EDI TECHNOLOGY - Electronic Data Interchange
EDI (Electronic Data Interchange) is the transfer of data from one computer system to another by standardized message formatting, without the need for human intervention. EDI permits multiple companies possibly in different countries to exchange documents electronically. Data can be exchanged through serial links and peer network, though most exchanges currently rely on the Internet for connectivity.
The technology behind EDI is 20-30 years old, and was designed to replace fax, postal mail, and email. Replacing human-to-human communication, whether through paper or electronic mail with automated EDI messages has been a cost-saver for many businesses. But because the EDI messages are automated, the messages must be in a standard format.
There are numerous EDI standards, including ANSI, EDIFACT, TRADACOMS and ebXML. This can create issues when businesses need to communicate with different EDI standards. The businesses will either have to agree on the EDI standard to use or employ some sort of translation service, whether in-house software or an EDI service provider. EDI standards prescribe both mandatory and optional information for any particular document and provide rules for the document’s structure.
When an EDI document is created, such as an invoice, the order of text and the order of the data fields within that text give it meaning. That text must strictly adhere to the EDI standard or else the sending and receiving systems will not be able to understand the document. They define exactly where and how each piece of information in the document will be found. An EDI message will comprise one single business document, e.g. a purchase order, invoice, or advance ship notice
For companies of any size, implementing EDI is necessary for maximum competitiveness and growth. It reduces costs and improves operational performance across your organization. From the start, EDI accelerates data exchange and sharpens accuracy. Your company and your customers benefit from streamlined administration, improved information flow, more accurate accounting, better inventory management and lower costs. Because electronic transactions are so efficient, customers that use EDI prefer to work with vendors that have EDI systems in place.
From financial, operational, and technical perspectives, the right EDI solution makes irrefutable business sense. EDI enables companies to complete business transactions faster with less expense and fewer errors. There are many other indirect benefits that derive from this increased control and efficiency, such as faster transaction processing, increased accuracy and better information access, among others. EDI isn't really very complicated or highly technical. It's just an extension of what most companies are doing already. That is, businesses today commonly use computers to hold and process information used in the management of various business functions such as purchasing, inventory management, payables and receivables and so forth. The computer is the repository of all information that will be included in business transaction documents. EDI simply takes this computer system capabilities one step further by adding the transmission of the business documents themselves. Purchase orders, invoices and the like are transmitted between trading partners over telephone lines in computer readable form.
EDI thereby making it possible to exchange data, without ever rekeying the original transaction, information stored in the sender's internal computer files. Sending business documents computer to computer is more efficient than printing the data stored in internal computer files, mailing paper documents, and having a trading partner's clerical staff enter the same document data into its own computer system. The elimination of paper documents reduces paper processing costs and clerical labor. Reducing document processing results in fewer mistakes and better customer service. In order to communicate with your trading partners using EDI, you need a computer, modem, phone line and EDI translation/communication software.