Learning EDI - Day 1: What is EDI?

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.

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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

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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.

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Benefits of EDI

1. Faster Processing

Orders reach trading partners within seconds.

Manual Process: Hours or days

EDI Process: Seconds or minutes

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2. Reduced Errors

Manual typing causes mistakes.

Example:

• Customer orders 100 units
• Employee enters 1000 units

EDI eliminates re-keying of data.

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3. Cost Savings

Reduces:

• Paper
• Printing
• Postage
• Manual labor

Organizations often save significant operational costs after EDI implementation.

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4. Better Accuracy

Data is transferred exactly as generated by the source system.

This improves:

• Inventory management
• Shipping accuracy
• Billing accuracy

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5. Faster Cash Flow

Invoices reach customers immediately.

Result:

• Faster payment cycles
• Improved cash flow

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6. Improved Supply Chain Visibility

Documents move electronically and can be tracked.

Businesses can quickly know:

• Orders received
• Orders shipped
• Invoices sent

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7. Scalability

A company can process thousands of orders without hiring additional staff.

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Typical EDI Flow

Customer ERP
     |
EDI Translator
     |
AS2 / SFTP / VAN
     |
EDI Translator
     |
Supplier ERP

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