Electronic Data Interchange, or EDI, is classified as an electronic communication method that provides standards for exchanging data via any electronic means. Data is transferred from one computer system to another by using a standardized format, without any human intervention involved. There are various standards of EDI (X12, EDIFACT, ODETTE, etc.) and companies utilizing the same standard are able to electronically exchange documents (i.e. purchase orders, invoices, shipping notices, etc.) through serial links and peer-to-peer networks. When sending an EDI document, both companies must adhere to the same standards, or set of rules set forth, which define where and how the information from the specific document will be found. Translation software owned by the companies is able to process the information sent and received, to determine the buyer’s/seller’s company name, order numbers, purchase items and prices, etc. This information can be sent to an order entry system without ever necessitating manual order entry.

So what exactly does an EDI message contain? 

An EDI message contains a string of data elements, each representing a singular fact (price, product model number, etc.) and is separated by a character that identifies the beginning and end of a character string, known as a delimiter. Each string in its entirety is called a data string.  One or more data segments framed by a header, an information structure which identifies the information that follows in the data segment, and a trailer, the information which occupies several bytes at the end of the data segment being transmitted, form a transaction set, which most likely will consists of what would usually be contained in a typical business document or form. Common EDI documents include Product Inventory (846), Product Catalog Price File (832), Warehouse Shipping (945), and more, each of which will be described more in depth in following posts.

What are the benefits of utilizing EDI?

Although many Fortune 500 and other large companies use EDI in order to achieve a uniform processing system, many small businesses are beginning to utilize EDI as well. Cost, speed, accuracy, and efficiency are all major benefits of EDI found in the field today. EDI eliminates both the need and cost associated with paper documents, and allows information to be processed quickly and read easily. EDI improves data quality and transactions can be exchanged in real-time within minutes rather than days. EDI can allow a business to grow tenfold without increasing workforces and creates more time for team members to work on more important tasks.