EDI Full Form- Electronic Data Interchange

What is EDI? The full form of EDI is Electronic Data Interchange. The electronic transmission of corporate data in a defined format is known as electronic data interchange, or EDI. This procedure enables businesses to communicate electronically with one another instead of utilizing paper documents. Trading partners are companies that conduct commerce electronically. Purchase orders and invoices are the two most often exchanged business documents using Electronic Data Interchange (EDI). EDI, at the very least, takes the place of the mail preparation and handling involved in conventional commercial communication. The true strength of EDI, however, lies in its ability to standardize information sent in business papers, enabling "paperless" exchanges.

Difference Between Traditional Paper Purchase Order and EDI Document Exchange

Traditional Paper Purchase Order

EDI Document Exchange

Typically, this procedure requires three to five days. The buyer decides what to buy, drafts and prints the purchase order. Purchase orders are mailed by the buyer to the supplier. Purchase orders are received by the supplier, who then inputs them into the order entry system. Purchase order acknowledgement is mailed to the buyer by the supplier, or the buyer phones the supplier to find out if the purchase order has been received.

This process can take less than an hour and usually takes place over night. The buyer decides what to buy, drafts the purchase order, but doesn't print it. The purchase order is electronically created by EDI software, which then automatically sends it to the supplier. As soon as the purchase order is received, the supplier's order entry system updates itself. The order entry system of the supplier generates an acknowledgment and sends it back to verify receipt.

 

Computer to Computer EDI

Computer to computer Postal mail, fax, and email are replaced by EDI. Email is an electronic method as well, but people, not machines, should manage the documents that are sent and received via it. People involved introduce errors and slow down the processing of the paperwork. Rather than going through a middleman, EDI papers can go directly to the right program on the recipient's computer (such as the Order Management System) and start processing right away.

Business Document 

These are any of the documents that companies usually share with one another. Purchase orders, invoices, and advance ship notifications are the most frequently transferred documents using EDI. However, there are a ton more, including bill of lading, payment documents, inventory records, customs documents, and shipping status documents.

Standard Format

In order for computers to read and comprehend EDI documents—which must be processed by computers rather than people—a standard format needs to be followed. Each item of information is described in a standard format, along with its type (integer, decimal, mmddyy, etc.). In the absence of a common format, every organization would send papers in its own format, which the recipient's computer system would not be able to understand—just as an English-speaking human is unable to understand Japanese.

• Today, a number of EDI standards are in use, including ebXML, TRADACOMS, ANSI, and EDIFACT. Additionally, there are numerous versions of each standard, such as ANSI 5010 and EDIFACT version D12, Release A. Businesses must agree on the precise EDI standard and version before exchanging EDI documents.
• In order to translate the EDI format so that the data can be used by their internal applications and allow straight-through processing of documents, businesses usually use an EDI translator. This can be done either internally or through an EDI service provider.

The rigorous formatting guidelines of the standard you are employing must be followed while creating an EDI document, such as a purchase order. Each item of information in the document has certain locations and methods specified by these rules.