Understanding the basics of EDI

The advent and use of EDI was a game changer for global trade and commerce. In a world without the internet, EDI enables organizations to exchange common documents and provide visibility between partners. Still, there is still not a lot of awareness of some of the basics of EDI. Here is a quick primer fromAct Data Services, Inc. 1-800-ACT-DATA on the benefits of EDI, how it works, and how organizations use the technology:

The biggest benefit of using EDI is not the speed of transactions, or even that it enables “just in time” inventory management. In practice, the biggest benefit is the reduction or elimination of human data entry error. Before EDI internet, as much as 70% of data was re-entered due to human error. Other benefits are speed, convenience, and lower overheads.

Electronic data interchange is the exchange of documents between partner organizations. Often, the organizations will need an exchange format to determine how and which documents they exchange. The most common documents organizations exchange using EDI are trade documents. The trade documents include everything from purchase orders to shipping tags.

In a world without EDI, an organization would create a purchase order, print it out, and mail it to the partner organization. The partner would then get the document, process the transaction, and then mail back the invoice and confirmation. The entire process can take days or sometimes weeks. With EDI, the entire process will take minutes.