Electronic data interchange (EDI)
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is EDI?
Electronic data interchange (EDI) is the exchange of business documents, such as POs and invoices, between two companies’ systems in a standard format. No one retypes them; in North America the usual standard is ASC X12, which numbers each document type: 850 for a purchase order, 855 for an order acknowledgment, 856 for an advance ship notice and 810 for an invoice.
How it works
Other common X12 documents cover PO changes (860, 865), inventory levels (846) and payment remittance (820); international trade more often uses EDIFACT. The two companies are trading partners, and documents travel through a value-added network (VAN) or directly over the internet, for example by AS2.
Because each trading-partner connection takes setup work, distributors use EDI mostly with their largest customers and suppliers. APIs are the newer alternative, exchanging data on request in real time rather than as standard documents. Errors in EDI documents can draw compliance chargebacks.
EDI example
A hospital system’s purchasing software sends an 850 in the morning. The distributor’s ERP turns it into a sales order, returns an 855 within minutes, and sends an 856 when the truck leaves.
Further reading
Related terms
- Purchase order (PO)A purchase order (PO) is a buyer’s document ordering specific items, in specific quantities and at stated prices, from a supplier.
- Advance ship notice (ASN)An advance ship notice (ASN) is an electronic message a supplier sends before a shipment arrives, listing its contents, packing and expected arrival.
- Order acknowledgmentAn order acknowledgment is a supplier’s confirmation that it accepted a purchase order, stating what will ship, at what price and when.
- Punchout catalogA punchout catalog is a connection that lets a customer’s buyer shop on a supplier’s website from inside the buyer’s own purchasing system.
- Enterprise resource planning (ERP)Enterprise resource planning (ERP) software is the central system a distributor runs on, holding orders, inventory and accounting in one database.
