EDI (Electronic Data Interchange) is the computer-to-computer exchange of business documents in a standard electronic format without manual intervention.
Instead of:
- Printing
a Purchase Order
- Sending
it by email
- Re-entering
it into another system
EDI allows systems to exchange data automatically.
Simple Example
Without EDI
Buyer → Email PDF PO → Supplier → Manual Entry → ERP
With EDI
Buyer ERP → EDI → Supplier ERP
No printing, no email, no manual typing.
Common EDI Documents
|
EDI Document |
Purpose |
|
850 |
Purchase Order |
|
855 |
PO Acknowledgment |
|
856 |
Advance Ship Notice (ASN) |
|
810 |
Invoice |
|
997 |
Functional Acknowledgment |
|
ORDERS (EDIFACT) |
Purchase Order |
|
DESADV (EDIFACT) |
ASN |
|
INVOIC (EDIFACT) |
Invoice |
Real-Life Example
Imagine a hospital orders ventilator consumables from a
medical manufacturer.
Step 1
Hospital sends:
EDI 850 Purchase Order
Step 2
Manufacturer sends:
EDI 855 Acknowledgment
Step 3
Manufacturer ships goods and sends:
EDI 856 ASN
Step 4
Manufacturer sends:
EDI 810 Invoice
Everything happens electronically between systems.
Benefits of EDI
1. Faster Processing
Orders reach trading partners within seconds.
Manual Process: Hours or days
EDI Process: Seconds or minutes
2. Reduced Errors
Manual typing causes mistakes.
Example:
- Customer
orders 100 units
- Employee
enters 1000 units
EDI eliminates re-keying of data.
3. Cost Savings
Reduces:
- Paper
- Printing
- Postage
- Manual
labor
Organizations often save significant operational costs after
EDI implementation.
4. Better Accuracy
Data is transferred exactly as generated by the source
system.
This improves:
- Inventory
management
- Shipping
accuracy
- Billing
accuracy
5. Faster Cash Flow
Invoices reach customers immediately.
Result:
- Faster
payment cycles
- Improved
cash flow
6. Improved Supply Chain Visibility
Documents move electronically and can be tracked.
Businesses can quickly know:
- Orders
received
- Orders
shipped
- Invoices
sent
7. Scalability
A company can process thousands of orders without hiring
additional staff.
Typical EDI Flow
Customer ERP
|
EDI Translator
|
AS2 / SFTP / VAN
|
EDI Translator
|
Supplier ERP
