EDI for beginners

In an increasingly digital business world, Electronic Data Interchange (EDI) is becoming increasingly important for companies looking to streamline their processes and save costs. But what exactly is EDI, and how can it help your business? In this blog post, we explain the basics of EDI and show how SPS Commerce can support your business with our EDI Fulfillment solution.

What is EDI and how did it originate?

Electronic Data Interchange (EDI) is a standardized method of exchanging business documents between different organizations. Instead of using paper documents or e-mails, EDI allows companies to exchange electronic documents such as orders, invoices and shipping notices automatically and securely.

EDI originated in the 1960s and 1970s as a way for companies to exchange data more efficiently. In the early years, it was mainly large companies and government agencies that used EDI to standardize and automate data exchange. The development of standardized formats, such as ANSI X12 and EDIFACT, allowed EDI to be widely implemented across industries, including retail, manufacturing and logistics. Over the years, EDI has evolved and been refined, making it a reliable and efficient method for managing business processes and improving collaboration between trading partners.

The benefits of EDI

EDI offers numerous benefits for companies that value efficiency and accuracy. Here are some of the key benefits:

• Cost savings: Using EDI eliminates the need for paper documents and manual data entry. This reduces the potential for human error and saves on paper, mail and labor costs. In addition, with EDI, businesses can benefit from faster transactions and improved cash flow.
• Improved accuracy: Manual data entry is error-prone. EDI eliminates these errors through automated data exchange, resulting in higher data accuracy and reliability.
• Faster transactions: EDI allows companies to exchange information more quickly and efficiently. This means orders can be processed faster, invoices can be paid faster and shipping information is readily available. This not only speeds up business processes, but also improves customer satisfaction.
• Better relationships with trading partners: EDI promotes collaboration between trading partners by streamlining communication and improving supply chain visibility. This leads to stronger relationships and better coordination between suppliers, distributors and customers.
• Improved visibility: EDI provides a transparent view of the supply chain dor provide real-time tracking and status updates. This visibility strengthens collaboration and enables informed decision-making across departments.

How does EDI work?

EDI works by translating business documents into a standardized format that can be read by computers. These are the main steps in the EDI process:

• Document preparation: Preparing the business documents such as purchase orders or invoices in a standard format.
• Document translation: Using EDI software to translate the documents into a standardized EDI format.
• Document transmission: Sending the translated documents over a secure network to the trading partner.
• Document receipt and processing: The trading partner receives the EDI documents, translates them back to a readable format, and processes them in their own system.

EDI in different industries

EDI is used in numerous industries to improve the efficiency and accuracy of business processes. Here are some examples of how EDI is used in different industries

• Retail: In retail, EDI helps manage the complex supply chain. It automates the exchange of purchase orders, shipment notifications and invoices between retailers and suppliers. This leads to faster inventory turnover, better order accuracy and improved customer satisfaction.
• Healthcare: In healthcare, EDI is used to exchange medical claims, patient data and insurance information. This improves data accuracy, reduces claims processing time and provides better patient care through timely and accurate information exchange.
• Manufacturing: In the manufacturing industry, EDI helps streamline processes such as purchasing, production planning and logistics. It ensures seamless exchange of data between manufacturers, suppliers and logistics partners, leading to improved efficiency, reduced costs and faster turnaround time.
• Logistics and transportation: In the logistics sector, EDI enables electronic exchange of transportation documents such as bills of lading, customs declarations and shipping notifications. This speeds up processing time, reduces paperwork and improves shipment traceability.
• Financial services: In financial services, EDI is used to exchange financial documents such as payment instructions, bank statements and reports electronically. This increases the speed and accuracy of financial transactions and reduces the risk of errors.

How can EDI help your business?

If you want to improve the efficiency of your business by implementing electronic data interchange (EDI), it’s time to discover what EDI can do for you. By moving to automated processes, you reduce the risk of errors, speed up your transactions and save costs.

At SPS Commerce, we understand the value of efficient data exchange. That’s why we offer comprehensive EDI solutions designed to support your specific business needs. We make sure you get the full benefits of EDI, from implementation to daily operation. Contact SPS Commerce today and find out how we can help you improve your data exchange.

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Majke Zoethout

Marketing Specialist at SPS Commerce

Majke is a Marketing Specialist at SPS Commerce, responsible for marketing strategies for the Benelux region.

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• EDI for beginners - June 10, 2025