EDI stands for "Electronic Data Interchange."
EDI enables companies to send information digitally from one system to another using a standardized format.
The term "EDI" describes both the transmission of the data and the translation of the received data into a standard data format.
EDI replaces order processes, transactions, and communications performed with paper or fax.
1. EDI Example: When ATS places an order with a supplier, the buyer will create a digital purchase order, which will be sent to the supplier. The supplier will send ATS a digital confirmation of the PO also via EDI.
2. EDI makes an electronic data version of the PO (EDI document 850 Purchase Order) and transmits it to the supplier.
Even though the supplier may be using a different system than the buyer, the supplier's order system will be able to receive the digital information since it’s provided in a standardized EDI format.
3. The supplier will send a digital acknowledgment back to ATS, confirming the PO was received (EDI 855 PO Acknowledgment). The 855 can say that the vendor accepts the PO, rejects the PO, or partially accepts it with changes.
3.1. If the vendor accepts the PO, it automatically posts to SAP.
3.2. If the vendor rejects the PO, or makes changes to some or all of the lines, an 860 is sent to the vendor telling them how ATS would like to handle the suggested changes.
4. Once Buyer and Vendor have agreed upon the PO, an 856 transaction is sent when it ships.
5. And finally, the supplier will send another EDI transmission to ATS' system: EDI 810 Invoice. This document requests payment for the items purchased. These are just a few examples of common EDI documents.
EDI ensures all business systems (from all business partners) speak the same language. EDI also eliminates a lot of paperwork!
By using a standard data format for digital order communications, EDI-capable companies can electronically exchange order information without human intervention. From an operational standpoint, EDI makes sense because it reduces human errors while streamlining the order process. Companies can fulfill orders faster, cheaper, and with fewer mistakes.
Info taken from SPS Commerce: EDI Guide
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