Electronic data interchange, or EDI, helps businesses send documents without using paper. It follows a set format, and everything runs without people needing to step in. You’ll see EDI used in retail, logistics, manufacturing and healthcare. It handles things like invoices, shipping notices and purchase orders. Some systems also use it for payments.
EDI depends on standards like EDIFACT or ANSI X12. It also uses secure methods, including AS2, FTPS and SFTP, to keep data safe while it moves. If a company connects EDI to its ERP or accounting tools, it can speed up how it handles orders or payments. That saves time and reduces mistakes. For companies that transfer a lot of data, EDI still plays a big role.
Key aspects of EDI
EDI streamlines communication between businesses by standardizing and automating key processes because it:
- Connects directly with ERP, WMS, TMS and finance systems
- Enables machine-readable communication across systems
- Replaces manual data entry and paper documents
- Supports fast, secure and reliable data exchange
- Uses standardized formats such as X12 and EDIFACT
These capabilities help businesses reduce errors, accelerate processes and meet the demands of high-volume supply chain communication.
Common EDI document types
Businesses rely on EDI to exchange critical transactional data using document types like:
- Purchase orders (850): Initiates a purchase from a supplier
- Invoices (810): Requests payment for goods or services
- Advance ship notices (856): Details shipment contents and timing
- Purchase order acknowledgements (855): Confirms receipt and acceptance of a PO
- Remittance advice (820): Provides payment details and adjustments
These documents drive key supply chain and financial workflows and are essential for automating business-to-business processes.
Benefits of EDI
Implementing EDI can unlock significant operational and financial improvements for enterprise organizations.
Speed
Near-instant delivery of business documents
Accuracy
Reduces manual errors like typos or miskeyed data
Cost reduction
Saves on printing, postage and labor
Efficiency
Speeds up order-to-cash and procure-to-pay cycles
Compliance
Many partners, such as Walmart and Amazon, mandate EDI
Integration
Connects with ERP, WMS, TMS and accounting systems
EDI standards
A few major standards are used around the world to handle how EDI messages get sent and read. These help make sure both sides understand the data in the same way. The main ones are:
- ANSI X12: Used a lot in North America.
- EDIFACT: A global standard that came from the United Nations
- TRADACOMS: Mostly used in retail businesses in the UK
- Universal business language (UBL): Based on XML and used for electronic invoices
Each standard has its own rules for how the documents should look. They also explain what fields are required. This helps companies stay on the same page, even if they’re in different industries or countries.
EDI communication protocols
EDI messages are transmitted securely over the internet using various protocols, depending on your organization’s security and compliance needs:
- Applicability Statement 2 (AS2): Commonly used for secure EDI over HTTPS
- File transfer protocol secure (FTPS): Adds encryption to the standard FTP protocol
- Odette File Transfer Protocol 2 (OFTP2): Popular in the automotive sector
- SSH file transfer protocol (SFTP): Provides encrypted file transfer
These protocols help ensure EDI transmissions meet data security standards and maintain message integrity during exchange.
EDI solutions from JSCAPE
Explore how JSCAPE by Redwood enables secure, automated and scalable EDI operations for enterprises.
EDI enterprise solution
Connect with any trading partner using a single EDI solution that works with any protocol.
EDI server
Automate the exchange of EDI in response to scheduled or server events without the need for human interaction.
EDI translation and mapping
Use flexible EDI software that works with any protocol, so you can connect to any trading partner.
Electronic data interchange FAQs
What is the main purpose of EDI?
The main goal of EDI is to automate how companies share business documents. It replaces older paper-based systems and cuts down on manual data entry. This makes processing faster and more accurate. It also adds security by sending data directly between systems without human involvement. EDI supports full digital workflows, which is important in settings where businesses handle large volumes of transactions every day.
It also improves how companies work together in the supply chain. Trading partners use EDI to send files in a consistent, machine-readable format. This includes documents like invoices, shipping updates and purchase orders. The structure helps reduce confusion and keeps records clear. EDI also supports compliance with rules and gives businesses a better view of what’s happening across their operations.
What is the difference between EDI and email?
While both EDI and email can transmit business information, they are fundamentally different in structure, purpose and automation. EDI transmits data in a standardized format that systems can read and process automatically. Email, by contrast, is designed for human communication and usually requires manual intervention to read, interpret and act upon the information.
EDI is used for machine-to-machine communication with specific message formats that trigger workflows without human involvement. This makes it much faster, more accurate and more secure than email. EDI is ideal for organizations that require predictable, scalable and auditable exchanges of business-critical information.
What are the three types of EDI?
The three most common types of EDI include direct EDI (point-to-point), EDI via a value-added network (VAN) and EDI via AS2. Direct EDI establishes a dedicated connection between trading partners and allows them to exchange files without third-party involvement. This option is typically preferred by large organizations with stable partnerships and high transaction volumes.
EDI via VAN uses an intermediary to route messages between trading partners, which simplifies management but potentially increases costs. EDI via AS2 remains common, but many enterprises now favor API-driven EDI for its ability to provide real-time status updates rather than traditional hourly batches. Each option serves different business needs depending on your organization’s resources and partner requirements.
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Explore essential connections in digital supply chains
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