Everything Around Electronic Data Interchange | EDI Systems, EDI Batch Processing  

Before we explain what EDI is, let us first take a look at what stands for EDI SYSTEMS. As defined this is purely electronic interchange of data between groups of functions on in-house computer systems (batches) or management systems linked through telecommunication lines – all done electronically.  

Electronic Data Interchange serves to most companies, manufacturers, retailers for example EDI SYSTEMS are integrated into software tools used within organization. Other Industries such as in services providers are also sustained by EDI Interchange. 

We will further learn the tools used in creating EDI, especially the format and components and even the positive impacts it brings to users. If you have questions like where do I find the EDI format or an example of EDI use, then this is the right area for you.  

Electronic Data Interchange (EDI) systems serve to facilitate and integrate various business functions through EDI tools such as invoice, order process, and etc. As it was stated above, most organizations today have adopted EDI systems, it is quite useful for organizations that deal with large volumes of transactions and improve the performance of their efficiency centered strategy through batch processing automation.

How does EDI work in practice?  

Let’s put things into perspective with a practical example:  

A retailer needs to place an order for 1,000 units of a certain product. Instead of emailing the supplier a PDF purchase order, the retailer’s system electronically transfers an EDI 850 Purchase Order directly to the supplier’s Software System. Subsequently, the supplier responds with an EDI 855 Purchase Order Acknowledgment and later dispatches an EDI 810 Invoice.  

All of these documents are exchanged electronically, automatically, and in a matter of seconds—without the need for printing.  

What are the three types of EDI?  

Based on the previous explanation, there are three ways to implement EDI:  

– Direct EDI (Point-to-Point): This is when there is a direct connection between two companies, which is ideal for larger volumes with more frequent communications.  

How does EDI work?  

An EDI system converts business documents to a specific format. The standardized data is sent to a trading partner over a secure communication channel (EDI). Upon reception, the trading partner’s system will convert the EDI data to their internal format.  

Typical steps include:  

• Document Preparation: Gather data from other internal systems.  
• Document Translation: Change to required EDI format.  
• Transmission: Transmit data through a secure method, such as AS2 or FTP.  
• Receipt and Processing: The receiver translates and processes the file.

EDI through VAN (Value Added Network): This can be a 3rd party that takes care of document exchange. Usually done to interface with many partners.  

Web EDI: A simpler solution for small businesses that use browsers. No software is needed as all forms are completed online.  

What Are The 4 Major Components Of EDI?  

An EDI system has 4 primary components:  

EDI Standards: These are the set guidelines that maintain uniformity such as ANSI X12 or EDIFACT.  

Translation Software: This is the program that braces keeps internal documents and other supporting documents in relevant EDI format and vice versa.  

Communication Network: Means of secure transmission of data like AS2 or FTP.  

Applications: Systems that generate and respond to EDI data and are commonly called Enterprise Resource Planning (ERP) or Accounting Software.  

What is the difference between EDI and Email?  

Both can be used to send data, but each has a unique function.  

Feature	EDI	Email
Automation	Fully automated	Manual sending/receiving
Format	Structured & standardised	Unstructured text
Integration	System-to-system	Human-to-human
Error Rate	Low (fewer manual steps)	Higher (manual input errors)
Speed	Instantaneous	Depends on user response

In short, EDI is designed to be exchanged between machines and emails are for people.

Does EDI still have relevance today?  

Certainly. Despite the existence of APIs and cloud solutions, EDI is still essential to supply chain activities. It is particularly important for the retail, automotive, healthcare, and logistics industries. EDI is used alongside vendors by major companies such as Walmart, Amazon, and Target.  

Which EDI format is the most commonly used?  

The most common one used in North America is the ANSI ASC X12 EDI format. In Europe and in some other regions, EDIFACT is used more frequently. These formats contain various transaction sets such as:  

• EDI 850 – Purchase Order  
• EDI 810 – Invoice  
• EDI 856 – Advance Ship Notice  

Each format ensures data is sent and received meaning the same thing regardless of its interpretation.  

What are examples of EDI data?  

The following listed is common documentation done through EDI:  

• Purchase Orders  
• Invoices  
• Shipping Notices  
• Inventory Updates  
• Payment Confirmations  
• Customs Documents  
• Claims for payment in healthcare  

These all fall under EDI transaction sets and they offer considerable efficiency improvements to the procurement, logistics, finance, and many other sectors.

What Are EDI Tools?

EDI tools are vital in managing document translation, mapping, monitoring, and communication. Some well-known tools include:

• Dell Boomi
• IBM Sterling
• MuleSoft
• Cleo Integration Cloud
• TrueCommerce

These tools offer integration with ERP systems such as Oracle, Microsoft Dynamics, and SAP.

What is EDI Primarily Used For?

As stated above, it is used to automate the exchange of business documents between organizations. Some core applications include:

• Order Processing
• Payment Processing
• Shipping Notifications
• Invoicing
• Inventory Management
• Order Processing
• Claims processing for healthcare services

With EDI, organizations are able to save time and reduce errors, as well as improve accuracy in everyday operations.

What Are the Four Layers of EDI?

The EDI structure is made up of four distinct layers:

Physical Layer – The actual infrastructure (servers, internet, etc.) 

Application Layer – Connects with the internal business systems

Translation Layer – Converts the internal format to EDI standards

Communication Layer – Secure transmitting of EDI messages

These layers are designed to work in unison to seamless exchange data.

What is the Best EDI Software?

Your company size, industry and company needs will impact the “best” choice of EDI software. However, these are some best reviewed options:  

TrueCommerce– Best for customer-centric mid-sized businesses.  

IBM Sterling B2B Integrator– Enterprise grade and traditional power house.  

Cleo Integration Cloud– Best for hybrid cloud setups.  

EDI Power by SPS Commerce– They have strong retail integrations.  

Dell Boomi– Known for their hybrid API and EDI abilities.  

Why Do Companies Use EDI?

EDI boosts business productivity for many reasons such as:  

• Enhancing speed: Quicker cycle orders to cash.  
• Improving accuracy: Less errors that come with manual work.  
• Cutting costs: Saving paper and admin time.  
• Efficient productivity: Automating regular comms boosts EDI effectiveness.  
• Improved compliance: Working with large corporations that expect partners to have EDI set up.  

How Are EDI Files Transmitted?

Comes down to the EDI files being sent through secure means such as:  

• VANs (Value Added Networks)  
• HTTP/HTTPS  
• Ftp/SFTP  
• AS2 (Applicability Statement 2)  

The trading partners compliance regulations and preferences play a vital role in choosing the preferred method of transmission.

What Are the Disadvantages of Electronic Data Interchange?

Even with all its advantages, EDI has some disadvantages:

• Initial Setup Cost: Can be expensive to implement
• Complexity: Requires technical knowledge
• Standard Variation: Different partners may use different standards
• Lack of Flexibility: Customization is often limited
• Maintenance: Ongoing monitoring and updates are essential

These obstacles may slow down smaller businesses’ adoption of EDI, although web-based options are helping ease that barrier.

Final Thoughts

Far from being obsolete, Electronic Data Interchange thrives in the business world where rapid speed, accuracy, and automation are important. Although other newer technologies such as APIs are becoming more popular, EDI is still a reliable way for systems to communicate in a predetermined format.