What Exactly is EDI?


EDI, which stands for Electronic Data Interchange is the transfer of business documents electronically in a specific format from one company to another. EDI documents such as, purchase orders, invoices, and advance shipping notices can be electronically sent, which reduces the chances of human data entry errors. EDI is utilized in industries such as manufacturing, pharmaceutical, retail, logistics, health care, and many more.


 Since there is no universal standardized format, various companies have their EDI documents in their own specific versions. How one company stores their information in their computer systems may be simply presented differently in a format that is not followed by another company.  One trading partner may input their purchase order number in a column where their trading partner inputs their quantity ordered. This is why data mapping is needed. The conversion process allows companies to easily read their trading partner’s documents that are being sent to them.

 


Before EDI was developed, documents would have to be entered manually into their respective systems, printed, then mailed or faxed to the partner. Once the partner receives the documents, they are again inputted into the partner’s systems and processed so that the desired products are ready to be shipped. With this process there are multiple situations that would allow for human error, as well as being very time consuming. EDI is a productivity-enhancing tool that electronically replaces the less efficient and error-prone human processes involved with inter-company communications.

 


EDI allows your company to have a “just in time” supply-chain process. This means new stock is ordered only when the current supply drops to a certain level. EDI allows for purchase orders to be quickly transferred and processed, helping reduce any inventory related costs. When “just in time” is implemented successfully, your company will experience a significant improvement in quality, efficiency, and most importantly a greater return on investments.

 

Benefits of EDI

·         Decreases operational costs

·         Increases accuracy of information

·         Increases efficiency and productivity

·         Decreases postage and faxing costs

·         Increases transaction volumes

·         Improves reporting

·         Improves sales tracking

·         Decreases inventory costs

·         Decreases the chances of error

·         Eliminates the need for paper documentation

·         Improves customer service