Electronic Data Interchange (EDI) is a system that allows businesses to exchange electronic

documents quickly and efficiently, electronic data interchange is the process of exchanging data
electronically between two or more computer system in a standardized format. Alos it works by
translating business documents such as purchase orders or invoices into standardized electronic
formats that can be easily transmitted between computer systems. EDI enables businesses to
reduce manual processes and decrease the time and cost associated with paper-based
transactions, also it reduces the risk of errors associated with manual data.

Electronic Data Interchange (EDI) is the electronic exchange of business documents in a

standardized format between two or more organizations. EDI is a paperless technology that
facilitates the exchange of data in a secure, efficient, and cost-effective manner.

Electronic data interchange (EDI) technology involves the following steps:

i. Document preparation; the documents to be exchanged are identified and prepared in

an electronic format.
ii. Mapping; the electronic documents are mapped to a standard format that both trading
partners agree upon, such as American National Standards Institute X12 (ANSI X12),
Electronic Data Interchange for Administration, Commerce and Transport (EDIFACT),
or Extensible Mark-up Language (XML).
iii. Translation; the converted documents are then translated into a machine-readable format
to be sent over the network.
iv. Communication; the documents are transmitted between the sender and received over a
secure network.
v. Validation; the received documents are validated against the agreed-upon standard to
ensure accuracy and completeness.
vi. Acknowledgement; a confirmation message is sent back to the sender indicating the
successful receipt of the documents.
vii. Integration; the received documents can be integrated into the receivers’ back-end
systems for processing such as order fulfillment or billing.

The following are some of the documents that can be exchanged by organizations using
EDI:

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Invoices: This is an electronic document that requests payment for goods or services that have
been provided by a supplier to a buyer. The electronic exchange of invoices is one of the most
common uses of EDI, the invoice data is transmitted from the supplier to the buyer, and the
process is automated.

Purchase orders: this is an electronic document that specifies the goods or services that a buyer
wants to purchase from a supplier. Purchase orders can be transmitted electronically, allowing
the supplier to receive them quickly and accurately.

Advanced shipping notices: This is an electronic document that provides detailed information
about a shipment, including the items included, the quantity shipped, and the expected delivery
date. Electronic data interchange technology enables the electronic exchange of shipping notices,
providing tracking information to both the supplier and the buyer. Advanced shipping notices:

Inventory status reports: This is an electronic document that provides information about the
current status of inventory levels. Electronic data interchange can be used to transmit inventory
reports, allowing suppliers to manage their inventory levels more efficiently.

Receipt confirmations: EDI can be used to confirm receipts of goods or services, ensuring that
orders are accurate and complete.

Payment remittance advice: This is an electronic document that provides details of the
payment made by a buyer to a supplier, a customer sends this document to inform the supplier
that their invoice has been paid.

In summary, Electronic Data Interchange provides a standardized, fast, and efficient method for
exchanging electronic documents between organizations. The documents that can be exchanged
using EDI include purchase orders, invoices, advanced shipping notices, payment remittance
advice, and inventory status documents. EDI technology has revolutionized the way businesses
exchange information. It streamlines processes, reduces costs, and improves accuracy, providing
organizations with a competitive advantage in the marketplace.

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References

Jennex, M. E. (2007). Electronic data interchange (EDI). In Encyclopedia of Distance Learning,

vol. 2 (pp. 537-539). Information Science Publishing.

Markovic, M., & Rakic, M. (2017). Electronic Data Interchange - Business Opportunity for
Small and Medium-Size Companies. In Management, Enterprise and Benchmarking in the 21st
Century (pp. 103-111). Springer.

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