EDI and e-commerce

EDI Overview

Electronic Data Interchange (EDI) involves automated data exchange between business entities in standardiZed formats. EDI transactions effectively contain the same data as a traditional paper-based transaction. Since it is automated, EDI greatly improves the speed of business transactions when compared to conventional transactions requiring human intervention.

EDI has been implemented in many organizations in order to further increase efficiency and increase profits. EDI provides the following benefits:

• Improved inventory management
• Improved accuracy
• Minimize paper user and storage
• Reduce cycle times and costs

Accredited Standards Committee (ASC) X12 developed and maintains EDI standards work across all companies and industries. These standards can change to meet the needs of the all organizations involved. These 300,000 organizations use the over 300 EDI transaction sets in order to exchange information and conduct business.

Some of the Industries using EDI include:

• Retail
• Insurance
• Education
• Entertainment
• Financial
• Government

How EDI Works

Each company runs own electronic business system. These systems may not be directly compatible with each other. EDI permits these different systems to communicate and exchange data for business transactions.

EDI works by relying on standards to allows different company systems to communicate. These standards are governed by a body know as American National Standards Institute (ANSI). ANSI ensures that standards like EDI follow a established set of rules and methods to make it accessible by everyone.

What results from the EDI standard is a common language for exchanging data and thus minimizing the resources required to reprogram internal data systems now and in the future as technology changes.

Advantages of EDI

• Traditional paper-based business transactions are usually time consuming and required resources to handle order forms, invoices, shipping documents, and numerous other forms to gather and record important data.

  EDI allows for the potential to have:

  • single-point data entry
  • reduced errors from data duplication
  • on-line data for secure storage and easy access
  • faster report generation for all levels of management
  • automatic reconciliation

• EDI transactions are much quicker than paper-based transactions due to the fact that electronic information can be delivered and processed much faster than paper can. EDI saves time and money by eliminating physical packaging and postal/courier costs.

• EDI allows uniform data to streamline communications along the supply chain including vendors, customers, and financial institutions.

• Companies and enterprises who implement EDI will enjoy a distinct advantages over non-EDI competitors.