Electronic Data Interchange (EDI) enables companies to exchange data with automated data entry instead of manual processes. EDI supports businesses by improving efficiency and facilitating more partnerships between companies along the supply chain. One type of EDI is EDI XML, which uses the XML open standard to communicate data. Companies can use EDI XML to transmit documents with their trading partners.

EDI can bring advantages for some companies, though others will face challenges. Understanding EDI XML and its functions can help your business decide whether to implement this technology.

EDI XML is a means of formatting EDI data in an Extensible Markup Language (XML) format. XML provides a set of rules for computers to encode documents. EDI via the XML open standard differs significantly from other standards-based EDI because XML comprises information gathered into tags rather than having set positions for the data like the EDIFACT and X12 standards.

Using tags within XML results in files much larger than other types of message files. Although the messages are larger, the tags within the code make the messages more easily read, allowing quicker troubleshooting. 

The Beginning of EDI XML

EDI XML has been a hot topic since 1998. In the late 1990s, the EDI XML file format promised an easier-to-understand, easier-to-use method for exchanging data between businesses. This XML format was touted as simpler to comprehend, straightforward, and easier to integrate into in-house systems than traditional EDI formats.  

However, reality has been much more challenging.

EDI XML is mainly used by expert users who deeply understand XML and EDI and the business processes involved. Most XML users have faced challenges, including:  

• File size: One of the biggest issues with XML documents has been the incredibly large file sizes associated with its tags. The file size increases the burden on organizations using XML files, networks, storage systems, and processing systems.  
• Implementation: XML EDI solutions have proven to be as challenging to deploy and learn as traditional EDI formats like ANSI x12 and EDIFACT and is not more flexible, negating any practical reasons to adopt this style of electronic business documents.  

EDI XML does have some potential benefits. Consider the following advantages of XML business transactions:  

• Ease of use: Since XML is a language frequently used in the data integration process, EDI XML could, in theory, make the process easier.  

• Cost of use: XML uses the internet to transmit data, which could reduce the cost of onboarding new trading partners.  
• Readability: XML tags are more easily read than raw EDI data formats, making XML data exchanges easier to troubleshoot.  

However, since most trading partners have developed unique, individual "implementations" of EDI, the same is likely to happen with EDI XML. This individualization negates any benefit from the more straightforward format of XML EDI documents.  

EDI XML is not dead — despite the scant success in the marketplace, there have been limited adoptions of this business data format. The Rosetta Net standard is an EDI XML standard with some degree of success in specific industries. In addition, EDI standards bodies like the UN and ANSI are working on creating EDI XML standards that would make adopting XML-based solutions easier. However, these bodies face two challenges, both of which are unlikely to be resolved any time soon:  

• They must show that EDI XML can provide significant advantages over standard EDI.  
• They must convince large retailers to adopt EDI XML as a unified standard format.  

Many EDI software vendors have begun to tout XML EDI files as a critical feature of their software. However, small businesses should think twice before adopting EDI XML entirely. The conversion cost from EDI to EDI XML may be higher than the technology is worth. It may be better to consider XML data as a "peripheral" technology until large retailers like Walmart and Target begin to demand its use.  

Should you consider EDI XML? Consider the benefits and reasons if a trading partner asks you to use EDI XML. If they agree to use traditional EDI files, it will likely save you both money in the long run.