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Oct 18

EDI 101: What is EDI?

EDI 101: EDI stands for Electronic Data Interchange and it is defined as the structured transmission of data between organizations by electronic means. It is used to transfer electronic business documents such as Purchase Orders, Invoices, Advance Shipping Notices (ASNs), Inventory Updates, Acknowledgements, Credit Memos and many more from one computer system to another, i.e. from one trading partner to another trading partner.

 EDI data flowsEDI data

EDI is not an out of the box solution.EDI 101

Three components must be placed together to establish a successful EDI connection with a trading partner:

  • EDI Standards (X12, EDIFACT, XML….) must be agreed and the documents that will be exchanged PO’s, Invoices, Shipping Notices, etc..
  • EDI Communication Protocols (VAN, AS2, FTP…) must be agreed, i.e. the communication tools the trading partners will use to exchange the agreed data and messages.
  • Integration with ERP/Accounting Package. This removes the need to re-key data, thus highly improving efficiencies, decreeing costs and eliminating errors.

How will I know if I need EDI?

  • You will trade with a large box store retailer such as John Lewis, Tecso, Sainsbury’s, Boots, B&Q, Walmart, Home Depot, Toys R Us, etc..
  • You will trade with Online Retailers such as Amazon and eBay…
  • You will use a Third Party Logistics Provider (3PL) for the outsourced storage and shipping of your goods.
  • Your customers will use terms like EDIFACT, X12, Tradacoms, VAN, AS2, sFTP, etc..
  • You will have a shopping cart built on an eCommerce Platform such as Magenoto, Shopify, Bigcommerce, WooCommerce, etc..
  • You want to further automate your supply chain processes through greater automation and cost reduction.

Advantages of EDI

We’re asked time after time, “Why should I use EDI if I don’t have to?” – Here’s our usual reply – Top 5 Advantages of EDI.

EDI Advantages

  1. Greater Accuracy: By removing the need to re-key data, EDI drastically reduces the potential for human error this greatly improving the accuracy of the transactions.
  2. Greater Speed: Electronic communication gives almost real time data to all parties.
  3. Integration: Integrate all aspects of your supply chain connecting your ERP/MRP/WMS, 3PL and all trading partners.
  4. Faster Payment: EDI facilitates a much shorter ‘order to payment’ cash cycle which means you will be paid much faster from your customers.
  5. Environmentally Friendly: Electronic communication removes the need for paper which is environmentally friendly and also reduces your print costs.


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