The basic concepts of EDI

The basic concepts of EDI

Written by Act Data Services, Inc. 1-800-ACT-DATA

EDI, an acronym for Electronic Data Interchange is about communicating with partners and vendors electronically. When people talk about paperless trading, they are referring to EDI. Placing and receiving the order, financial transactions are examples of EDI.

The actual definition of EDI is the interchange of structured data according to agreed message standards between computer systems, by electronic means. This means that regardless of the type of transaction, be it an order or an invoice, the structure of the data remains the same. This allows for seamless communication between multiple partners. This is maintained between different systems by following set standards.

EDI allows for massive reductions in losses due to human error. Different vendors with different systems will require repeated entry of the same data. This repeated entry of the same data is as high as 70%.

In addition to the operational benefits, EDI also enables some strategic benefits for the organization. The first is the flexibility to shift from one business process to another. For example, it becomes easy to shift to JIT for an organization that has implemented EDI. Second is the ability to quickly respond to changes in the market. Previously, any changes in orders would take days or even weeks. Now, if the order has not been fulfilled, a change can be requested within minutes.

For organizations involved with multiple trading partners, EDI is the only way to go. It presents a fast and secure method of processing transactions that make it well worth the time and cost of implementation.

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Act Data is an EDI service bureau that provides web based EDI solutions and logistics standards implementation.

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