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  • Writer's pictureNisarg Naik

EDI - Overview and Benefits

EDI is often talked about in many business contexts. Now what is EDI and why is it so frequently mentioned in discussions about the flow of performance of both SMEs and businesses? At a glance, the answer is very simple. EDI stands for Electronic Data Exchange In terms of standards used for internal and external data exchange between various business sectors, government entities and companies. However, this standard has been in use since the late 1980's so a simple definition cannot represent all the depth behind it.

The general definition of EDI is not enough to fulfill its main idea so we will also look at how well EDI works, what reasons to use it, and what you need to be able to start using EDI in your business scheme.


Let's start by giving detailed answers to the questions "What is EDI", and what does EDI stand for and certain standards that define many aspects of transactions, such as industry, RFQs, POs, invoices, etc. (These terms will be considered in the next section.) EDI is a type of document flow between two computers made without human assistance. to manage errors, check transfer quality, and complete other documents themselves in special cases.For a computer to view data properly, it must be formatted strictly. common, data structure, etc. These guidelines vary from one industry to another. For example, trade, transportation and medical companies will fill out electronic documents separately. The main point of EDI is to establish the automatic exchange of commercial messages with the lowest possible error. In real life, failure occurs as a result of human error, and therefore, EDI is intended to reduce the individual's role in transmission and utilization of all potential.

How EDI works

EDI is a very complex concept and answers the question "How does EDI work?" it may be deceptive. However, we will try to explain this process as clearly as possible. The whole process can be divided into three stages:

Preparing EDI documents. At this point, the sender must prepare the document in order. The data must be organized in such a way that it will be read by the EDI software, so, instead of printing a PO (purchase order), the system creates its own electronic form and configures it according to EDI standards. Among the document processing methods, there is data import instead of manual printing, converting electronic documents to data files, and purchasing ready-made EDI software.

Translating them to EDI format. This step requires the use of special EDI translation software. Such applications classify data into categories and objects. In addition to the software purchase, you can send the information to the EDI service provider, and you will perform the task. In this way, the provider enables translation documents not only but also in EDI format.

Transfers texts.

Using a VAN to deliver documents can be very expensive as money is taken by VAN networks with individual transmission companies. However, it may help you to save some setup costs.

The documents are encrypted, and in addition, passwords and identifiers are used to achieve maximum security during the document exchange. Data protection measures depend on the protocol you use, so when compiling an EDI, choosing the right protocol for your business is necessary.

What you can say is that when you start your business, it is important that you have an effective EDI. This term means that you are using software that is valid for the use of EDI and that it allows for the use of both customer and merchant encryption, etc.


After we understand what EDI is and find out how EDI works, let’s see what the practical benefits of using EDI are, and why it’s a good idea to use EDI solutions for your business. The main heights are:

Fast processing. Document transactions take minutes instead of the days spent sending mail, or hours of e-mail, and fill them with information by hand. In addition, this type of work requires fewer people in that way, and workers who may have been busy with manual labor can now perform much more important tasks. Real-time tracking, like the work of any EDI software, ensures both parties that the messages are sent on time.

There are no human errors. While collecting business information, completing documents by hand, sending them by email, tracking documents, etc. There is a good chance that errors will occur at some point, be it a loss of messages, problems with secure delivery, or easy to ignore.

High accuracy is the solution to the problem described in the previous point. Because each process in EDI is automated, data is collected, interpreted, and sent correctly, and stored on time.

Commercial profit. It does not have to be paperwork, printing, storage, and retrieval of paperwork, filling, shipping, etc. It is greatly reduced by using EDI. It also saves costs that are often spent on handling errors, such as lost books, or rewriting that is unreadable for some reason.

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