EDI Services – How Does It Work?

The availability of widespread internet connectivity marked the beginning of the digital age. Computer systems are now integral office components, eliminating the need for paper documentation. EDI, or the Electronic Data Interchange, allows businesses to expedite the transaction processes and facilitate better documentation and record-keeping. Hence, EDI services are essential to the digital transformation of businesses.

The availability of widespread internet connectivity marked the beginning of the digital age. Computer systems are now integral office components, eliminating the need for paper documentation.  EDI, or the Electronic Data Interchange, allows businesses to expedite the transaction processes and facilitate better documentation and record-keeping.  Hence, EDI services are essential to the digital transformation of businesses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

EDI Meaning: Understanding the Basics

What is EDI?

EDI is a process of transferring business-related information from one firm to another through electronic means instead of paper. The interchange occurs between trading partners by means of a standardised format. 

The two most commonly transferred business documents that go through the EDI are invoices and purchase orders. The standardised paperless exchange instrument acts as the perfect substitute for mail drafts and conventional business communication handling.

Conventional business communication methods involve computer invoice generation, printing a physical invoice copy. The same is then mailed to the required recipient, who marks and enters the invoice particulars in their own computer system. To sum things up, the entire process consists of invoice information transfer from the seller end to the consumer’s computer system. 

The application of EDI drastically reduces the process, eliminating or reducing the manual labour involved to a bare minimum. The apparent benefits are quite notable and make a significant improvement in comparison to traditional paper transfer protocols. 

Compared to traditional billing and mailing options, EDI exchangers complete the entire process within hours. The elimination of manual processes saves up a lot of time, while the order entry system makes and transmits an acknowledgement slip, acting as proof of receipt. The order entry system of the supplier is updated as soon as the purchase order is received. 

What are EDI Standards?

computer applications

EDI directly transfers transaction information between computer applications of different organisations. EDI standards are used to define the documented information’s location and type. The automated transmission results in time-efficient distribution of the required information.

In present times, EDI-integrated applications are popular among organisations for sharing multiple document types, ranging from purchase orders, invoices, loan quotations, and many more. Trading partner organisations utilise these applications across B2B and supply chain networks for interchanging goods and services. 

Popular examples of EDI Standards


The most common EDI Standard used across the North American continent, ANSI ASI X12 is the de facto official US national standard designation for EDI standard development and maintenance. 


EDIFACT is an acronym for the Electronic Data Interchange for Administration, Commerce, and Transport. It is an international standard developed by the UN and is popular among cross-border organisations involved in international and inter-industrial exchanges.


HIPAA stands for the Health Insurance Portability and Accountability Act. It is a subset of the American ANSI ASC X12, specialised for use across the medicine and healthcare industries. As explained previously, HIPAA creates a secure environment for electronic data exchange, in addition to ensuring confidentiality.


An EDI standard popular across England’s retail trade sector, TRADACOMS has been there as early as the 1980s. The EDI standard is accepted by the UK Article Numbering Association and is now referred to as GS1 UK. 

EDI Support Services

It is easy to understand there are multiple practical applications of EDI services throughout the industries. Examples of industry implementation include:

Direct EDI

Electronic Data Interchange is commonly used by enterprises to connect with their business partners. This type of communication is common among huge corporations, retailers, and hospitals. The process is widespread in areas where a large volume of documents are exchanged. Technologies used include: 

  1. AS2
  2. SFTP
  3. VAN

Outsourcing for EDI

Commonly known as B2B outsourcing and EDI-based data management solutions, EDI is an excellent option for outsourcing and exchanging business information through electronic means. The service allows companies to divest their resources towards business operations while expert teams handle the EDI ecosystem. Examples include:

  1. Mobile EDI
  2. WebEDI
  3. EDI VAN. 

EDI Billing and Payment

Billing and Payment

The automotive industry witnesses one of the largest implementations of EDI services. The industry deploys “Just-in-Time” order processing along with optimised inventory management systems to maintain the competitive edge. EDI billing options are also cost-effective and environment-friendly, saving paper expenses. Let us now take a closer look at the functions involved in an EDI process.

The EDI billing process begins with clients sending the purchase order. The software updates details of the ED purchase order into the ERP system automatically and instantaneously. The seller then ships the required product, generating an invoice print. The billing software then updates the invoice segment of the ERP, sequentially starting an EDI transaction bill, which is then delivered to the consumer online. 

EDI billing software also has additional time-saving bill generating options for customers who have their shipments delivered in full, avoiding partial delivery. The invoice for these transactions is exactly the same as the purchase orders. Referred commonly as a doc-turn, the EDI software creates an invoice transaction bill and directly sends it to the customer, saving more time by bypassing processes in between. 

Almost all available EDI software is capable of EDI billing. The trick in finding the right one for your business is to ensure that the software performs them quickly and flawlessly. Depending upon business requirements, one should look out for additional upgrades and options for automation in their EDI software, such as the Doc-Turns. 

Advantages of Using EDI Services

As explained above, there are several merits of using EDI software. Plotting some of the advantages of using EDI software, we have:

Reduced Expenses

Despite popular belief, using EDI services is practically much cheaper than manual handling and sorting of paper documents. Studies actually demonstrate manual paper-based processes cost $100 or above for each dollar spent on ESI orders.

Lower Labour Time

EDI services deliver products faster than manual handling. In general, paper-based orders may need weeks to reach the buyer. In comparison, EDI needs only a few hours to generate an invoice. EDI services can also be outsourced to external third-party service offering companies. 

Lesser Chances of Error

The use of automation and computer software reduces the chances of human error associated with manual bill processing. Lower error also reduces the operational cost. The quicker delivery time also helps in better inventory control. 

Higher Productivity

A much lower amount of time taken makes EDI billing software a much more productive option than traditional billing processes. The automation of documentation processes makes EDI a much more effective and accurate choice.

Environment-Friendly: EDI Operations are Paperless 

The shift from a paper-based system to an electronic computer-based process eliminates the need for paper. This results in cost-saving, lower cutting of trees and CO2 emissions, and elevated corporate social responsibility. 


EDI is a crucial tool for communication across several industries. Prominent examples include retailers, eCommerce, manufacturing, grocery, pharmaceuticals, healthcare, and more. Improved communication and data exchange options enable the increase of operational efficiency. The process is easy to integrate across sectors as varied as shipping service, accounting, and ERPs on one hand and ERP, WMS, and API on the other. 

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