Electronic Data Interchange, or EDI, is a process that enables the rapid, automated and secure electronic exchange of documents between businesses. An EDI solution converts business documents such as purchase orders and invoices into a standard EDI format and sends it to another EDI user, usually a trading partner. But how does EDI work?

1. Preparation and organisation of data

In the case of sending a purchase order to a supplier via EDI. Rather than creating and printing a purchase order and sending it via post, fax or email, the first step is to gather the PO information and prepare it to be translated into the standard EDI format you and your trading partner have agreed to use. Typically this is done by exporting the PO data from your accounts or ERP system, however some businesses may simply export it from a spreadsheet or report.

2. Translation to the EDI format

Once your PO data is ready, it is then run through an EDI translator to convert it from your non-standard internal format into a standard EDI format. EDI software uses the data elements and segments in your original spreadsheet or file to ‘map’ to the EDI format.

The most common EDI standards used globally include:

– EDIFACT

– EDI XML

– EANCOM

– ANSI X12

Businesses can buy and install EDI software to use in house, or choose to partner with an EDI managed service provider to have the process taken care of on their behalf.

It’s important to note that the process of EDI mapping does involve some specialist expertise when defining the data to be mapped and translated, so opting for an EDI service provider can be a huge advantage. An EDI managed service, like the one offered by TrueCommerce, handles the entire EDI mapping and EDI translation process, so businesses can be free to focus on what they do best.

3. Transmitting the EDI documents

With your purchase order now translated into a standard EDI format, it can now be sent to your trading partner who will follow the same process in reverse, translating the EDI document from the EDI standard into the format required by their internal systems. In the case of an integrated EDI solution, the data can be automatically sent to your internal system—no manual rekeying required. Again, there are options when it comes to how to do this.

The files can be sent via a VAN (Value Added Network) or alternatively direct connectivity can be set up between the trading partners using FTP (File Transfer Protocol), SFTP (Secure File Transfer Protocol) or AS2 (Applicability Statement 2) protocols which means VAN’s are not required.