What is EDI?

EDI (electronic data interchange) is the term used to describe the automated, electronic exchange of data and documents between business partners. EDI is a collective term for a multitude of bilateral processes, or processes with differing standards for the electronic transmission of communications.

IT systems guarantee that communications from the sender to the receiver are transmitted automatically. Humans only monitor these processes and intervene only when necessary. Agreements between communication partners can be very simple or very detailed and comprehensive in nature. In a simple agreement for example it could be just the messaging format and the end-point to which the information is sent that are defined. Very detailed and comprehensive agreements require fixed semantics and a format with a multitude of notifications, standardized code values and transmission protocols. In this respect there is a large number of differing standards.

What is an EDI standard?

A standard defines which data will be exchanged and in which way. In setting these standards formats and message type semantics are controlled down to a single byte. Code values are often standardized in order to clearly identify order types, for example. An existing ISO code will often be used for the more common codes such as country or currency. The standard itself will also often pre-determine via which protocol these messages are to be exchanged (AS2, OFTP2, SFTP, HTTPS, etc.) and which error procedures are to be used in case of error.

EDI standards are sector specific. Many industry sectors have their own sector standards. The UN/EDIFACT standard of the UNO covers many sectors but also contains sector specific subsets. The SWIFT standard is used in banking, the ODETTE or VDA standard in the European automobile industry and RosettaNet in electronic and e-business.

How is EDI used in companies?

As already described, EDI refers to the electronic exchange of information. A classic case is the processing of orders between two companies.

Company A orders one or more items from company B.

Without EDI company A will send its business partner a fax, letter or email detailing the order. In company B an employee will confirm receipt of the order, invoice or delivery note in a similar way. Although both companies probably use IT systems as application software, communication between the two of them follows manually. A break in media occurs. Data must be input manually into the respective IT systems – this costs time and money and is prone to errors.

Using EDI the transmission of business documentation follows automatically, as the IT systems in both companies exchange messages directly in line with the agreed standards. The standard dictates in which way messages are to be created and transported. If both parties adhere to the standard then nothing can stand in the way of the quick, reliable and secure exchange of information.

Why is EDI important?

Beyond a certain volume an exchange of information can only be managed appropriately if it is automated. Many companies expect and require of their suppliers and partners that they are contactable via their EDI network. The aim of electronic data exchange is to facilitate the quick, reliable and secure transmission of data and documents.

How can we help you?

EDI with Scheer PAS

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