Thursday, February 03, 2005

What is EDI anyway?

EDI is an acronym for Electronic Data Interchange. EDI is a computer record format that companies use to exchange business documents with each other.

EDI enables the computers of one company to “talk” to the computers at another company. Faxing and mailing of paper documents are replaced with fast and efficient electronic documents.

EDI uses standards to define how EDI records will be formatted. However, companies can use the flexibility that is included in the standards to fit their particular business needs.

The variation of EDI transaction formats from one company to another makes EDI more of a challenge for small and mid-sized businesses that do not have information technology departments with dedicated staff resources.

EDI is used by a large number of companies and in a wide variety of industries. In 2005, over 80,000 companies use EDI to improve their efficiency and to help their business partners. It is very typical for many of these companies to insist that their partners also use EDI.

EDI frequently replaces paper purchase orders, purchase order changes, purchase order acknowledgements, packing slips, advance ship notices, and invoices.

Other common EDI documents include production planning releases, payment remittance advices, requests for quote, responses to requests for quote, organization changes for shipping addresses and product activity data reports.

Companies that require their partners to use EDI will provide an EDI guide. The EDI guide will describe exactly how the EDI transactions should be formatted.

EDI records must be perfectly formatted in order to pass the company’s validation requirements for input into their EDI system. But once EDI transactions have been thoroughly tested, they flow between business partners automatically, without human intervention and far quicker than faxes or mailed documents.