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How do you Communicate? Direct or VAN based EDI?

Direct of Van Based EDI

Which is best for your company?

As a professional who has helped over 1,000 companies during my career implement EDI with Dynamics as their back office, I often get asked “What method of EDI communication is best for MY company?” Since there are only two main methods of communications; an EDI Value added network (VAN) provider or Direct EDI, my response is typically the same. 20 years ago VAN’s were the only choice; however, most major trading partners support direct communications. Fortunately, the decision for most companies can be straightforward and should be based entirely on business requirements, such as volume of documents, IT support, and services being provided by your EDI provider.

Differentiating Direct vs VAN

Direct EDI, such as File Transfer Protocol (FTP) or standards such as AS2, establishes a secure line between two business partners. With minimal software and an internet connection, companies can now connect to their trading partner base with no per document fees. Certain industries or partners may require or highly suggest this form of communication such as Wal-Mart, Lowes, Cardinal Health, etc. because it is closer to real time communications, and avoids costly per document fees for both parties.  

An EDI VAN is a secure outsourced network where EDI documents can be exchanged between business partners. Your company is provided with a ‘mailbox’ from which EDI documents are sent and received, similar to traditional paper based mail (snail mail). The “value added” part of the mailbox are often services like mail notifications, inspect, authentication, and validating the message.  Messages are tracked and recorded for auditing purposes, as well as other services available through VANs, such as backup and recovery, mapping, compliance, and more.

Learn more about how simple EDI can be with the right partner. Download our white paper.

Deciding Which Method is Best for Your Company

A Direct EDI connection may be best if:

  • You are trading a higher volume of EDI documents, frequently (typically more than 500 per month)
  • Your trading partners have varying requirements, particularly with communications protocols (AS2, FTPS, SFTPS, etc.).
  • You have an internal IT resources to setup and maintain the direct connections OR your EDI provider offers assistance in this setup and support. 

A VAN may be better if:

  • Your business partners do not support a direct EDI communications and/or you anticipate having a lower count of trading partners.
  • You are trading a low volume of EDI documents (typically less than 500 documents per month).
  • You want to outsource communications.
  • You have limited IT resources.

When selecting the option which would make the most sense for you, there are a few questions you need to ask:

1)      Does my trading partner support direct EDI?

2)      What type of EDI traffic do I anticipate?

3)      What IT resources will be required?

4)      What support/assistance will my EDI provider give me related to communications?

One of the biggest factors in communication choice, in addition to what options your partners support, is your anticipated volume. You want to keep in mind that certain transactions will equal other transactions. So if you receive in 100 POs per month, and now need to send out PO Acknowledgments, shipment notifications, Invoices—those 100 POs often result in 400+ documents per month, when you factor in at least a one to one relationship (and don’t forget about resends, or partial shipments!). There may also be supporting transactions such as PO changes, Inventory Levels, payment remittance advises that need to be counted as well. 

Monthly Cost of VANs

 

                   ****Cost Per Document *****

**Doc Count**

0.25

0.50

0.75

1.00

100

 $        25.00

 $        50.00

 $        75.00

 $        100.00

500

 $     125.00

 $     250.00

 $     375.00

 $        500.00

1,000

 $     250.00

 $     500.00

 $     750.00

 $    1,000.00

5,000

 $  1,250.00

 $  2,500.00

 $  3,750.00

 $    5,000.00

10,000

 $  2,500.00

 $  5,000.00

 $  7,500.00

 $  10,000.00

NOTE--Does not include mailbox fee or other services.

You also want to factor in how your volume will change over time. For instance, do you expect to add new customers? Will you increase your volume of orders? Will you change your shipping patterns? For example, shipping to a distribution center tends to be low PO count but high product count, whereas ship to stores are middle volume, and ship to consumer is often many small orders.

The decision to go with a VAN provider vs (or in addition to) Direct EDI is an important discussion based on budget, resources, and trading partner requirements. When selecting an EDI provider, it’s important to make sure they can support multiple methods and choice in communication, beyond other areas that are critical (good technical support, deep knowledge of the ERP, integration of the documents you need to process, etc.).  

To learn more about which EDI solution is right for you, and how we can support your EDI efforts with EDI Made Simple®, read our white paper.

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