What is EDI?

EDI Definition

What is EDI???  Starting with EDI basics, Electronic Data Interchange (EDI) is the computer-to-computer exchange of business data in standard formats. Information is organized according to a specified format agreed to by both parties, allowing a "hands-off" computer transaction that requires no rekeying on either end.  All information contained in an EDI transaction set is, for the most part, the same as on a conventionally printed document.  No EDI definition is complete without also mentioning there are different standards depending where you are in the world such as X12 (US), Edifact (Europe) and Tradacoms (UK).

Usage and Trends of EDI

EDI is one of the most exciting and competitive tools available in the business world today.  The usage of EDI is growing at a stunning rate as more and more companies ask, "What is EDI?"  The next question is not “will my company do EDI?” but “how well will we do EDI?”  The fast-paced business environment of today demands the use of EDI. This need is driven by just-in-time (JIT) manufacturing schedules, customer-service demands, “partnering” with another company or sharing information systems, increasingly competitive business environments, and the need to establish and maintain the competitive advantage.  Many companies are entering into EDI not proactively, but reactively, in response to an EDI mandate by their customers or vendors.  This mandate often threatens businesses because they may lose their trading relationships if they do not implement EDI.  One measure of the need to not just do EDI, but to do it well, is evidenced in the charge backs that are levied by some of the larger companies (like automotive manufacturers) upon the receipt of invalid data or other EDI errors.  These companies specify how much each error will cost their Trading Partner in a signed Trading Partner agreement.

 Factors to Consider

  1. Transaction Volume:  Approximately how many EDI transactions (Purchase Orders, Invoices, etc.) will you be sending and receiving each day, week, or month?  Do you expect your volume to increase substantially in the next year or so?  Is the EDI solution robust enough to meet your company’s needs, now and into the future, but not expensive “overkill?”
  2. Staff Requirements:  What personnel, and level of experience, will be required to administer the EDI solution?
  3. Compatibility:  Will the solution meet all of your trading partners’ EDI requirements, as well as your own?  Does the EDI provider have experience in your industry, or with your trading partners?
  4. Integration:   Do you intend for EDI documents to be seamlessly integrated into and out of your current order processing and/or accounting software?  If so, does the EDI solution have this capability, and does the EDI provider have experience with your software system?
  5. Implementation Time and Cost:  Does the proposed solution include everything you need for a quick and painless implementation:  Software, installation, trading partner setup, training, maintenance and support?  How long should it take to be fully operational with EDI, and how much will it cost?
  6. Support:  How will ongoing support be handled?  Does it require on-site visits, or can it be handled remotely?  What days and hours is support available?  Are there any added costs?
  7. Technology:  Will the EDI solution be adaptable to changing standards and methods of communication?
  8. Routing:  How will your EDI documents be routed to and from your trading partners?   If a Value Added Network (VAN) is required, what are your options?  Is direct communication over the Internet available?
  9. References:  Who are some other companies with requirements similar to yours that are using this EDI solution?


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