September 8th, 2020
Maybe you are just stepping into the EDI world. Or, maybe you have been exchanging business documents electronically for years. Either way, the term “value-added network,” or “VAN,” most likely sounds familiar.
After all, the first VAN connections were introduced in the 1970s. Since then, EDI and VAN go hand-in-hand. This is especially true when it comes to business-to-business exchanges in the supply chain. In Europe, VAN services are most often included in your SaaS solution for EDI. In the U.S., however, a VAN is typically a stand-alone offering. For this post, we will focus on VAN services in the U.S.
What is an EDI value-added network, and why should you care? Let’s start with the basics.
What Is an EDI VAN?
A Value-Added Network (VAN) is a private network for electronic data interchanges. In other words, it is hosted service that provides a secure way to exchange EDI documents between companies.
Serving as a collaboration network, EDI VANs help to facilitate EDI communications among business partners. It does so by reducing the number of entities each company needs to connect to.
How Does a Value-Added Network Work?
Value-Added Network services are often compared to an electronic postal service for trading partners. In general, a postal service picks up mail from a sender. Then, the postal service sorts out the mail and delivers it to the recipient’s mailbox. Likewise, an EDI VAN service transmits electronic messages between multiple recipients that use the service.
Let’s take a supplier that starts doing business with a retailer as an example. In this case, a direct point-to-point connection might be used to deliver EDI messages from point A (the supplier) to point B (the retailer), and vice versa. When a supplier does business with multiple retailers, EDI via VAN enables the supplier to communicate with all retailers as if they were one. This eliminates the need to establish a direct connection to each one of them.
Why Use an EDI VAN?
Many consider a VAN to be the mere communication channel that delivers data securely from one mailbox to another. This was its original function, but there are additional services that a VAN can provide. That is why it is one of the most common EDI solutions today.
With the rise of new EDI standards and communication protocols, VANs have evolved to support many different requirements. To elaborate, VAN capabilities have expanded to include EDI translation, data validation, re-processing, authentication, encryption, and reporting. VANs also include a wide range of other services that aim to simplify document exchange with many partners via EDI networks.
Let’s go back to the previous example. Assume that Retailer A requires the supplier to exchange documents in XML format and via AS2 connection. On the other hand, Retailer B requires ANSI X.12 document format sent via FTP connection.
Through the value-added network, the data is properly formatted and validated before being securely delivered to both Retailer A and Retailer B. This offers a way for each company to keep using their preferred data formats and communication methods. In addition to that, some retailers only accept EDI via VAN. This means that the suppliers that want to do business with them don’t really have a choice.
Why would a retailer make this mandatory? First, it reduces costs. Second, it makes it easier for them to onboard their trading partners and route all their messages through a single connection. Additionally, the value-added network provides access to an extensive network of business partners all at once. These added services make it easier for ‘EDI beginners’ to get started.
More and more companies are considering value-added networks to be an integral part of their EDI strategy. This holds true regardless of industry, size, or level of EDI expertise. The following are a few of the main benefits of using EDI VAN services according to many EDI experts:
- Reduced business operations costs
- Increased compliance with customers and suppliers
- Increased security, data accuracy, and efficiency
- Closer B2B relationships and faster orders-to-cash
- Increased visibility into EDI transactions and workflows
Last but not least, here are couple of things you might want to consider when selecting an EDI VAN provider:
- Supports multiple communication protocols
- Any-to-any translation into standard and proprietary formats
- Trading partner onboarding and management
- Full integration with ERP or accounting system
- Affordable, predictable pricing options
- Leading-edge security with document authentication and encryption
- Trading partner and electronic document archiving