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What is EDI (Electronic Data Interchange)?

The Electronic Data Exchange or EDI is a technology that helps trading organizations and partners get more done faster by speeding up logistics timelines and eliminating manual errors through business to business communication automation. EDI allows organizations that produce, ship, purchase, and sell goods or provide services such as retailers, manufacturers, insurers, health care providers, airlines and more.

EDI has been in use since the 1960s, though it is finding new use today by enabling supply chain automation and acting as a key part of the workflow for business process automation. By the end of this blog post, you should have a fairly solid understanding of EDI and an introduction to the basics of EDI technology.

Computer-to-Computer Data Exchange

EDI is an automated computer-to-computer exchange of standard electronic business documents that occurs between business partners over a standardized and secure connection.

With computer to computer communications, there is no need to rely on manual options such as email, facts, and postal mail. Documents move directly from the sender’s computer application to the receiver’s computer application. For example, a buyer can send over a purchase order and the supplier will automatically send over an invoice.

Thousands of standard business transaction documents can be spent automatically with EDI. Common examples include purchase orders (EDI 850), shipping statuses (EDI 214), invoices customs information, payment confirmations (EDI 820), and inventory documents.

The standard EDI format allows computers to process EDI documents. Standards describe each piece of data and the format, such as the type of document, the parties involved, the date common and the actions to take. The use of standards eliminates company to company variations so that each business partners computer system speaks a common language.

EDI systems use a variety of standards for various regions, use cages, and industries. The EDI standards have different versions, so EDI partners have to use the same standard and version for the data to flow properly.

Among the most popular standards are ANSI X12 used in the United States, UN/EDIFACT which is used globally, and industry specific standards, such as HIPAA.

EDI uses a range of secure protocols for document exchange. Partners have to agree upon the protocol to use and make sure they are using the same protocol before they can exchange EDI files. If they do not, they must work with an intermediary to facilitate the exchange between the two protocols.

Certain EDI security protocols require more technology than others but using EDI software such as ESSBUS Connect can facilitate a wide variety of exchanges without a major investment.

These protocols range from the long-established file transfer protocol (FTP) or secure FTP (STFP) that is used to upload content to a host server for a website, to API-based systems such as AS4, web-based via A2, and other options, including mobile EDI.

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