What is an EDI system, and how does it work?

Electronic Data Interchange is the term used to describe a computer-based multilateral transfer (or interchange) of business documents. There are multiple standards for the electronic format of the documents being transferred, and it is because of those standards that coding and decoding of any transfer is made possible.

The most common business documents transferred with an EDI system are purchase orders and invoices. In this way, such a system is a more efficient alternative to previously used (or consumer oriented) systems like postal mail, email, or fax.


Other than making the process faster and streamlined, the document communication becomes less susceptible to errors and unplanned delays. This is made possible by replacing human intervention with computational power. This deputation to computers also offers scalability that is easy to achieve with minimal financial investment.

Electronic Data Interchange systems are being implemented at an ever increasing rate, throughout the world, in a diverse range of industries. Ecommerce is one of the industries that has benefited the most from EDI technology. Particularly in any ecommerce business process, documents, which are mostly orders and invoices, a properly implemented EDI system can be crucial for growth.

Keeping all this in mind, here is some information that will help you understand how an EDI system works, and probably better utilize it in your business.

Preparation of documents

Since most invoices and other business documents are in a paper based, or digitally parsable format. The EDI systems needs to first organize this data into data structures which fulfil the specifications and offer easy extraction and appendages to the date. Depending on the complexity of the documents, the process may need to utilize a human data entry personnel, or a optical character recognition system.

Translation to EDI

When the data has been internally organized, the next step is translation of the data into an EDI format. The choice of format depends on what your software supports, and what is most compatible with your business partners. Then there’s the process called EDI mapping, in which a data integration specialist, correlates the input and output data with the firm’s internal data format and structure.

In case of TIE Kinetix eVision, which is the most popular EDI solution, and other options too, there are support providers that take care of eVision mapping, so that the system works smoothly and communicates well with your business partners.

Transmission and communication

After the data has been streamlined and converted, it needs to be transmitted and similar data needs to be recieved and interpreted, completing the course of commmunication. For this communication, two types of networks are mainly used- a direct server-client connection, or a value added network.

If you have an holistic idea about how an EDI implementation works, you can make sure that your business processes benefit optimally from its utilization. This will help you choose the best

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