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EDI stands for Electronic Data Interchange. It is simply the computer to computer exchange of business documents between companies. EDI documents use specific computer record formats that are based on widely accepted standards. However, each company may use the flexibility allowed by the standards in a unique way that fits their business needs.
EDI is used in a variety of industries. In fact over 80,000 companies have made the switch to EDI to improve their efficiency. Many of these companies require all of their partners to also use EDI.
Computer-to-computer exchange of information is much less expensive than handling paper documents. Studies have shown that processing a paper-based order can cost $70 or more while processing an EDI order costs a dollar or less. Much less labor time is required. Fewer errors occur because computer systems process the documents rather than processing by hand.
EDI transactions between companies flow faster and more reliably than paper documents. Faster transactions support reduction in inventory levels, better use of warehouse space, fewer out-of-stock occurrences and lower freight costs through fewer emergency expedites. Paper purchase orders can take up to 10 days from the time the buyer prepares the order to when the supplier ships it. EDI orders can take as little as one day.
EDI’s efficiency has made it an important contributor to the efficiency of business communications in many industries. Business documents like invoices, purchase orders, and advanced ship notices can all be exchanged between companies through EDI.
