EDI 101

Most people that may benefit from EDI, don't know too much about it. We've done our best to outline what EDI is at a practical level, without getting too technical.

Electronic Data Interchange (aka EDI) is a process where information between business partners is exchanged in a standard electronic format. 

What information is commonly exchanged via EDI?

In most cases, business documents are exchanged. Here are a few of the most common ones that are sent between trading partners.

  • Purchase orders
  • Invoices
  • Advance shipping notices
  • Inventory documents
  • Shipping status documents 
  • Payment documents 

EDI formats

Because EDI documents come in all types of formats, they need to be standardized into a format that any business system can understand.


A standard format describes what each piece of information is and where it is in the EDI message, as well as how it’s formatted (e.g. an integer, decimal, or mm/dd/yy format). 


When two businesses integrate using EDI, they agree on the specific EDI standard and version. Generally, one party will already have a standard format (e.g. a major retailer like Walmart).


To make sure all data is the same format, businesses typically use a tool or an EDI service to translate data between their own systems format, and those of their trading partners, 3PL warehouse, and/or another internal system.

 


The world before EDI

 

Typically, businesses interact with other businesses through manual processes -- paper and manual intervention is involved. The thing is, people and paper slow document processing and introduces inaccuracies and errors. Take Jim the grocer, for example...

Jim needs to order 500 apples for his store.

So he emails his supplier, Tom, to order some.

Tom’s a busy man and doesn’t pass Jim’s order to his warehousing team for 24 hours.

By the time the warehouse gets Jim’s order from Tom, they’re out of apples.

Jim’s order has to wait another 24 hours until more apples are picked.

Finally, Jim’s apples arrive.

But Tom missed a zero in his email to the warehouse team.

Only 50 apples turned up.

Jim is furious.

 


 

The world after EDI

 

Business documents flow straight from your applications to your trading partners and vice versa. Instead of waiting on someone to email or fax, order processing begins immediately. Here’s what Jim’s life is like with EDI...

Jim logs into his inventory management system.

He sees Tom has 500 apples available.

So he confirms an order in his system.

Tom receives a shipment notice back within a couple of hours.

The apples arrive.

Jim is happy.

By moving from a paper-based exchange of business document to one that’s electronic, businesses reduce costs, increase processing speeds, cut down errors and improve relationships with their business partners.

 

Learn how EDI can help your business

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