EDI VAN: What Is a Value-Added Network & Why Is It Important?
September 17th, 2020
Regardless of whether you’re just stepping into the EDI world or have been exchanging business documents electronically for quite a while, the term “value-added network,” or “VAN,” most likely sounds familiar. After all, it’s been since the first VAN connections were introduced in the 70s that EDI and VAN go hand-in-hand. In Europe, VAN services are most often included in your organization’s SaaS solution. In the U.S., however, a VAN is typically a stand-alone offering. For this post, we’ll focus on VAN services in the U.S.
But what exactly 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, hosted service that provides a secure way to exchange EDI messages between companies.
Serving as a collaboration network, EDI VANs help to facilitate the communication among business partners 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. Just like a postal service picks up the mail from the sender, sorts it out, and delivers it to the recipient’s mailbox, an EDI VAN service transmits electronic messages between multiple recipients that use the service.
Let’s take a supplier, for example. When a supplier starts doing business with a retailer, a direct point-to-point connection might be set up to deliver the EDI messages from point A (the supplier) to point B (the retailer), and vice versa. But when a supplier does business with multiple retailers, EDI via VAN enables the supplier to communicate with all the retailers as one, eliminating the need to establish a direct connection to each one of them.
Why Use an EDI VAN?
Although many consider VAN to be the mere communication channel that delivers data securely from one mailbox to another—which was indeed its original function—there are additional valuable services that a VAN can provide, making it one of the most common ways to exchange business documents 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, as well as a wide range of other services that aim to simplify and optimize document exchange with many partners.
Let’s go back to the supplier-retailer example and assume Retailer A requires the supplier to exchange documents in XML format and via AS2 connection, while 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—and all other trading partners—offering 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, so suppliers that want to do business with them don’t really have a choice.
Why do retailers do that? Well, first, it reduces costs. But it also makes it easier for them to onboard their trading partners and route all their messages through a single connection. On the other side, because the value-added network provides access to an extensive network of business partners all at once, it makes it easier for ‘EDI beginners’ to get started.
VAN Benefits
Regardless of industry, size, or level of EDI expertise, more and more companies are considering the value-added network to be an integral part of their EDI strategy. The following are a few of the main benefits of using EDI VAN services:
- 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 the right EDI VAN provider for your needs:
- 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
This post was written by Chiara Carnevali, Marketing Manager, North America
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