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What is EDI (Electronic Data Interchange)?

What is EDI (Electronic Data Interchange)?

What is EDI?

EDI stands for Electronic Data Interchange which is defined as computer-to-computer exchange of business information in a standard and structured format. Organizations use electronic data interchange to streamline and improve operational efficiency of business processes and communications by exchanging data electronically.


Electronic data interchange allows for: 

  • The automated flow of business information between organizations
  • Integrated information flows into and out of respective business systems
  • Common “language” among different computer systems and data format
  • Data in a standard and structured format is translated into information that is understood by different systems used by organizations

What is EDI - How EDI Works

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Contact our EDI experts to learn more about
  • How EDI can reduce your operating costs 
  • Scalable solutions: from web-based to complete integration
  • Lowering transactions costs and drop ship rates
  • Integrating with your business systems and shipping solutions


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Why EDI & How Can it Help Your Business?

Businesses adopt EDI compliance to enhance efficiency, improve communication and accuracy of data interchanged, strengthen partnerships, and drive down costs. It eliminates the need to re-key information, reduces error-prone data entry and speeds up the process of exchanging business documents with customers and other trading partners. As seen in the following example, common transactions such as (EDI 850) Purchase Order and (EDI 810) Invoice, help simplify and streamline the entire data interchange process, form order purchasing to invoice sending. Read more about What Companies Use EDI.



Infographic Order Process with EDI

Order Process With EDI, With EDI, What is EDI, Electronic Data Interchange, EDI, EDI Infographic

Infographic Order Process without EDI

Without EDI, Order Process without EDI, What is EDI, Electronic Data Interchange, EDI, Without EDI Infographic

Benefits of EDI

  • Labor minimizes data entry
  • Cost Savings eliminates expense of manual steps
  • Inventory reduces lead time on orders
  • Communication improves efficiency of communication and relationship with partners
  • Improve the order to cash cycle
  • Quicker exchange of business information
  • Accuracy eliminates errors and submission of inaccurate data
  • Efficiency integrated electronic data interchange makes the order processing more efficient and streamline

Learn more about the benefits of Electronic Data Interchange

How does Electronic Data Interchange work?

How Does EDI Work, EDI, What is EDI, Electronic Data Interchange

EDI optimizes workflow by replacing previous order processes such as mail, fax or email and electronically exchanges documents between two companies with different business systems. A translator will convert the business application data between the sender and receiver, such as trading partners. Trading partners is referred to two separate organizations, for example buyer and supplier or OEM and manufacturer. The order processing life cycle is shortened significantly.

  • EDI Document Preparation: Generate the electronic file to be sent. Document preparation varies based on how each business generates the data, refer below to types of EDI software.
  • EDI Translation: With the use of an EDI solution, the data is translated to or from an EDI file in a standard and structured format. The common “language” among different computer systems and data format is translated into information that is understood by different business systems.
  • Transmitting EDI Documents: Once the data has been translated to an EDI format, the document is ready to be transmitted to your trading partner. There are different methods of communication to send/receive data.

Types of EDI Solutions

  • EDI Outsourcing: EDI Outsourcing (also known as B2B outsourcing and EDI data management solutions), is designed to enable companies to communicate business data electronically. Outsourcing EDI allows your company to focus on your business while a team of specialists manage your EDI environment. A few outsourcing software options include: WebEDI, EDI VAN, Mobile EDI.
  • WebEDI: WebEDI (also known as Web EDI or web-based EDI), provides EDI communication through an internet browser. WebEDi is a simple, affordable, easy-to-use solution for companies to connect, manage documents and process transactions. Learn more about WebEDI.
  • EDI VAN: EDI Van, value added network (VAN), is a third-party network provider that is solely responsible for routing, storing and delivering messages to and from the sender/receiver. Learn more about VAN solutions.
  • Mobile EDI: Mobile EDI provides user access to WebEDI via mobile device with basic/limited functions like other software applications/mobile apps.

Learn more about DataTrans EDI Solutions.

Types of EDI Solutions, EDI, What is EDI, Electronic Data Interchange

Most Common EDI Communication Methods

  • AS2 which specifies how to connect, deliver, validate and acknowledge data, and creates an envelope for a message which is the sent securely over the internet. An implementation of AS2 involves two machines, a client and a server, communicating with each other over the internet using HTTP/HTTPS protocol.
  • SFTP is a secure file transfer protocol that provides file transfer and manipulation functionality over any reliable data stream.
  • VAN, value added network, is a third-party network that acts as an intermediary between trading partners, an is responsible for routing, storing and delivering EDI messages.
  • HTTP/HTTPS is a communications protocol used to transfer information on intranets and the world wide web. Direct EDI allows for companies to connect to business partners through various communication methods (including AS2, SFTP, VAN, HTTP/HTTPS). Direct EDI is most often seen in large corporations such as retailers, OEMs or hospitals, that have numerous business partners and exchange a high volume of documents.

What are EDI Standards?

Learn more about common EDI transactions and industry terminology definitions.


ANSI ASC X12 is the official designation of the U.S. national standard body for the development and maintenance of EDI standards. The most widely used standard in the United States and much of North America.


EDIFACT, known as Electronic Data Interchange for Administration, Commerce and Transport, is the international standard developed under the United Nations. The EDIFACT standard provides messages which allow multi-country and multi-industry exchange.


HIPAA (Health Insurance Portability and Accountability Act) is a subset of X12 with healthcare specific requirements. Part of the HIPAA initiative seeks to establish standardized mechanisms for electronic data interchange, security, and confidentiality of all healthcare-related data.


Tradacoms is an EDI standard introduced and implemented for the UK retail sector. Tradacoms was introduced in the early 1980s and is maintained by the UK Article Numbering Association now known as GS1 UK.

How to Get Started with EDI

Easily become EDI enabled and compliant with all your trading partners via WebEDI. As DataTrans adheres to trading partners’ specifications, users maintain compliance with their entire network.

With a seamless sign up link, you will have an analyst working on your behalf, testing directly with your trading partners and setting a go-live date. Attend WebEDI training sessions to anticipate what to expect when you receive your first order.

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  • WebEDI provides maximum up-time so that your solution is always available to access.
  • No special software or computer knowledge required. Only access to the internet.
  • Become compliant quickly with minimal cost and very little training.
  • DataTrans WebEDI allows users to manage all of their activity and transactions from one simple, easy to use webpage.
What is EDI (Electronic Data Interchange)?

EDI Frequently Asked Questions

Below are the most frequently asked questions about EDI. Have more questions? Check out more FAQs about EDI page or contact our EDI experts directly.


What is meant by EDI?

EDI means electronic data interchange. Electronic data interchange allows businesses to send information electronically in a standard, structured format.

What is EDI and an example?

EDI, also known as electronic data interchange, is exchange of business information in a standard and structured format. An example of EDI is when a buyer sends an order to a supplier, that order is known as an EDI 850. Buyers and trading partners, have specified EDI document types suppliers comply with, for this instance, the supplier will respond back with an invoice also known as EDI 810. All of this is exchanged securely via EDI ensuring data accuracy and enhancing efficiency for all parties involved.

Where is EDI used?

EDI is used across industries and market verticals such as retail, grocery, automotive, manufacturing, healthcare, pharmaceutical, utility/energy and more.

What is EDI and why is it important?

EDI (Electronic Data Interchange) enables companies to automate the exchange of business transactions securely and enhances efficiency for all parties. EDI is important as it streamlines the supply chain process, improves data accuracy, eliminates manual processing and errors and strengthens communications and partnerships.

What is an example of an EDI transaction?

An example of an EDI transaction is an EDI 850, also known as an electronic purchase order. An EDI 850 Purchase Order is a fundamental EDI transaction used by business partners to initiate the procurement cycle and is used across almost all market verticals.

What are the 4 major components of EDI?

The 4 major components of EDI are: standard document format, translation and mapping, preferred communication method and communication network to send and receive documents.

What are the steps associated with EDI?

The steps associated with EDI are: data entered into business system, data translation into EDI format, preparing EDI document, transmitting document via preferred communication method to send to business partners.

Is EDI a software?

EDI, also known as electronic data interchange, is a software that streamlines business processes and improves operational efficiency. DataTrans Solutions provides cloud-based EDI software that enables you to connect, integrate automate and expand your business.


Connect, Integrate, Automate & Expand Your Business


Connect to your network of trading partners


Fulfill orders faster and on time


Streamline your order fulfillment process`


Leverage your EDI capabilities to expand your network of partners


Elimination of rekeying errors mitigating charge backs


Receive and respond in minutes


EDI improves the overall order processing