Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI)

Most businesses invest in technology and systems to automate their internal business processes by using software like Enterprise Resource Planning (ERP) software. However, the same companies act differently and are slow to automate their business-to-business transactions, such as the exchange of purchase orders, including accounts payable and receivable, inventory control, and other things.

EDI stands for Electronic Data Interchange. It may be defined as the exchange of standard business documents such as invoices, purchase orders, inventory levels and shipping notices between two machines such as computers. In today’s business environment, B2B integration is a key to success; in fact, if you can’t do business electronically, many companies refuse to do business with you.

Electronic data interchange (EDI) is the most often used Business to Business (B2B) commerce technology. Electronic Data Interchange (EDI) is facilitating the majority of all electronic business transactions. EDI software solutions facilitate the exchange of business documents and data across a variety of platforms and programs. Manual processes are automated and electronic now. Processes that used faxes, phone calls, paper, etc are now done through EDI.

A little historical perspective certainly helps. Businesses realized the value of exchanging information electronically by seeing the railroad industry in sixties itself. In the eighties, many industries started adopting EDI. However, those businesses that could afford large mainframe computers were able to participate and make use of the electronic exchange of standard formatted business documents. The ubiquity of the personal computer and then the arrival and availability of the internet, use of EDI became available and accessible to all companies, all round the world, regardless of size and revenue of business.

EDI connects manufacturers, distributors, and retailers, through their information systems, in a worldwide business-to-business network. In general, EDI solutions integrate with ERP systems, access and use the information available to create the documents you need to do business with other companies. It is a fact your suppliers and your clients have specific requirements as to how they do business and you need to accommodate them for their business. EDI solutions facilitate the exchange of information that is mutually comfortable and safe.

Standardization of data is needed to ensure that request and information are compatible with one and other information systems so that everyone fulfills their respective expected role, thus meeting the requirements of one another. Standardization leads to security, simplicity. As the data is standardized, the search for data becomes easier and the time to find the data is reduced.

Information is organized through a process in which fields are accurately mapped so that only relevant data is used during the implementation of EDI software. When any information request is received by the EDI system, the data is automatically converted to fit the recipient system and all incoming and outgoing documents with crucial information for the transaction is generated and transmitted.


Manual processes are not truly reliable when the scale is involved. However, manual process with a knowledgeable person can be creative and flexible. People over a period slow down and introduces avoidable errors even when they are careful. Manual processes are more error prone However, the scale of the errors would be less compared to electronic processes. EDI helps you in helping your company moving away from the old, manual processes to the electronic and automated ones.

Accuracy and elimination of manual errors lead to reduced rework, improved confidence and relationship with partners, minimizing costly charge backs, late deliveries, or incorrect product prices.

EDI has become the lifeblood of many businesses as it makes the processes streamlined, thus efficiency, reduced costs in the process as all unnecessary expenditures are removed, and increasing customer satisfaction due to error free and timely delivery.

The automatic generation of various outputs such as invoices, sales orders, shipment reports and so on will also make the work simpler for sales and warehouse staff.

EDI systems and solutions are set up in such a way that they are only accessible to pre-defined and authorized users. They are equipped with audit trails so one can track back, use and ensure security. Trust through transparency is ensured with electronic confirmations between parties.

EDI is a technical differentiator. EDI helps to grow your business as large companies prefer and demands partners those have an EDI solution. It is in your business interest to have EDI in place so you are able to trade with different partners around the world and make transactions with them. EDI is a non-negotiable requirement increasingly in most global business.

Information flow is speedier in the EDI. Processes done and outputs are created automatically without any user input or time. Feedback and information exchange is also instant. You can choose financially wise decisions as you can take appropriate decisions based on that information.

There are no delays due to different time zones, or for other reasons such as having to get a person familiar with the term on the phone. No need for FedEx, Couriers, Faxes, or Paper trails. All the above will lead to shorter lead times, better cash flow, and faster buy-sell cycle time, and reduced inventories.

EDI remains a game changer across all industries, including retail, banking, manufacturing, high-tech, and services.

Implementing and maintaining an EDI system needs experts in technology and in your business industry domain. It is advised to choose the experts wisely so as you get the highest returns on your EDI investment consistently and continuously.