Electronic Data Interchange

Electronic Data Interchange Definition And Introduction To EDI

Electronic data interchange (EDI) is a business-to-business, computer-tocomputer exchange of transaction information, such as purchase orders, invoices, and advance shipping notices. Each of these transaction types has a specifically defined, computer-readable format assigned to it. This is referred to as a transaction set, and more than 300 such sets currently exist.

EDI has been around for many decades and is a mature technology that is finding ever-increasing use as businesses seek ways to streamline their workflow, cut their costs of doing business, and process huge volumes of transaction information on a regional, national, and sometimes global basis. EDI documents are exchanged with other businesses, referred to as trading partners. A trading partner is any outside organization that a company does business with, such as a customer or a vendor.

The structure of EDI documents is governed by standards development boards such as ANSI ASC X12, UN/EDIFACT, or RosettaNet, which are the most popular today.

EDI data is designed for efficient computer processing. In its raw form, EDI data is very difficult to read manually. When EDI data needs to be human-readable, we make use of EDI translators, which are software that read the EDI code and can, present it in a form and format that’s more easily human-readable.

EDI data can be transmitted through any communications protocol agreed upon by the trading partners such as Value Added Networks, Internet EDI via AS1, AS2, and FTP. The EDI Communication options are an extremely important component of the EDI setup.

EDI is a key business tool in today’s highly competitive environment. There are many benefits to be derived from EDI, from cost savings and better workflow to improved customer service and enhanced competitiveness. Achieving these benefits, however, depends on careful planning and correct implementation of a comprehensive EDI strategy. We discuss EDI implementation planning at our online webinars and onsite training.

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