Data exchange between different companies is often very cumbersome in practice. For example, when companies work with different systems, their employees have to manually transfer the exchanged information to the other system in a cumbersome manner. EDI was created to prevent human errors during data transfer and to make processes simpler and thus more efficient.
What does EDI mean?
EDI is the short form for Electronic Data Interchange and stands for the electronic cross-company data exchange of standardized business data.
After various companies began to create their business data electronically, the desire arose to be able to process them digitally as well. This refers to the transport, automated reading as well as storage of the documents.
This was helped by EDI, a smart system that created computer networks and contributed to the development of standards for interfaces and uniform document layouts. The TDCC (Transportation Data Coordination Committee) was founded after the first companies in the transportation industry began using EDI.
Edward Guilbert is still considered the father of EDI and was one of the key players in creating translation rules for four existing industry-specific standards. After 1975, the first Value Added Network (VAN) was established under the name Telenet. A VAN is a network through which cross-industry data exchange can take place.
Here is a trivial example of a traditional-manual process of an arbitrary purchase order:
- The purchase order is created by the buyer.
- After the order is printed, it is sent to the supplier via mail, fax or email.
- The supplier receives the order and enters it manually into his own order management system (Netsuite, Salesforce, Quickbooks, SAP, etc.).
- The supplier then creates the associated invoice and prints it out.
- The supplier now sends the invoice to the buyer by mail, fax or email.
- After receiving the invoice, the buyer manually enters the invoice content into his own system.
Next, an example of the same data exchange using EDI:
- The buyer decides to purchase a good or product.
- The buyer’s smart EDI system automatically creates an EDI version of the order and sends it digitally to the supplier.
- Then, this EDI version of the order is automatically transferred to the supplier’s system.
- Now, the order confirmation and invoice are automatically created and sent directly to the buyer.
EDI offers an uncomplicated possibility for fast, efficient and automated data exchange for a wide range of industries. Above all, quality, transparency and speed of the process are optimized.