Electronic Data Interchange (EDI) allows businesses to transfer critical information to each other electronically. Who benefits from this technology—how and why? Check out our brief guide:

What is EDI?

Electronic data interchange is the transfer of data from one company to another electronically—across serial links or peer-to-peer networks using an internet connection. This allows your business to communicate with multiple trading partners (businesses) simultaneously.

Who uses EDI?

EDI is often used by companies with large-volume data transfers including invoices, purchase orders, ship notices and customs documents, etc. Used properly, EDI can replace all other document transmission methods including fax, email and physical mail.

In the past, EDI was generally reserved for large manufacturers running an ERP system, but the advent of scalable, on-demand EDI solutions now makes it possible for any company to take advantage of its benefits.

When do you need EDI?

EDI often becomes a necessity for two reasons: One, your company wants to cut costs on the storage, printing, processing and transfer of paper documents. Two, you want to ensure no data is lost during transmission, since a missing form or mistyped product number can significantly impact payment processing times and lower ROI. Leveraging EDI means improved data quality without the need for human oversight.

Where is EDI most used?

EDI solutions are used worldwide, but under different standards across the globe. In the US, most EDI solutions use the ANSI ASC X12 specification, while the Electronic Data Interchange for Administration, Commerce and Transport is used abroad. In addition, specific industries such as automakers or health care have their own compliance-based standards.

Why use EDI?

There are several compelling arguments to use EDI. The first is standardization; when both sender and receiver use the same data transmission format, the result is fewer errors and decreased processing time. Additionally, new EDI solutions are able to integrate with existing ERP tools without requiring re-deployment, allowing seamless interaction with competing standards such as XML. When deployed, standardized and applied correctly, the right EDI system will offer faster processing, easier payments and improved data quality.

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Editor’s Note: This post was originally published in March 2015 and has been updated with the latest information concerning EDI.

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