What Is EDI?

Electronic Data Interchange (EDI) is the automated, system-to-system exchange of business documents using structured, standardized formats. Instead of exchanging PDFs, spreadsheets, or emails, trading partners send data that can be validated, processed, and integrated directly into ERP, WMS, and finance systems without manual intervention.

EDI is widely used across retail, distribution, logistics, and manufacturing because it ensures consistent data quality, predictable processing, and reliable supply-chain communication.

How EDI Works

Although implementations vary, the EDI process follows a consistent pattern:

Source data extraction – Order, invoice, or shipment data is exported from an internal system (ERP, WMS, PIM, etc.).
Formatting – The data is structured according to a defined EDI standard (EDIFACT, X12, XML, etc.).
Translation – Data is mapped from internal fields to standardized EDI fields.
Transmission – The EDI file is sent via an agreed communication method (AS2, SFTP, VAN, PEPPOL, API).
Receipt & translation – The recipient’s EDI system translates the file into a format their backend can consume.
Acknowledgment – A technical or functional receipt is returned (e.g., CONTRL, 997, APERAK) confirming successful processing or reporting errors.

Benefits of EDI

1. Data accuracy
Standardized formats reduce manual data entry and eliminate errors caused by retyping or inconsistent document templates.

2. Operational efficiency
Documents flow automatically between systems, reducing processing time and enabling real-time or near real-time supply-chain visibility.

3. Faster document exchange
Orders, invoices, and shipment notifications move electronically rather than via email or portals, enabling higher throughput.

4. Security and compliance
EDI protocols support encryption, authentication, non-repudiation, and controlled access—far more secure than email-based document exchange.

Types of EDI Connections

Direct (point-to-point)
Two partners exchange files over a single agreed protocol (e.g., AS2, SFTP). Reliable, but complexity grows with every new partner.

Value Added Networks (VANs)
A third-party network routes messages between partners. Simplifies connectivity but often adds per-document fees.

Web EDI
Browser-based portals for manually entering or downloading EDI documents. Suitable for low-volume suppliers.

API-based EDI
Real-time exchange through APIs. Increasingly common for event-driven workflows, though dependent on modern system architecture.

Core Elements of an EDI System

EDI Standards
Define structure, data types, and segment requirements. Common examples:

EDIFACT – international/global
ANSI X12 – North America
TRADACOMS – legacy UK retail

Translation Software
Converts internal data to/from the required EDI format, applying rules, mappings, and validations.

Communication Protocols
Secure transport methods such as AS2, SFTP, FTPS, VAN, or PEPPOL. Protocols ensure the file is delivered and acknowledged.

Data Mapping
Aligns internal system fields with EDI segments (e.g., mapping SKU → LIN+12 or item description → IMD).

EDI Envelopes
Metadata wrappers identifying sender, receiver, message type, and control numbers (e.g., UNB/UNH in EDIFACT).

Integrations
Links between the EDI platform and ERP/WMS/finance systems, enabling automatic inbound/outbound data flow.

Common EDI Transactions

Purchase Order (EDIFACT ORDERS / X12 850)
Sent from buyer to supplier. Includes order line details, delivery dates, pricing, and references.

Invoice (EDIFACT INVOIC / X12 810)
Sent from supplier to buyer. Contains pricing, quantities, tax details, payment terms, and references.

Despatch Advice / Advance Ship Notice (EDIFACT DESADV / X12 856)
Sent from supplier to buyer/warehouse. Confirms shipment details, packaging structure, SSCC/UCC128 labels, and tracking data.

Order Response / Acknowledgment (EDIFACT ORDRSP / X12 855)
Confirms acceptance or changes to the received purchase order.