Understanding About Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format between business partners

Computer to Computer

Business Documents

Standard Format

Business Partners

Computer-to-Computer EDI replaces postal mail, fax and email. A typical manual process is like with lots of paper and people involvement.

EDI documents can flow straight through to the appropriate application on the receiver’s computer and processing can begin immediately. The EDI process is like with no paper, no people involved

Business Documents are typically exchanged between businesses. The most common documents exchanged via EDI are

Purchase Orders

Invoices

Advance Ship Notices

Many others such as bill of lading, customs documents, inventory documents, shipping status documents and payment documents

A Standard Format must be used so that the computer will be able to read and understand the documents. A standard format describes what each piece of information is and in what format (e.g., integer, decimal, mmddyy). There are several EDI standards in use today, including

ANSI

EDIFACT

TRADACOMS

VDA

ROSETTANET

When two businesses decide to exchange EDI documents, they must agree on the specific EDI standard and version. Businesses typically use an EDI translator — either as in-house software or via an EDI service provider to translate the EDI format.

The Exchange of EDI documents is typically between two different companies, referred to as Business Partners or trading partners. For example,

Company A may buy goods from Company B.

Company A sends orders to Company B. Company A and Company B are business partners