Electronic data interchange is a standardized, automated method to communicate business information electronically, rather than using paper documents. With EDI, the information moves directly from a computer application in one organization to an application in another.
EDI transmissions can be broken down into two basic types:
1. Point-to-point or direct connections. Two computers or systems connect with no intermediary over the
internet, generally with secure protocols.
2. Value-added network (VAN). A third-party network manages data transmission, generally with a mail
boxing paradigm.
As an automation technology, EDI delivers core business benefits:
1. Saves time and money. Automates a process previously manually executed with paper documents.
2. Improves efficiency and productivity. More business documents are shared and processed in less time.
3. Reduces errors. EDI’s rigid standardization helps ensure that information and data is correctly formatted
before it enters business processes or applications.
4. Improves traceability and reporting. Electronic documents can be integrated with a range of IT systems to
support data collection, visibility and analysis.
5. Supports positive customer experiences. Enables efficient transaction execution and prompt, reliable
product and service delivery.
EDI is important to both large and small businesses - For large organizations, EDI enables standards to be instituted across trading partners to consistently achieve benefits. For smaller organizations, adherence to EDI offers greater integration with larger firms that have big budgets and strong influence.
Metalanguages like Extensible Markup Language (XML) or JavaScript Object Notation (JSON), and application programming interface (API) integration complement, rather than replace EDI
Effective EDI
There are some basic conditions, capabilities and resources needed to implement EDI effectively. In addition to obvious factors like agreement on document types, secure transmission methods, and requisite hardware and software, an effective EDI implementation should consider:
1. Translation or mapping software. Takes fields such as names, addresses, currency amounts, part
numbers and quantities, and maps them from business application formats into standardized documents
and vice versa.
2. Batch enveloping or developing capabilities. Supports large EDI message batches to enable senders and
receivers to wrap and unwrap transactions which can then be grouped from or split to several divisions or
areas of a trading partner’s business.
3. Message routing mechanisms. Required once a message is developed to sort messages for different
groups and deliver them to the appropriate targets. Message transformation may also be required to get
the message into the correct format for its destination.
4. Trading partner agreements (TPA). Clarifies terms and conditions, establishes standards for business
documents and defines communications and business protocols between trading partners.
The future of EDI
In future supply chains, EDI will be the core document exchange capability to support innovations like the Internet of Things (IoT), block chain and artificial intelligence (AI). Future EDI will use:
1. IoT sensors:- Incorporated into the shipment’s packaging and tied to periodic EDI 214 messages to
improve package condition visibility in near real time.
2. Block chain technology:- Underpinning EDI information flows for shipments can offer a shared version of
the truth to help quickly resolve and even avoid charge back disputes.
3. AI agent:- Monitors all relevant events and information connected to the shipment, and can identify a
non-compliant event, determine if a reshipment is required, analyze the most efficient source of
replacement, initiate a new shipment and an authorized return.
