A simple definition of Electronic Data Interchange (EDI)

We can define Electronic Data Interchange (EDI) as "the exchange of business data from one organisation's computer application to the computer application of a trading partner".
The messages exchanged are typically Orders and Invoices, although there are hundreds of available messages.

EDI comes into its own when repetitive manual tasks are required to support a business relationship; Electronic data interchange simply eradicates them by automating the process and removing the paperwork element.
It increases accuracy by eliminating the re-keying of data and the quality of data is enhanced by agreeing product codes, prices and location codes in advance.
Electronic data interchange also helps cement customer/supplier partnerships by reducing the supply chain costs associated with manual processing.
EDI enabled suppliers are cheaper and easier to deal with.

EDI began in earnest over 20 years ago and is now used by over 20,000 UK companies.
It is most commonly used by the UK retail sector, typically in Grocery, Catering, Building & DIY, Publishing, Stationery and Department Store sectors.
EDI can also be found supporting business supply chains in a vast spectrum of other industries ranging from Electronics to Motor Manufacturers, and Pharmaceutical Supply to the Inland Revenue. There are no barriers to the use of electronic data interchange in any industry.
The expansion has been driven by major clients insisting that suppliers adopt electronic data interchange (EDI) to reduce overhead costs, thereby helping to enhance the on-going competitiveness of their business.
Widely used across Europe, North America and the rest of the world, EDI is actively encouraged by European Governments using United Nation's EDI standards to facilitate cross border trading.

EDI normally involves the use of secure private networks known as VANs (Value Added Networks), which securely and reliably deliver information between trading partners; VAN providers include global companies such as BT, Sterling Commerce and IBM.
The VANs are accessed by specialist communications software providing access to the user's 'mailbox'. Typically EDI systems are likely to be PC-based (even if the back office system is on another platform) leveraging the exceptional PC power at very low cost.
In recent times there has been a move towards AS2, leveraging the power of the Internet to allow real-time delivery of messages without the associated costs of the VANS. For more information about AS2 please click here...
Software is needed to enable the communication, management and translation of messages into and out of the EDI formats.

First we should define EDI "standards". Standards can be imagined like a spreadsheet where every 'cell' or element defines a part of the message, say the colour or quantity of an item on an Order. Both ends of the relationship need to agree the standard and implement it precisely.
The most common EDI standard in the UK is TRADACOMS - a set of message definitions laid down to describe the data elements that are used to make up an electronic data interchange message.
TRADACOMS is being slowly superseded by EDIFACT and its subsets - like EANCOM and ODETTE, which are capable of handling more complex messages and address more involved business processes like transportation and multiple currencies; in America there is also ANSI X12, which is simply another EDI standard.
It is increasingly likely that UK companies will need to support more than one standard in their EDI solution. It is also possible that other standards not mentioned here may be used in specific countries or industry sectors.

Learn more about the advantages of edi here.

A Simple Definition of EDI

6 Easy steps to EDI implementation