MarsDevs Introduces You to Electronic Data Interchange.

Published on:
October 12, 2022

While EDI sounds like some genre in music, you can only hope it is that interesting. (The genre you are thinking about is EDM, by the way) EDI stands for Electronic Data Interchange. And MarsDevs is here to make these uninteresting concepts exciting for you. 

In this blog, MarsDevs introduces you to EDI and helps you understand how it can transform your business and its operations.

What is EDI?

EDI, or electronic data interchange, helps intercompany communication of business documents in a standardized format. The simple definition of EDI is a standard electronic format that can replace a paper-based document. The replacements include purchase orders or invoices. By automating these paper-based transactions, organizations can save ample time and eliminate costly errors that manual processing can cost.

In EDI transactions, you can move information directly from one computer application in one organization to another. EDI standards can easily define the location and order of information in a document format and make them more accessible. With this automated capability, we can share data rapidly instead of wasting hours, days, or weeks over the usage of paper documents or other traditional methods.

Today, industries use EDI integration to share various document types — from purchase orders to invoices to requests for quotations, loan applications, etc. In most instances, these organizations act as trading partners. They help exchange goods and services frequently as part of their supply chains and business-to-business (B2B) networks.

There are several perks to moving to an EDI platform specializing in EDI integration only. They include the following:

  • Reduction in costs 
  • Automation in workflows 
  • Efficiency and speed in document transmission and transformation
  • Most accuracy with fewer errors
  • Smoothening of relationships with partners and customers.

EDI transactions can contain critical information for business exchanges. If we consider one of the most famous examples of an EDI in action, it would be that of EDI order processing.

How does EDI work, then?  
The processes are more straightforward than they seem. First, the buyer submits a purchase order for a specific product from a supplier. Then the supplier sends an invoice. Once the buyer receives an invoice, both parties exchange acknowledgement receipts and complete the process. 

Every EDI transaction between the trading partners, i.e., separate sender and receiver, undergoes a calculated set of steps. These steps are straightforward and ensure that all data you have sent is free of errors, confirming that the transaction is done promptly.

To understand the process in depth, let us go through them in the following few sections.

The most common types of EDI

In addition to various standards, there are different ways to implement EDI. These ways rely on other underlying technologies to function better and have different pros and cons. So, there is no 'best' type of EDI. All of them can be useful in other circumstances.

Mobile EDI

Until recently, this type of EDI was not popular because of several security issues and the usability of different mobile platforms. However, as mobile devices became more and more common and the whole infrastructure of mobile apps started booming, this type of EDI became more widespread too.

Direct EDI

When you use a direct EDI, you and your partner establish a single direct connection between your systems. You must go through a whole setup process for each new connection. This somewhat costly method takes some effort to establish and scale. On the other hand, it allows for the fast transferring of vast volumes of data, making it a well-known choice for several large corporations.


VAN EDI is another popular solution. We have established this one through a Value Added Network (VAN). In this type of EDI, VAN providers usually manage the network and give access to unique mailboxes through which businesses can exchange documents. It is easier for you to set up than direct EDI.

EDI Outsourcing

EDI outsourcing is a fast-growing type of EDI. It relies on third-party services to run EDI infrastructure. This is an excellent solution for smaller businesses that don't have the resources to establish their EDI infrastructure.

How does EDI Integration work?

Technology has been around for decades. Many organizations now seek EDI integration solutions for EDI modernization initiatives with its advancements. You can use it to extend EDI data integration and automation capabilities beyond a traditional EDI message. This helps you support emerging business requirements. 

Enterprises must find an EDI system that can deliver an integrated approach for automated workflows that increase EDI visibility into operations. In addition, it improves customer service, regardless of the industry it belongs to.

Step 1: A sender exports a particular business document from an in-house system or application. A typical example can be a purchase order to buy goods, services, or both.

Step 2: Data transformation mapping software, then convert the business document, say a purchase order EDI cycle from the in-house computer system, into the required EDI format.

Step 3: The EDI business document is run through EDI conversion software. This step ensures that it is structurally accurate and is fairly based upon the agreed-upon EDI standards currently in place.

Step 4: We can transmit the EDI document data to a value-added network (VAN). We do this via a secure communication protocol like SFTP, HTTPS, or AS2. These can be built into the same validation software or another application or transmitted to the client via a specific direct connection over similar protocols.

Step 5: Direct EDI over AS2 creates a secure line between two different businesses. Enterprises connect to their trading partners without document fees and thus gain real-time communication capabilities. 

Then the receiving party receives the file, verifies the details, authenticates the source, and decrypts the file so it can finally ingest the EDI doc right into its systems. It also sends a message disposition notice (MDN) to acknowledge delivery.

Why should businesses use EDI?

EDI is a suitable integration that is recommended for companies in any industry and size. Its main advantages include the following:

  • It shortens the supply chain process. Electronic Document Interchange allows documents to be sent and received with high accuracy, efficiency and speed. EDI also makes it possible to substantially automate and streamline document management. The time needed is reduced by 70% which is the case with electronic invoices now. 
  • It also enables the company to keep a track, in real-time, how much merchandise it needs to receive, how many products it should buy, and more. This process allows for better business planning and leaves more room for decision-making.
  • It increases the transaction accuracy too. Electronic interchange enables automation of significant portions of documentation management, which avoids carelessness, delays, and human errors. According to the studies by Gartner, such automation can deliver businesses up to 65-80% savings.
  • It expands the market by expanding possibilities for the company's activities. We structure EDI under a specific, standardized format, which enables companies to reach more international partners and share standards with them.
  • It enables transaction tracking. A complete Electronic Document Interchange system allows them to be traced. With EDI, companies can see exactly where they are in the process and whether documents have been correctly sent, received, and so on. This helps them to stay on top of handling times.

Automation saves. So automate your business needs with MarsDevs now

Knowing the product development strategy is great for ideation. But you need a team to execute it. Execution works better when you streamline processes and automate systems. And while it's tough to find practically skilled developers often, MarsDevs can take your worries away. You can now hire the best product development team without having to worry about the extra cost and effort of hiring.

Managing an extra team is nothing but a hassle if you are just starting out. So, outsource your tech worries to MarsDevs. As mentioned before, we can be more than just friends. While we work together on innovating your product development cycle, do not forget to let us know about your project. And in case you want to discuss possibilities, what about a cup of virtual coffee?

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