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How EDI is Used

Understanding the Basics of EDI

Understanding the Basics of EDI

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Uses of EDI

The transmission of information between people can be fraught with delays, errors, misinterpretations, and security breaches. Electronic Data Interchange is the computer-to-computer exchange of documents, offering a secure, encrypted alternative to paper processing and supply chain tracking.

Electronic Data Interchange was created to ease the management and flow of transaction information. Accordingly, any data that is part of a business document can be transmitted using Electronic Data Interchange. Trade documents are some of the most frequently exchanged using Electronic Data Interchange. These include bills of lading, status reports, purchase orders, invoices, quotes and other more esoteric forms like residential mortgage insurance applications and healthcare claim payments. 

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Since Electronic Data Interchange is the exchange of information between systems, rather than between people, the information sent via Electronic Data Interchange is in a style that is only recognizable by a machine. Both the sending and receiving computer must have Electronic Data Interchange software that can interpret the data and transform it into a form usable by the business. There are two common forms of translation for Electronic Data Interchange - a machine to readable format, also known as "rip and read" that creates a printed report, and the automatic translation of Electronic Data Interchange into an ERP or accounting system, also known as Integrated Electronic Data Interchange.

Electronic Data Interchange can be used in a variety of information transactions, including but not limited to:

  • Transportation management. Major retailers – Walmart, 99 Cents Only Stores, Lowes, Office Depot, and Costco, to name a few – use EDI to manage their transportation and routing instructions.
  • Purchase order management It’s possible to use EDI to integrate purchase orders into the sales order system simply and efficiently. Files can then be archived for accurate accounting and reporting, as well as for future reference during the drafting of additional documents.
  • Invoice management. Invoice processing is an essential component of effective business practice – EDI ensures accurate and fast invoicing, eliminating inaccuracies and facilitating fast payment.
  • Warehouse management. EDI can extract data from an Advanced Shipping Notice infrastructure and produce a clear graphic depiction of sequential processing steps. Furthermore, EDI is commonly used for remote and third-party warehousing fulfillment processes.
  • Product management. EDI solutions can expedite delivery of current products and pricing information to any and all partners, providing individualized information pertinent to the specific needs of the particular partner, in their required format.



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