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  • Electronic Data Interchange (EDI)

    Electronic Data Interchange (EDI)

    Electronic Data Interchange (EDI) is the process of exchanging information electronically. At its heart, it is simply a business transaction conducted in an electronic manner. It is typically used in the transfer of data between businesses that would otherwise take place via paper documents. A simple example of EDI would be the transmission of a computer file from one business to another containing all of the information necessary for placing an order for goods and services to be purchased. Another example would be the transmission of a file containing invoice information or another containing receipts for shipments.

    When humans communicate, they use a series of audible rules to shape sounds that are understood by the person to whom they wish to speak. The person who is listening would be unable to receive any useful information from the communication if they didn’t speak the same language as the person who was speaking. It works the same way with EDI. EDI works because both the sending business and the receiving business follow a set of rules that they both understand and agree upon in advance. There are many sets of these rules for EDI which are referred to as “standards.” Just like computer technology in general, EDI has evolved over a period of many years and over several continents. As a result, there are many different standards that have been developed. These standards have been shaped not only by geography but also by the nature of the businesses who developed and use them.

    The first step in diving deeper into EDI involves understanding the organizations that have developed standards for EDI and then understanding the standards which they have developed. The standards that are not widely used or that are being phased out will not be discussed here. Finally, some conclusions will be made regarding the current state of EDI and how it can best be adopted today.