Before the Internet, private Value Added Networks (VANs) took care of moving EDI data between trading partners. They stored the data in electronic mailboxes on their servers and used high speed telephone lines to move the data from one VAN to another. Customers would use regular telephone lines to send and receive data from their mailbox on their chosen VAN.
The telecommunications companies charged VANs a fee based on the speed that data was transferred through the telephone lines. They spoke in terms of packets of data and bits per second, whereas today the industry speaks in terms megabits per second through the Internet – which is real fast.
Using the telecommunications companies’ billing practices as a model, the VANs came up with the idea of charging customers a fee for every 1,000 characters of EDI data transmitted. Hence the kilo-character (KC) charge was born. If you look at an EDI transaction like an 850 Purchase Order, it’s made up of a bunch of characters strung together. Here is an example of what one line item on a purchase order looks like - it has 48 characters:
Add up the number of characters in each 850 plus every other EDI transaction transmitted during the month, and you get the total number of kilo-characters. For example, 250,000 characters of EDI data equals 250 KCs (250,000 / 1,000 = 250). At $0.20 per KC it would cost you $50.
One month your VAN bill might be $140. The next month it might be $130, then drop down to $120 the following month. When costs fluctuate, it raises many questions. Are we overpaying? Did our VAN make a mistake on our invoice? It’s difficult to get an answer to the question “How much is EDI going to cost us each month?”. Ask your VAN or EDI service provider and they will say “It depends on how many KCs you use." Then they put the onus on you to trace the KC fluctuations back to your trading partner activity. Who has time for that?
The Alternative to KCs
Counting KCs made sense before the Internet. Today, measuring KCs has become meaningless and should be taken out of the EDI cost equation. There are a few alternatives to KC charges for you to consider.
If your trading partner supports direct FTP or AS2, you can bypass the VAN entirely and eliminate KC charges altogether. If you outsource EDI, your service provider might charge you transaction fees instead of KC fees. Transaction fees are easier to understand than KCs but the cost still fluctuates each month. If your EDI traffic is consistently high, you might be able to negotiate a flat monthly fee from your VAN.
For a more detailed view of how kilo-characters fit into context of EDI, download the whitepaper “What is EDI and how does it work?”.
If you feel trapped and stuck with the same EDI system or service provider, read the article “The ideal time to change your EDI system”.
At Integral Group, we don't charge KC fees or transaction fees. Have a look at our plans to see what we charge.
I’ve met many 3PLs who operate very complex and expensive EDI systems. They purchased software, hired IT personnel and pay antiquated VAN fees. Or, they outsourced EDI and pay excessive setup fees every time a new customer asks for EDI. Often I will ask a 3PL provider this rhetorical question “Are you in the EDI business or the 3PL business?”
The answer is clear but some 3PLs spend far too much time and money on EDI. Those resources should be allocated for warehousing and distribution services, not EDI. You still need EDI because customers demand it, but you might feel trapped and stuck with what you started many years ago.
Don't pay unnecessary EDI fees.
If you’re using the same EDI system or service for more than five years, now’s the time for a change. You may have replaced your WMS when it stopped working for you; so why not your EDI system? Things have changed in the EDI industry since you started, especially pricing. These days you shouldn’t be paying VAN fees nor should you be paying for mapping. EDI outsourcing is even more popular as an alternative for 3PLs who don’t want to run an EDI department. This is the ideal time to consider outsourcing.
This is the point where I get to bestow to virtues of outsourcing your EDI to Integral Group. We charge 3PLs a flat monthly fee based on the number of connections and transactions anticipated each month. We don’t charge trading partner setup fees, mapping fees, VAN fees or transaction fees of any kind. Since you already paid for trading partner mapping in the beginning, you shouldn’t have to pay for it again. It will cost you $0 to switch your current EDI connections to our service. The only one-time cost you face is for us to integrate EDI with your WMS. You pay this once for each document type like an 850 or 856 and it covers all your current and future customers.
We’ve been in the EDI business for 30 years and provide excellent customer service. We are leading the marketplace with our simple, flat fee pricing model. As you contemplate outsourcing EDI and contact other service providers, I encourage you to ask them this one question, “Exactly how much is EDI going to cost us each month?” and listen while they dance around an answer.
To see how much EDI outsourcing with Integral Group will cost, have a look at our plans
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