All that You Need to Know about EDI

08-09-2021 11:31:05 Comment(s) By Abir

Electronic Data Interchange, which is popularly known as EDI is a universally acknowledged system of data exchange that is effective in more ways than one. This system is utilized to send documents across the pool of business partners through standardized custom norms. The uniform data code of EDI helps business processes across the grid to comprehend documents perfectly and work upon them very swiftly. This helps in reducing errors, giving impetus to efficiency, and increasing speed.

Why EDI Is Gaining Prominence?

Human work is tantamount to follies and delays but EDI, which is bound by standard electronic format is such a marvel of modern technology that it mitigates scopes of mistakes in any kind of information sharing. EDI replaces the age-beaten and problem-ridden systems like letters, fax, and email. While in these systems, processing of the documents can sometimes take abnormally long, EDI makes the task automated and hence easy and lightning fast. All types of documents can be processed with EDI which range from purchase order to advanced ship notice; from invoice to inventory details; from customs details to payment details.

The most special thing about EDI documents is the standard format that they adhere to. This formatting language is used so that computers can read these messages. In the case of human language, a lot of things can get lost in translation but to ensure maximum efficacy, certain standard formatting is used across EDI. TRADACOMS, ebxml, UN/EDIFACT, ANSI, VDA, VICS, SWIFT, SAP, ODETTE, EANCOM, RosettaNet, Oracle Gateway, HIPAA, are some of these formats. Business partners agree upon the format and version of EDI standard they would use so that computers can read the messages seamlessly. An in-house EDI translator or an external service provider helps machines go through EDI documents and come up with accurate meanings.

The Difference between Legacy Process and EDI in Document Handling

When we compare the paper-based or legacy documenting system with EDI, we get to know the agility that gets embedded in the latter. In the former, the buyer enters information manually to create a purchase order, after having come to know of the need. The PO is printed and/or mailed to the supplier. On acknowledging the PO, the supplier issues invoice, and the process of shipment gets initiated. The acknowledgment can take days altogether sometimes. In this tedious process, if there is a little bit of error that creeps in, the process can get further delayed.

On the other hand, EDI documents are automatically generated once the party requires inventory and sends the PO to the vendors. The vendor’s sales order system receives the PO almost immediately and sends EDI-generated invoices to the buyer and issues shipment instructions.

Data Elements and Segments

In order to give lucidity to the EDI documents, the data elements and segments are formatted according to the EDI protocols. In the process of creating these EDI documents or transactional sets, standardization of rules is stringently followed so that the machines get to read the information and that too in its proper place.

Data elements are individual sets of information embedded in the transactional set which may constitute the company’s name, address, city, order quantity et al. Each data set is separated from the other. The data elements may vary from numeric, text, alphanumeric type; may constitute code or symbolic values like the symbol of currency.

Data segment on the other hand is the group of similar data elements. In a segment, similar elements are clubbed in together and each segment gives away unique information. Each element within the segment is separated by separators.

To give clarity to the process of data transfer EDI documents are placed in envelopes, which are digital counterparts of paper envelopes. Each transaction set is kept in a message envelope. Each group of a transactional set, such as a group of invoices is kept in a group envelope and all the group envelopes that are sent are clubbed in one interchange envelope. 

The Process of Sending EDI Formatted Files

To generate an electronic EDI document, one needs to bring the necessary information in one place. The data can be manually entered on devices or can be exported from spreadsheets. Companies that are ready to stay a step ahead go for applications that interface for EDI documents or can create automatic output systems so that EDI formatted documents are generated as soon as the need occurs. After having the data heaped up, they need to be adequately formatted according to the EDI norms. This can either be done by enterprise-level on-premise software or by can be outsourced to EDI service provider who translates the data to suit the needs of the customers. After having the documents prepared and formatted they are sent to the other parties either directly through secure internet protocols or they are handled by EDI service providers and sent by them.

In Conclusion…

EDI is a fast-paced data integration system that has become the need-of-the-hour. In this modern market where everyone needs to have an edge over the others, EDI renders speed and security to the business process which was unimaginable a few years ago. To get away from the rut and redundancy of paper-based and manual systems and to do away with errors as much as possible, business firms must mull over resorting to EDI formats and the time has come to spare serious thoughts to it.


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