What is EDI

What is EDI? Quick overview

When you are dealing with a business partner, there is an exchange of documents such as a Purchase order, Invoice, Shipment notification, etc. Traditionally this done through paper. The digital form of such business documents is what EDI is.

People use emails and fax as well, but such communications still involve people to receive, review and act on them. In a large scale environment, such as the Retail industry, this will not scale.

You might have hundreds of purchase orders. Viewing, reviewing, and accepting them is a lot of hard work. You can instead have your computer do that for you. You can achieve that by having your business partner send the documents as an EDI file.

How does an EDI file look?

An Electronic Data Interchange is a file that has important data points formatted in a certain way. For example, if you take a Purchase order EDI, it will have the following data points,

  • Purchase order number
  • Quantity ordered
  • Products ordered

Of course, there are more data points that are necessary for processing a Purchase order as you will notice in the sample file image below.

In the image below, the data point highlighted in green is the Purchase order number and the one in red is the Product ID that is being ordered.

Sample Walmart Purchase Order EDI file

(Modified to hide sensitive information)

Similarly, an Advanced Shipment Notification (ASN) will have data points pertaining to the shipment that is set to arrive.

Who decides the EDI file format?

There are organizations across the globe such as ASC X12 (charted by ANSI) that design the standards (or format) of these files. This is known as the EDI standard.

The ANSI X12 standard is prevalently used in North America. There are other standards as well. EDIFACT, VDA to name a few. EDIFACT is primarily used throughout Europe, while VDA is used across European automobile industry.

Different EDI Standards across the globe

Do I need an EDI software to read these files?

Yes. Traditionally, companies set up EDI software on their servers. This software enables companies to read the data in the files and insert the data into their ERP or any other software they might use to manage their business transactions.

As an example, when a Purchase Order EDI file arrives, the software can read data in the file and insert the data points such as Purchase order number, Products ordered, etc into your ERP. This lets you manage all your Purchase orders inside your ERP even if it comes across EDI.

This of course in recent years, has moved to the cloud. Software-as-a-service companies such as Zenbridge has solutions that work from the cloud without needing to install EDI software.

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