What Is EDI and What Does It Do?

 In Blog, News, Small Business, Smb

To manage data and minimize time, companies use Electronic Data Interchange (EDI) to minimize errors and maximize efficiency.

EDI is the exchange of business information utilizing a standardized format.

The American National Standards Institutehas published its X-12 standard for EDI for more than 35 years. While the North American standard is X-12, Europe established the Electronic Data Interchange For Administration, Commerce and Transport (EDIFACT) standard shortly after X-12 came about, and the United Nations has adopted those.

So what does EDI do?

  • Increases speed
  • Increases accuracy
  • Increases communication
  • Eliminates errors
  • Streamlines inventory
  • Increases productivity
  • Improves record keeping

There are hundreds of document types in EDI that cover most transaction types commonly used by suppliers and vendors.

Unlike more complicated methods which involve the printing of sales orders and invoices, EDI is held electronically with process controls.

EDI is broken into four components:

  • Translator  — The distributor or supplier must have an EDI translator to receive documents and change from EDI standards to a readable format.
  • Data mapping — Data mapping must also be in place to ensure that all data shows up correctly in both the supplier and the vendors computer systems as well as all associated documents. Data mapping is seamless and allows to ensure that all documents are sent in the correct format.
  • Network — A network betweens suppliers, vendors, and distributors needs to be in place for all parties to communicate.
  • Support and Maintenance — An EDI system needs to be maintained and if issues arise you need adequate trained support staff to ensure the system runs effectively.

The best use of EDI is to pair it with customer relationship and inventory management systems to create a full functioning system that is paperless.

EDI is so important to scaling a business that many big box retailers require you to have an EDI system implemented just to do business with them.

— Shane Kluiter

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