EDI 101
Learn how EDI works and why retail companies use it, explore the benefits of EDI, or browse types of EDI documents.
Common EDI transactions
What is EDI?
EDI is an abbreviation for electronic data interchange. Using EDI, companies send information digitally from one business system to another, using a standardized format.
The term EDI describes both the transmission of the data as well as the translation into a standard data format.
EDI allows companies to exchange data electronically rather than by paper. It’s an important component for automation in business processes.
How does EDI work in retail?
EDI replaces order processes, transactions and communications that were done with paper or fax in the past.
For example, when a buying organization wants to place an order with a supplier, the buyer will create a digital purchase order. EDI software (or an EDI provider) will then make an EDI standard version of that purchase order (known as an EDI 850) and send it to the supplier.
Even though the supplier is likely using different technology than the buyer, their order system will be able to receive the information since it’s in a standard format.
The supplier will send back an acknowledgement that the order was received (an EDI 997). After the order is ready, the supplier will send another electronic communication, the invoice (EDI 810) which requests payment for the items that were purchased. And so on.
In simpler terms, EDI ensures that all of your business systems (and those of your retail partners) are speaking the same language.
There are many different types of EDI transactions. Since EDI is a standard data format, there are also specifications for each type of transaction. In addition, specs and EDI requirements can vary from retailer to retailer.
Why do retailers require EDI?
By using a standard data format for order communications, EDI-capable companies can electronically exchange order information without human intervention.
In this way, EDI provides a technical foundation for automation.
From an operational standpoint, it makes sense because it reduces human errors while also streamlining the order process. Retail companies can fulfill orders faster, cheaper and with less mistakes.
Benefits of EDI:
EDI is proven to streamline and improve workflow while enhancing supply chain predictability.
Make more-accurate documents and forecasts
Reduce inventory
EDI is cheaper and faster than traditional paper methods
Respond quickly to disruptions
Reduce manual data entry, as well as the errors
Free up valuable office resources to focus on more important business functions
In-house:
- Requires software
- Requires hardware
- Requires knowledgeable resources in-house
- Requires ongoing support within the organization to preserve EDI capabilities
- Must develop and maintain maps and requirements for each trading partner connection
Outsourced EDI:
- Outsourcing takes most of the work off your shoulders.
- Managed service (uses your provider’s software/platform).
- Requires no hardware on your end.
- Requires no software on your end.
- If a retail partner changes an EDI map or specification, your EDI provider will manage the change so there’s no disruption to your EDI document flow.
Want more info on using an EDI provider vs doing it yourself?
Learn more about options, costs, resources and what you need to know before you invest in an EDI solution.
Why more retail companies trust SPS over any other EDI provider:
The most widely-used and reliable EDI platform
The largest network
We’re the retail industry’s largest trading community with more than 75,000 customers in over 60 countries.
The best technology
Pre-wired connections
Expert support staff
Onboarding expertise
Cloud-based EDI solution
ERP integration options