Electronic Data Interchange (EDI) - Explained
What is an Electronic Data Interchange?
Written by J. Mance Gordon
Updated at April 22nd, 2024
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What is Electronic Data Interchange (EDI)?
Electronic data interchange (EDI) is an electronic transmission system which allows transferring data according to predefined message standards from one system to another system without any intermediary.
How Does an Electronic Date Interchange Work?
Electronic data interchange is an exchange of message between two peers or trading partners.
EDI enables users to exchange data without any intermediary between the two.
It reduces the cost and time for businesses, as they can now exchange data and corporate documents with each other without any human intervention.
EDI refers to standards that are not specified for transmission but rather the standards are set and specified by trading partners.
There are four major EDI standards are as follows:
- The UN/EDIFACT Standard: UN/EDIFACT is the international standard and recommended by UN.
- The US Standard ANSI ASC X12 (X12):It is the most important standard used in North America
- The TRADACOM Standard: This standard is often used by retail industry in United Kingdom (UK)
- The ODETTE Standard: This standard is used by European automobile industry.
Uses for EDI
Electronic data interchange (EDI) has many uses and applications which allow businessmen to save time and money. EDI facilitates smooth functions and speedy exchanges of data between business to business or peer to peer. Some applications are illustrated as following:
- Electronic data interchange (EDI) facilitates healthcare provider and insurers to exchange information easily and in timely manner
- EDI can be used in traveling and hotel booking etc.
- It is applicable to education. Students and university administration may exchange information through electronic data interchange.
- It is also useful in supply chain management
- EDI ensure efficient administration
- Electronic data interchange is used for tax reporting purpose
The Electronic data interchange (EDI) standards do not depend on any pre-specified standards for transmitting data and information. Both sender and receiver may choose any methodology and agreed upon them to exchange data.