EDI and Electronic Data Interchange Information

EDI is commonly used instead of faxing and mailing paper documents. It improves the efficiency of communicating documents such as Purchase Orders, Invoices and Advance Ship Notices. Other common EDI documents are Functional Acknowledgements, Purchase Order Changes, Product Data Activity Reports, Payment Remittance Advices and Order Status Inquiries.

Thousands of companies use EDI to improve their efficiency with their supply chain partners. Many companies require their business partners to have EDI capability and to be compliant with their EDI standards.

Paper business documents can take up to 10 days from the time the buyer prepares an order to when the supplier ships it. EDI orders can take as little as one day.

EDI is much less expensive than transmitting paper documents. A paper-based order can cost as much as $70 while processing an EDI purchase order costs less than a dollar. Much less labor time is required and fewer errors are made because computer systems process the documents rather than processing by hand.

First a buyer prepares an order and has it approved. Next, the EDI order is translated by the buyer’s purchasing system into an EDI document format called an 850 purchase order.

The EDI 850 purchase order is then securely transmitted to the supplier either via the Internet using AS/2 or through a VAN (Value Added Network). The supplier’s VAN makes sure that the supplier receives the order.

The supplier then processes the order and sends the buyer an EDI Advance Ship Notice to let them know the product is on its way. Later, the supplier sends an EDI Invoice to bill the buyer.

Each trading partner has their own EDI requirements. The requirements will include the kinds of EDI documents to be processed, such as the 850 purchase order used in the example above, 856 advance ship notices and 810 invoices. Either ANSI X-12 or EDIFACT standards must be followed based on the trading partner's specifications.

Just about any business document that one company would exchange with another company can be sent via EDI. However each EDI document must be exchanged with the partner in exactly the format they specify.