WHAT IS EDI?

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business data in standard formats. In EDI, information is organized according to a specified format set by both parties, allowing a “hands off” computer transaction that requires no human intervention or rekeying on either end. The information contained in an EDI transaction set is, for the most part, the same as on a conventionally printed document.

The shipping and transportation industries first developed EDI about 25 years ago to reduce the burden of paperwork, a significant factor in the cost of doing business. Traditional applications of EDI are purchase orders, bills of lading, invoices, shipping orders and payments. However, the development of standards and the widespread use of computers has encouraged the use of EDI in many new arenas including health care insurance and management, record-keeping, financial services, government procurement, and transactions over the Internet.

Organizations adopt EDI for the same reasons they have embraced much of today’s modern technology—enhanced efficiency and increased profits. Benefits of EDI include:

  • Administrative cost reduction 
  • Marketing advantage over competitors who do not use EDI 
  • Value added to products and services through more rapid and accurate information processing 
  • Improved inventory control 
  • Strategic integration of EDI data and information processing 
TODAY, SOME 100,000 U.S. ORGANIZATIONS USE EDI TO CONDUCT BUSINESS.

In order for EDI to work effectively, standards must be employed to ensure that the information being transmitted is universally acceptable. Standards are structured so that computer programs can translate data from in-house to standard formats and vice versa, either through the use of software at the user location or by the services of value-added network (VAN) communications vendors.

There are several hundred standards currently being used to conduct a wide variety of business-to-business transactions. The Accredited Standards Committee (ASC) X12 standards are designed to work across industry and company boundaries. Changes and updates to the standards are made by consensus, reflecting the needs of the entire base of EDI users rather than those of a single organization or business sector.

In developing standards for EDI, ASC X12 seeks to minimize the cost and burden upon users. Additionally, the Data Interchange Standards Association (DISA), ASC X12’s secretariat, works to provide the continuing education and information necessary to ensure a smooth implementation and future success.