What Is EDI?



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EDI 101: The basics

What exactly is EDI?

Electronic Data Interchange (EDI) is the electronic exchange of routine business transactions. These transactions include such documents as purchase orders, invoices, inquiries, planning, acknowledgements, pricing, order status, scheduling, test results, shipping and receiving, payments, and financial reporting.

 

Who uses EDI?

Industries currently using EDI include retail, insurance, education, entertainment, mortgage banking, and numerous departments of the U.S. Government. Note, however, that this list is far from complete! As more and more businesses turn to EDI, several standards committees—including the Accredited Standards Committee X12 (ASC X12) and EDIFACT—are working to include appropriate transactions in its body of standards.

 

What makes EDI work?

EDI permits hundreds of unrelated companies to communicate and process business transactions electronically.

EDI works because it relies on a standard system that everyone can use, developed under the guidelines of the American National Standards Institute (ANSI), the coordinator for national standards in the United States.

The ANSI committee ensures that everyone using a process such as EDI follows the same rules and methods, making the program universally accessible. As a result of the standard, all businesses share a common interchange language, which minimizes the need for users to reprogram their internal data processing systems.

 

The advantages of EDI:

1. First, it saves a lot of trees. Traditionally, the manufacture and sale of new products and services has been accompanied by a long paper trail consisting of order forms, invoices, bills of lading, and a variety of documents containing specific but crucial data.

EDI makes it possible to enjoy

  • one-time data entry

  • reduced errors

  • on-line data storage

  • faster management reporting

  • automatic reconciliation

 

2. It saves a lot of time. We know it takes time to compile the necessary paperwork in order to conduct a specific transaction, but we often forget—until it’s too late—that we need to allow time for that document to leave our hands and arrive at the appropriate person/department. EDI serves as a faster and substantially more efficient way to communicate and process business data. In addition, it eliminates postage and courier costs.

 

3. EDI allows you to have uniform communications with all of your trading partners, including customers, suppliers, carriers, and financial institutions.

 

4. EDI will put you in a better market position in relation to non-EDI competitors.