(FORTUNE Small Business) – At Westminster Inc., an Atlanta-based toy company, the salespeople love landing new deals to supply giant retail chains such as Marshall Field's and Toys "R" Us. But for Dori Levy, Westminster's IT manager, dealing with a new retailer can be daunting.

The nation's largest chains now require vendors to submit purchase-order information using a digital format called EDI (electronic data interchange). For small companies such as Westminster that don't employ a full-time IT staff but still need the ability to do business with giants, EDI equals major overhead. The software is pricey and cumbersome, and some retailers seem to delight in fining suppliers thousands of dollars for minor offenses such as a misapplied bar code.

Adding to the confusion, there's no standard EDI technology. "Not every retailer uses the same EDI method, software, or system, and there's not really any movement toward one standard," says Dawn O'Brien, senior director of retail systems at the National Retail Federation. "Smaller suppliers have a harder time integrating that into their overhead."

Originally EDI was supposed to save everyone time. The technology first became popular about ten years ago, as big retailers started using IT to cut supply-chain costs. The idea was to minimize paper and human error by forcing vendors to submit all data regarding a sale--invoices, packing orders, shipping notices--electronically. Today EDI covers 80% to 90% of all business-to-business traffic, according to Forrester Research. Yet companies still waste around $10 billion a year trying to correct supply-chain mishaps, says the Vendor Compliance Federation.

Until recently Westminster was spending more than $55,000 annually to deploy diverse EDI software packages, which came with little technical help. "There is no standard," says Westminster CEO Max Ker-Seymer, 57. "It's like dealing with foreign countries--one retailer speaks German, the next speaks Chinese." And while Westminster was working with only six EDI retailers, they accounted for as much as 40% of annual sales. "If we wanted to maintain that business, we had to become more EDI-savvy," says Levy.

That meant, among other things, learning to avoid "chargebacks." Big retailers impose stiff fines on vendors that violate their supply-chain requirements. For instance, J.C. Penney charges $5 for every label that is crooked or placed on the wrong side of the carton (see the box on this page for more examples). And Belk once fined Westminster several hundred dollars because Belk's scanners couldn't read the bar codes on the outer carton labels. "It's depressing for small companies to get a check stub and see minuses for various things," says Jeff Kaiden, founder and CEO of Capacity, a New Jersey-based firm that handles EDI compliance and warehouse management for small businesses. "They shouldn't have to hassle with that kind of stuff."

Thanks to specialists such as Kaiden, small vendors now can keep pace with their larger competitors by outsourcing EDI headaches. Leading providers include Capacity, Inovis, and RedTail Solutions, an 11-person startup outside Boston. Major shipping services such as FedEx and UPS also offer EDI-compliance consulting, but much of their practice is geared to customs clearance and other international shipping issues. Capacity offers EDI, warehousing, and shipping services, while Inovis and RedTail provide EDI consulting but won't store or ship goods.

Levy paid RedTail a setup fee of $1,800 to assume responsibility for all of Westminster's EDI compliance, beginning in late 2003. Today she simply alerts RedTail when her salespeople strike a deal with a new retailer. RedTail engineers set up the electronic transfer system (if the retailer uses a channel other than the Internet), integrate the retailer's purchasing information into Westminster's accounting system, and review the retailer's requirements to reduce the risk of chargebacks.

RedTail argues on behalf of Westminster in any EDI disputes. And with the exception of shipping mishaps, which remain Westminster's responsibility, RedTail covers any punitive charges that a retailer might impose.

Westminster pays RedTail a monthly subscription fee of $100 and an annual transaction fee of $16,000. Since using RedTail, the company has seen annual revenues grow by about 20%, to slightly more than $10 million last year. Westminster estimates that it is saving about $33,000 a year in EDI-compliance costs alone, with no corresponding increase in overhead. "I no longer have to stay on top of all the little nuances of EDI," says Levy. "RedTail watches over us."