.

Basically, an EDI simply sends business documents associated with a sale back and forth between businesses without paper or people.

The Relationship Between EDI and B2B eCommerce

Photo source

EDI Benefits:

  • Increased speed & accuracy thanks to reduced order cycle time. EDI can speed up your business cycles by as much as 61%.
  • Cost savings due to reduced order errors. Automation leads to the elimination of costly and error-prone manual order processes.
  • Enhanced inventory and supply chain visibility with a better look into transactions’ status.

EDI Challenges:

One of the main challenges facing companies that use EDI is when a customer doesn’t use EDI. This is because an EDI only connects and works with another EDI. If one of your main customers is operating without an EDI, there will be significant resources needed to process those orders.

Additionally, as more emphasis is being placed on customer experience during the ordering process, it’s important to note that an EDI doesn’t offer a modern interface. An EDI cannot be used as a sales portal to communicate with customers or sales teams to encourage new products, market or cross-sell and upsell.

What is B2B eCommerce?

Business to Business Electronic Commerce (B2B eCommerce) involves interactions and transactions between a company and its trading partners through a value-added network or proprietary connection such as an electronic marketplace.

In 2017, Forrester said it expected the B2B e-commerce market to top $1.1 trillion in the U.S. by 2021, accounting for 13% of all B2B sales in the nation.

Unlike EDI, where orders are usually large and recurring, B2B commerce tends to deal with ad-hoc ordering scenarios, or where products and order management processes may be very complex.  

More than just online ordering, B2B eCommerce provides a platform to communicate with your customers in an interactive way, online. It brings your product catalog to them, allowing them to browse and educate themselves. It offers a new vehicle to market to them, and keep them in the know on product news, business announcements, deals and promotions.

With B2B eCommerce, your customers are also able to keep track of orders and other data online, just like they’re able to with other orders they place outside of their business purchases.

B2B eCommerce Benefits:

  • Increased revenue due to 24/7 ordering. By far one of the biggest benefits of B2B eCommerce is that your customers are able to place orders any time, and anywhere there is an internet connection.
  • Cost savings associated with moving away from on-premise solutions. B2B eCommerce platforms that take advantage of the cloud and subscription pricing reduces the total cost of ownership.
  • End to end automation for better supply chain control. Modern technologies such as APIs make it easy to integrate with existing systems and automate all parts of the ordering process.

Why are EDI-focused businesses adding B2B eCommerce to their sales and distribution strategies?

As you can see, both EDI and B2B eCommerce help to automate the ordering process and improve efficiencies across the business. And more often than not, one strategy is not necessarily better than the other.

However, in today’s digital age, more and more companies who have historically had an EDI-focused strategy are launching a B2B eCommerce channel as well.

For years, analysts like Forrester Research have been predicting that the B2B eCommerce market will generate over $1 trillion in sales by 2020.

It’s not surprising then that companies like Kellogg are expanding their B2B business with a stronger focus on eCommerce technology. Chris Hood, president of Kellogg North America, explained that they see a significant growth opportunity for brands like Kellogg’s Corn Flakes and Special K in B2B eCommerce.

“As part of our redesign within our North American structure, [Kellogg is] making an investment in eCommerce capability to really strengthen not only our ability to call on and serve omnichannel players but also pure-play as well as B2B. In B2B, in particular, we think there’s a huge opportunity for growth. We already have a pretty significant business there today, but there’s a big opportunity for us to continue to accelerate.” –Chris Hood, President of Kellogg North America

Kellogg is launching B2B eCommerce initiatives their specialty channel, which includes product purchases and distribution on businesses that are not grocery, like convenience stores.

Incorporating B2B eCommerce strategies into growing channels like this should allow Kellogg to create a modern ordering experience for their customers. Unlike with EDI, B2B eCommerce opens up the opportunity for their customers to have visibility into order data and track the status of their orders; learn more about products and receive tips and information on how to sell more; and place orders on their own time, at any time of day.

Thanks, in part, to digital experiences like Amazon, today’s buyers expect an excellent ordering experience, despite the fact that it is for “work” purchases. Companies who invest in their buyers’ demands today with modern, digital buying experiences, will surely pay-off as expectations become stronger every day.