Core Services

Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI) has been ever a business necessity. Most engineers and IT professionals are not yet aware of it. Who are aware is yet to comprehend the possibilities with EDI, especially in big data and data analytics, and automation.

Virtually all industries use EDI to one degree or another. EDI has a great purpose. You can connect computers (trading partners) and make both of them exchange information about each other using EDI.

In non technical terms, Electronic data interchange (EDI) is a process through which different companies’ or entities (schools, hospitals, etc.) computer systems to 'talk' to one another and engage in the formalized transfer of business information between two electronic devices using structured message formats. Through EDI business documents are exchanged electronically. By using EDI, no human intervention is required and the chance of errors is reduced. Agreed standard language is being used in EDI.

Electronic Data Interchange (EDI) is the process through which organizations entities

In ever increasingly connected world, and with suppliers and clients from all over the world, there is a need for standardization. Diversity in company practices with ever changing IT systems and so many software and hardware configurations complicate the situation which the companies need to grapple with. Companies prefer standardization to reduce the confusion, and to streamline, to automate, to increase the efficiencies and thus profits possibilities.

Everyone prefers to use their habituated or preferred business templates and formats. Machine interaction is not possible when such diversity exists. Incompatibility is the result. In order to avoid incompatibility issues, both trading partners need to agree on a method for exchanging information pertinent to their business transactions. They adopt an industry wide standard (different industries/regions often have their own standard) so that different companies' computer systems can 'talk' with one another. By using EDI both the sender and receiver don't have to work on a mapping document and exchanging data in EDI provides high accuracy

EDI is a standardized communication of business documents between different systems. Here is the process

EDI needs Standard Language as interchanging electronic information requires a standardized language shared by the sender and receiver to structure the messages. In a typical EDI transaction, non-EDI data will first be translated to EDI via an EDI translator before it is transmitted to another partner.

Typically, one business will pull the information from its database, format data, say for an invoice, according to the manner which has been previously agreed upon. Then that invoice will be sent to the other entity, known as a trading partner.

Of the different standards in the EDI, three are widely used standards: X12, EDIFACT and XML. X12 is used primarily in the United States, and EDIFACT is used internationally EDI has defined standards for many domains, including insurance, retail, manufacturing, banking, healthcare, etc. Without a standard 'language', each company would develop its own way to communicate with others and processing another company's communications would be much more difficult. It would probably require a person to see the structure of the documents and determine what meaning every piece of information has.

There are standardized formats for lots and lots of commercial transactions, so they’d procure a system that uses such standards and make arrangements with suppliers that accept such transactions, and automate the process of materials acquisition.

Business documents include invoices, purchase orders, advance ship notices, bank payments, invoices, shipment/manifest notifications, shipment tracking and many more. There are EDI standards for every industry that uses EDI and for those documents.

EDI also needs Communications Network and calls for secure communications systems adapted to the peculiarities of this type of transaction. It will either be sent to the trading partner either directly using protocols such as FTP, SFTP or AS2, or it will be sent to a Value Added Network (VAN), which is sort of an electronic post office, where the trading partner can pick it up.

There are different options available, although the most widespread are VANs or Value Added Networks. These are private communications networks with high levels of security, control and monitoring that guarantee the correct sending and reception of the different messages. Today, however, Internet-based solutions like Odette File Transfer Protocol (OFTP) which is popular in Europe, and AS2, which is more popular in the US, are used for transmitting the EDI documents.

EDI needs EDI software so as sender and receiver must have an EDI solution to construct and manage the messages according to the standard in which the interchanges takes place. Once it arrives at other trading partner, another EDI translator will convert the EDI data to whatever format is used by that trading partner. Everyone is interacting with what is known and comfortable to them, but the machines interacted and exchanged the data in the standard format.

EDI Transactions can be developed in different technologies such as Dotnet, Java, etc. and can be linked to databases such as MSSQL, MySQL, MongoDB etc.

EDI system is not about just software alone. One needs to look at a number of interlinked business systems (people, software, processes) both within one’s own business and between partners as well (suppliers, customers, logistics providers, etc). Once the basic language of EDI has been established, business becomes routine and easily managed.

EDI is a powerful tool that can be misused in the wrong hands. As a result, companies monitor and control new connections and give compliance only if procedures are followed to the point.

Every company that wants to make best use of EDI must get a globally recognized number to identify themselves using GS1 ( is a worldwide organization, which administers and assigns companies a unique number. As per their website, “GS1 EDI (Electronic Data Interchange) provides global standards for electronic business messaging that allow automation of business transactions commonly occurring across the entire supply chain. It covers master data alignment, order and delivery and financial settlement management, as well as transport and warehouse management.”

Unique EDI addresses can be created using this number so data can be sent between business partners. One may also buy a series of barcodes from GS1 to ensure one’s own products are uniquely coded, thus tracked, monitored and controlled.

On the surface Electronic Data Interchange (EDI) appears easy, simple, and relatively basic and perhaps similar to email; however, there are several deviations within the system that are often specific to individualized business transactions and to domains.

There are frequent changes in EDI Transaction formats and thus one need to keep the system and processes updated.

Robustness and Ease of use are some of the issues which professionals always grapple with. These issues also depend enormously on the type of systems one is dealing with, and the part of the system and also which parts of which business processes one is looking at.

EDI has many advantages. Electronic Data Interchange (EDI) has the capacity to transmit data in the exact way it was received. Because of its accuracy, errors occurring while re-keying are no longer a concern. As a direct result, the costs involved with mailing and postage are virtually eliminated, lead times and inventory carrying costs are drastically reduced, and customer service and loyalty are significantly improved. Early notifications of potential orders can be utilized for forecasting and planning; allowing for appropriate inventory and production adjustments.

Using EDI reduces the paper work, and it is faster, standardized, and quicker. EDI helps in integration. One can streamline most administrative and management tasks using EDI. Efficiencies are realized by reducing processing times, increased security and confidentiality, and cost reduction.

As with any important decision, obtaining most accurate information helps in improved judgments leads to appropriate decisions and great results. EDI helps companies in many ways and thus can be said, one need to invest in it and reap the benefits.