Many businesses worldwide rely on electronic data interchange (EDI) to streamline operations and maintain secure communication between trading partners. But not all EDI providers operate the same way — differences in their design play a critical role in efficiency and scalability.
Among the various types of EDI, VAN (value-added network) providers stand out by acting as intermediaries, offering centralized networks that facilitate secure, standardized data transmission — a distinctive approach compared to other EDI solutions.
In this guide, we’ll explore what value-added networks are, their pros and cons, and how they compare to other EDI providers, such as cloud-based solutions like Orderful.
What is a Value-Added Network (VAN)?
A VAN is a secure private network through which businesses share electronic data files with their trading partners. It simplifies EDI setup and communication by reducing the need to manage multiple third-party connections.
Instead of dealing with each partner’s specific data requirements, businesses use a single VAN to handle it all. Acting as both the messenger and the translator, the VAN ensures that files are properly formatted and securely transmitted.
EDI VAN providers also manage incoming documents through a virtual mailbox, sorting files and delivering them to the appropriate recipients. This keeps data organized and processes running smoothly.
9 Types of Value-Added Networks
Several types of VANs exist, each offering unique services to meet specific business needs. Here’s a closer look at the most common:
Internet-Based VANs
These VANs use the internet to handle EDI transactions, offering web-based interfaces where businesses can manage their transactions through a browser. While they provide essential tools for document exchange and transaction tracking, they often lack the advanced scalability and integration capabilities needed for more complex operations. Internet-based VANs generally work best for businesses looking for a simple, browser-friendly solution to manage EDI communications.
Industry-Specific VANs
Designed to meet the needs of specific industries, such as retail, healthcare, or automotive, these VANs customize their features to comply with industry standards and regulations. This tailored approach helps businesses adhere to sector-specific requirements with ease.
Public VANs
A shared network used by multiple businesses, public VANs offer standard EDI services like tracking and data transmission at an affordable cost. They’re ideal for small and medium-sized businesses (SMBs) with limited EDI needs because they provide a cost-effective way to manage EDI transactions without requiring extensive infrastructure or customized solutions. Public VANs simplify data exchange by offering shared resources, making them accessible and efficient for businesses with smaller-scale operations.
Cloud-Based VANs
Cloud-based VAN connections utilize cloud technology to deliver flexible and scalable EDI services. Unlike basic internet-based solutions, they provide on-demand access and pay-as-you-go pricing, making them cost-efficient and adaptable. Businesses gain advanced features like seamless system integration, real-time data validation, and the capacity to scale with growth. Platforms like Orderful take this approach further, simplifying setup and optimizing supply chain operations for a variety of business needs.
Private VANs
Private VANs cater to a single organization or a group of related enterprises. They offer dedicated services customized to the company’s specific requirements, such as tailored data formatting, advanced security measures, or specialized compliance protocols, giving businesses more control. This model often works well for larger companies with complex or unique EDI needs.
Integrated VANs
These VANs connect directly to business systems like ERP or WMS, enabling seamless, end-to-end integration of EDI transactions. They’re designed to boost automation and improve overall efficiency.
Hybrid VANs
Hybrid VANs combine the best of cloud-based and traditional VANs, offering security, flexibility, and reliability. They’re generally a great choice for businesses handling sensitive data, as they can also integrate with analytics tools to provide detailed reporting.
Traditional VANs
As the original VAN model, these networks offer a wide range of services like encryption, data validation, and formatting. While they’re more established, they’re still a reliable choice for businesses looking for secure and dependable EDI transactions.
Value-Added Service Provider (VASP) VANs
These VANs go beyond standard offerings by providing specialized services like data validation, mapping, and transformation. VASPs tailor their features to meet each business's unique needs, delivering additional value beyond basic EDI functionality.
How VANs Work
VANs streamlinedata exchange, acting as a central communication hub for EDI transactions between trading partners. Let’s break it down with an example: A manufacturer sends a purchase order (EDI 850) to a supplier through a VAN.
1. Connection Setup
Both the manufacturer and the supplier establish connections with the same VAN provider, enabling them to send and receive documents through a single, secure platform.
2. Document Preparation
The manufacturer creates a purchase order formatted according to EDI standards, including details such as product quantities, delivery dates, and prices. The manufacturer’s internal EDI system then converts this information into the standard EDI format, preparing the document for secure transmission.
3. Transmission to the VAN
The manufacturer’s EDI system transmits the purchase order to the VAN using secure protocols such as AS2. The VAN verifies the document’s format and ensures it adheres to EDI standards, identifying any missing or incorrect fields.
4. Data Translation
The VAN translates the purchase order into a format compatible with the supplier’s EDI system, ensuring it can be processed without errors.
5. Acknowledgment and Tracking
After successfully delivering the purchase order to the supplier, the VAN sends an acknowledgment to the manufacturer, confirming receipt. This message also includes details about any errors or missing data for correction.
6. Error Handling
If the purchase order has issues, such as incorrect product codes or missing delivery dates, the VAN notifies the manufacturer with specific details. The corrected document can then be retransmitted.
6 Benefits of Using a VAN for EDI
From automating transactions to scaling along with your business, VANs streamline operations and enhance efficiency. Here are six key benefits:
1. Improved Efficiency and Productivity
Reliable trading relationships depend on consistent and secure connections. VANs ensure seamless transactions between partners, giving businesses confidence in their EDI operations.
2. Reduced Cost and Errors
Instead of investing in expensive hardware to build EDI infrastructure, businesses can outsource to VAN providers who manage the system and resolve errors. This reduces upfront costs and helps eliminate costly mistakes.
3. Enhanced Security and Compliance
VANs use secure protocols to protect sensitive data during transfers, ensuring privacy and safeguarding against breaches. They also adhere to major industry standards like ANSI X12 and EDIFACT, keeping companies compliant.
4. Greater Flexibility and Scalability
VANs easily adapt to growing businesses, efficiently handling larger volumes of data and transactions without requiring significant infrastructure upgrades or adjustments. This scalability makes them a practical choice for companies anticipating growth or managing fluctuating transaction demands.
5. Improved Trading Reliability
Reliable trading relationships depend on consistent and secure connections. VANs ensure seamless transactions between partners, giving businesses confidence in their EDI operations.
6. Enhanced Communications
A centralized network eliminates the hassle of setting up individual integrations for each trading partner. VANs ensure that data aligns with EDI standards and remains compatible across different systems, reducing maintenance and costs.
How to Choose a VAN Provider
Choosing the right provider is central to maintaining smooth and secure EDI VAN operations. The ideal provider should support your business, scale with your growth, and deliver the tools needed for seamless EDI management. Here’s what to consider when evaluating your options:
Experience and Reputation
A VAN provider manages critical contracts and data for your business, so choosing one with a strong reputation and proven expertise is key. Look for a provider with experience in your industry who can handle large-scale EDI networks and solve problems effectively.
Automation Capabilities
Modern technology is essential for streamlining EDI processes. Prioritize VAN providers that leverage cloud technology to automate tasks, offer customization, and provide flexibility. Your EDI solution should enhance productivity, not slow it down.
Fast Onboarding
A provider that simplifies partner onboarding, data migration, and map generation is invaluable. Efficient onboarding processes save time, boost credibility, and foster stronger business relationships from the start.
Pricing and Support
VAN services should offer value without breaking your budget. Avoid providers with hidden fees and opt for those with clear, upfront pricing. Additionally, comprehensive support — including EDI setup, partner onboarding, and technical assistance — ensures smooth operations and peace of mind.
Security and Compliance Measures
If your business handles sensitive data or large transaction volumes, look for a VAN provider with robust security features like encryption, data backups, and compliance with industry standards. Tailored services ensure your unique business needs are met.
VANs vs. Cloud-Based EDI Platforms: How They Differ
VANs are just one type of EDI provider businesses can choose to manage their data exchange needs. While they’ve been a trusted option for years, modern cloud-based EDI platforms like Orderful are changing the game with greater speed, flexibility, and cost efficiency.
Here’s how they compare:
How They Exchange Data
Traditional VANs rely on mailboxes for document exchange, storing and forwarding files as intermediaries.
Cloud-based platforms enable direct, real-time exchange, bypassing mailboxes to streamline communication.
Ease of Setup and Integration
VANs often involve manual setup and complex configurations for each trading partner, making onboarding time-consuming.
Cloud platforms simplify setup with dynamic integrations, cutting down on time and effort.
Scalability and Flexibility
VANs may struggle to scale with rapidly growing businesses or high transaction volumes.
Cloud platforms are built for scalability, adapting effortlessly to business growth and evolving supply chains.
Cost Considerations
VANs typically charge for partner setups, mailbox maintenance, and data usage, leading to higher ongoing costs.
Cloud platforms offer transparent pricing models, avoiding mailbox fees and allowing businesses to pay for only what they use.
Who Benefits Most
VANs generally suit businesses with simpler EDI needs or those comfortable with a traditional approach.
Cloud platforms are ideal for companies looking for modern, flexible solutions that align with long-growth strategies.
Choose Your EDI Provider with Confidence
While traditional VANs focus on facilitating EDI exchange, Orderful takes it a step further as a cloud-based EDI platform built for today’s business needs. With features like real-time data exchange, fast partner onboarding, and complete visibility into your workflows, Orderful provides a scalable and efficient alternative to legacy systems.
If you’re switching ERPs, upgrading your infrastructure, or modernizing your EDI processes, our EDI specliasts are here to help. Chat with our experts today.