The Basics of EDI

Here is a quick primer on EDI, including what it is, how it works, and how your organization can reduce costs.

What is it?

EDI is the collected and organized transmission of online data between two or more organizations that have an existing trading relationship. The transmission occurs without any human intervention. Invoices, purchase orders, and, advances shipping notices are examples of the type of documents that flow through EDI.

How does it work?

In the first step, the user at one organization prepares the document and transactions. The EDI system will then translate the document to an agreed format and transmit them to the trading partner(s). The system at the trading partner will then translate that into documents that the internal systems can accept. In some cases, replies and counter-replies will go back and forth automatically.

How do we save?

The first and most obvious saving is in the amount of time you save sending and receiving documents. A transaction that goes through conventional means can take as long as three weeks to go from a PO for shipping. With EDI, it can happen in days. However, the savings are not just there. For example, you will save money even sending payments. Sending a payment through EDI costs less than a dollar, saving as much as $4.50 for every payment. If your organization sends out 500 checks a week, you can save more than a $100,000 per year.