Electronic Data Interchange (EDI) is a process that enables the computer-to-computer exchange of business documents in a standardized electronic format among business partners.
In computer-to-computer communication, EDI replaces traditional methods such as mail, fax, and email. While email is an electronic approach, it requires manual processing of documents by humans, slowing down the process and introducing errors. EDI, on the other hand, transfers documents directly to the recipient’s computer application and initiates processing immediately. This automated process, with reduced paper and human involvement, more efficiently exchanges business documents (e.g., purchase orders, invoices, advance shipment notifications).
The EDI process is typically defined as the exchange of business documents in a standardized format among business partners. To ensure computer understanding of business documents, a standard format must be employed. Various EDI standards exist, including ANSI, EDIFACT, TRADACOMS, and ebXML. It is crucial to reach an agreement on a specific EDI standard and version for the exchange of EDI documents between two businesses.
Businesses often use an EDI translator to convert the EDI format for their internal applications to directly process documents. In partnerships between two businesses, EDI documents are frequently exchanged in processes such as procurement or order fulfillment.