What is Electronic Data Interchange? Let’s Elaborate EDI

Electronic Data Interchange – EDI

Electronic Data Interchange is a process to exchange business documents from one computer to another computer in a standard electronic format decided by business partners.

To do document exchange less paper-based and fast, digital document transformation is the best suitable and affordable way. Most of the businesses use this document transformation method to:

• Reduce the cost and errors,
• Increase processing speed,
• Fast communication and
• Improve relationship with partners

Let’s try to understand the definition more clearly and closely.

One Computer to Another Computer:

Not only the traditional postal mail and fax method, but a recent email method is also replaced by EDI. Though email is an electronic way to exchange the documents and human resource handles these emails rather than a computer. People can work up to some limited time of a day. Therefore, it slows down the process of documents and there are chances of errors also. Instead of it, iPaaS can forward EDI documents straight through to the destined application of the recipient. Therefore, the document transformation process can start immediately. Now, take a look at the traditional manual process with lots of people and paper involvement.

But in Electronic Data Interchange process paper and people are not involved at all.

Business Documents

Business documents are exchanged between partners. Whenever we talk about business documents related to purchase, typically it will be regarding purchase invoice, order invoice, sale receipt, advance ship notices or anything else related to order. Apart from these, there are many other types of documents. For example, inventory documents, landing bills, shipping status, payment documents, and other custom documents. These documents are depended on the type of business and it’s processed methods.

Standard Format

In Electronic Document Interchange, computers process on EDI documents rather than humans. Therefore, there must be one standard format that the computer can understand and read/write as per the requirement. The main purpose to use standard format is computer can read/write each piece of information. The standard format describes what is each piece of information such as integer, text, decimal, special characters, mmddyy, etc. If any company doesn’t use a standard format, then that company must use its own specific format. Therefore, there might be chances that a German person may not understand the Danish language. On another side, the recipient doesn’t understand the sender’s company-specific format.

• There are many EDI standards are in trend today. It includes CXML, HUBXML, EDIFACT, OIOUBL, OIOXML, EHF, CXML, BISV2, FINVOICE, TEAPPS, NAVXML, BSFACTURA, OCXML, UBL, EML and many more. Moreover, each standard has many versions. Therefore, before exchanging documents, business partners must decide the specific EDI standard and its version.
• Usually, businesses use their in-house EDI software or buy this service from EDI service providers like HubBroker Aps for digital document transformation. Therefore, there is no chance of data loss and document processing will be done fast.

Business Partners

Typically, two different companies transfer or exchange EDI documents and these companies are known as business or trading partners. Let’s understand this via a simple example. HubBroker Aps buys computers from Dell and HubBroker Aps sends an order invoice to Dell. So, HubBroker Aps and Dell are business partners.

HubBroker Aps is a well-known name in Electronic Document Interchange service providers.