Electronic Data Interchange – The Fundamentals of Business Data Exchange

Ever wonder about the inner workings of how information flows from one place to another? As the world becomes more interconnected through computers and Internet, Electronic Data Interchange (EDI) plays a more critical role in our lives.

EDI is something applied across all different industries and disciplines – but in the most fundamental sense, EDI is defined as the exchange of information between different computer systems within an organization or among different organizations in a standardized manner…which is referred to as the ANSI X-12 standard developed by the Data Interchange Standards Association.

Different from electronic mail, EDI involves actual transactions, not simple text exchanges

An EDI message, referred to as a transaction set in this context, basically consists of a string of data elements, each representing one fact – examples of these elements include price, quantity, product number, etc. An entire string of data elements is referred to as a data segment.

We as individuals interact with EDI probably on a daily basis – a common example is Electronic Funds Transfer (EFT) between financial institutions…direct deposit of paychecks, debit of individual banks accounts through ATM withdrawals and purchases are just a couple of examples.

EDI is also widely used in the retail industry as part of electronic scanning and point-of-sale inventory control systems.

Another application of EDI technology that is up and coming is in healthcare – electronic storage and retrieval of health records could possibly help reduce costs and make things more efficient, reducing treatment errors due to a manual processing error.

As technology like the BizTalk server evolves, more small businesses are able to experience the benefits of EDI

EDI makes an organization function more effectively, eliminating the need to print, ship and re-enter information on the other end. The technology was developed to eliminate the problems and errors that arise from handling information manually.

Saving time is perhaps the biggest benefit of EDI – it can possibly take days for a document to be sent to another organization and processed on their end. These steps are not necessary when EDI technology is adopted.

Eliminating steps like printing, stuffing envelopes, sorting, matching, etc. also saves costs…many managers agree this represents a large part of their overhead. And EDI reduces errors since there are fewer places for them to be introduced into the information stream.

Using EDI also makes it easier for others to access the information since it is computer retrievable. This saves space at company headquarters since documents do not need to be stored in filing cabinets, allowing a company to make more efficient use of their building.

Bookmark and check back with the ITstaffing-e knowledge center often for more in-depth articles regarding EDI and its application, benefit and the technical nuts and bolts of what makes it work.