Electronic Data Interchange In Brief Guides
Electronic data interchange (EDI) is a business-to-business, computer-to-computer 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. Electronic data interchange 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. We will discuss these organizations in the EDI standards portion of this course.
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 electronic data interchange 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.
In order to understand what EDI is, it’s important to understand what EDI isn’t. EDI is not just a regular method of sending documents electronically via EMAIL or the WEB. EDI documents are standardized (according to a standards development body) in a machine-readable format intended to be processed by an EDI Translator. For example, emailing a Purchase Order created in Microsoft Excel to a vendor can not be categorized as an EDI document transfer, because such process is not standardized. The caveat here is that EDI is used for computer-to-computer exchange of transactions without any human involvement.
Sending a proprietary-format flat file via FTP to a vendor is also not EDI. No proprietary or custom format qualifies as EDI. The essence of EDI is the standardized format created and agreed upon by a standards governing body. This is what makes any EDI file readable by any computer that’s processing EDI. Standardization is the heart and soul of EDI, and the key to its ability and versatility. EDI is not associated with the use of tools such as diskette transfers, E-mail, tapes, fax, internal customized file transfers, or voice-response systems. EDI is not a programming language or an IT tool. EDI is an industry with specific methods and protocols that are constantly evolving to better serve all users.
EDI is not limited to large enterprise organizations like GM or Wal-Mart, though the needs of large corporations made many of them EDI pioneers. EDI is accessible and is widely used by small and medium-sized businesses that benefit from the cost savings and workflow advantages of EDI. EDI is not just a technical function, and seeing it as that is one of the most frequent and costly EDI implementation mistakes. EDI is about business-to-business interaction and relationships. EDI is about business processes and functionality, and it needs to be understood as that and overseen by executives and managers who fully understand the true role of EDI.