Electronic Data Interchange (EDI) is the process of interchanging business documents between business systems using a standard format. It is an electronic process sent through business processes, between companies rather than manually printing each document and mailing them. The documents used in EDI mainly purchase orders and invoices. The exchange of EDI documents typically takes place between two different companies and they are referred to as business partners or trading partners. EDI can be broadly categorized into three – EDI software, web-based EDI and EDI service bureaus.
EDI software is where companies develop their own EDI environment. Executing EDI software through a company firewall is another preferred choice. This approach assumes that a company has the correct internal resources to implement the software and maintain it on an ongoing basis. Web-based EDI is an EDI system that can be accessed and used through a web browser. These systems are based on a “Software as a Service” principle where the user will pay a monthly fee in exchange for access to the web-based EDI system.
EDI Service Bureaus acts as a third-party provider between the business partners. The Service Bureau receives EDI data from one partner to process into a legible format (on behalf of the destination partner) and then send out to that intended trading partner. Converting from a paper-based exchange of business document to an electronic one benefits a business in many ways such as decreased cost, increased efficiency, reduced errors, higher ROI and improved relationships between business partners.