EDI- Electronic Data Interchange
Electronic Data Interchange (EDI) is a business-to- business exchange platform which provides standardized data exchange capabilities between two trading partners. It involves sending and receiving business information in a standard format via electronic means, thus replacing paper means as the primary means of exchanging business information.
EDI has been in existence for a long while, as much as the time the internet has been in existence. It was developed around 30 years ago and has been going through changes and developments over time.
There are several standards that have been developed over time to cater for different regions, countries, niches, and fields of business. This includes TRADACOMS, EDIFACT, and ANSI. Furthermore, the two trading companies have to agree on a precise version of each format to use since there are many different version of each format. A good example is a D12 version of EDIFACCT or ANSI 5010.
Business Documents Exchanged in Electronic Data Interchange
There are a lot of business data that can be exchanged in this system. Any kind business document can be transferred in the system. Such document includes payment documents, invoices, customer documents, inventory documents, advance ship notices, shipping status documents as well as a bill of lading.
How the Electronic Data Interchange works.
Electronic Data Interchange works by sending data securely through a network. The network may be private where the trading companies have a peer-to-peer exchange setup. Another setup is where the trading companies use a third party to provide the linkage between the two companies. The company usually provides the software and hardware for electronic data interchange to take place.
Regardless of which setup a company chooses to use, the steps involved in the exchange of data are the same. An example of ordering with electronic data interchange involves the purchasing company prepares the order paper and get them approved. The order is then processed and translated to an EDI standard format. It is then transmitted to the recipient company where it is translated and processed by the recipient’s system.
The data exchange process remains secure especially in instances where Value Added Networks (VAN) is used.VAN are provided by third party companies as part of the package.
The Requirements needed to be EID Compliant
Electronic Data Interchange is a system that seeks to provide a standardized format for business-to-business interactions. It, therefore, goes without saying that there is a need for a basic set of requirements that must be attained to facilitate b2b interactions. This includes EDI software which translates data to EDI format. EDI mapping is also required. It helps to connect the trading partners to facilitate interactions. The third requirement is having an EDI VAN. This provides the network through which interactions take place.
Advantages of Electronic Data Transfer
Electronic Data Interchange (EDI) has emerged as a common Business-to-business interaction platform. In some cases it has becomes the standard interaction tool. Some companies carry out their business interactions solely via EDI. This is due to the advantages that this system offers including enhanced data security through encryption of data, reduced cycle times, reduced running costs and improved accuracy where errors are reduced due to the withdrawal of human errors. Electronic data interchange (EDI) also provide the best data processing practices as well as storage of business data.