{"id":46174,"date":"2022-10-13T16:12:50","date_gmt":"2022-10-13T15:12:50","guid":{"rendered":"https:\/\/softco.com\/glossary\/electronic-data-interchange\/"},"modified":"2023-06-07T15:15:04","modified_gmt":"2023-06-07T14:15:04","slug":"electronic-data-interchange","status":"publish","type":"glossary","link":"https:\/\/softco.com\/uk\/glossary\/electronic-data-interchange\/","title":{"rendered":"Electronic Data Interchange (EDI)"},"content":{"rendered":"\n
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Electronic Data Interchange (EDI)<\/h1>\n<\/div><\/div>\n\n\n\n
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What is Electronic Data Interchange (EDI)?<\/h2>\n\n\n\n

Electronic data interchange (EDI) is the exchange of documents between different companies while following a specific format. EDI replaces paper-based documents with electronic documents that can be read and interpreted by computer applications.<\/strong><\/p>\n\n\n\n

EDI replaces the standard paper-based communication method for sending documents like purchase orders or invoices, automating the entire process and helping organizations save on the costs of manual processing. <\/p>\n\n\n\n

During an EDI transaction, information is moved automatically through a computer application from one organization and received by the other application, where the information is automatically decoded and read. <\/p>\n\n\n\n

The format and order of information is determined as per EDI standards, making it easy for information to be read quickly.  This standardized flow of information is what leads to a fully paperless exchange of information. <\/p>\n\n\n\n

Benefits of Using Electronic Data Interchange<\/h2>\n\n\n\n

There are a number of benefits of using electronic data interchange for modern businesses. Here are a few:<\/p>\n\n\n\n

Significant Cost Reductions <\/h3>\n\n\n\n

One of the biggest advantages of using EDI is that it helps companies reduce their costs in processing important documents. Instead of sending paper-based invoices or purchase orders, companies can simply use a computer application to send information remotely. <\/p>\n\n\n\n

Faster Processing<\/h3>\n\n\n\n

Electronic data interchange offers considerably faster processing speeds. Information is automatically captured from standardized documents, allowing for faster document processing. Companies that have to deal with a large number of invoices or purchase orders can ensure nothing is missed with EDI.<\/p>\n\n\n\n

Reduced Risks of Human Error<\/h3>\n\n\n\n

EDI also reduces the risk of human errors considerably. There\u2019s no risk of error when information is being copied, unlike when dealing with paper-based documents. The information is read automatically and EDI documents are automatically picked up by a relevant application on the receiver\u2019s computer. <\/p>\n\n\n\n

Improvement in Business Relationships<\/h3>\n\n\n\n

When invoices are processed faster, it helps companies not only build better relationships with their business partners, but it also improves their goodwill. It allows vendors to trust them and makes it easy for the company to avoid supply issues.<\/p>\n\n\n\n

How Electronic Data Interchange Works<\/h2>\n\n\n\n

The concept of EDI is actually quite simple: all documents must be converted into specific EDI formats.. <\/p>\n\n\n\n

Companies often specify which EDI format they use, and trading partners are required to comply with those. Transaction documents can be run through EDI software to convert them into different formats. <\/p>\n\n\n\n

EDI messaging standards are defined by different organizations, and the most common standards include:<\/p>\n\n\n\n