What is EDI?

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EDI stands for Electronic Data Interchange and as its name suggests, it refers to an electronic way of inter-changing data between two different computers. What makes it different from standard sharing of data through email and file transfer protocols for example is that EDI involves standardization of the file formats. All files that are exchanged between two computer locations must adhere to a specific format in order for the electronic process to work. Through EDI, no human-intervention is necessary to interpret or process a certain file. The agreed guidelines in terms of file format will basically take care of file processing.

The idea of EDI can be customized according to the needs of the different parties involved. The data being transferred or inter-changed must simply be in the format that is agreed upon. One company for example may need to send invoices to another company and both may find it better to agree on a common data format for faster processing of the said invoices. Through EDI implementation, the invoices are sent in a specific file format to the recipient company. The recipient company meanwhile will be able to use the EDI file for faster processing of invoices using a compatible system that can read the formatted file. This particular file is typically handled and read by electronic means only. This is what makes EDI file formats different from other means of file exchanges or transfers. Human intervention is not needed in reading or processing the files that are transferred by an EDI system. This particular feature is often the reason that various companies work together to come up with a specific file format for sharing or inter-change. With the file format under EDI standards, all processing will be done electronically resulting to faster turn-around of various activities and processes. With faster exchange and processing of files, the two companies involved in the process will have more time to spend on other important tasks.

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