What is Electronic Data Interchange?

What is Electronic Data Interchange?
EDI is simply the sending and receiving of information using computer technology
Its efficiency has made it a condition of doing business in dozens of industries, including retail, grocery, warehousing, transportation (rail, ship, and trucking), health care, education, real estate, and government. Any standard business document that one company would exchange with another (such as a purchase order, invoice, shipping schedule, inventory inquiry, and claim submission) can be exchanged via EDI between two parties, or trading partners, as long as both have made the preparations.

EDI cannot be activated with a flip of the switch or in a moments notice. Many procedures must be carried out in preparation for exchanging EDI data with a trading partner. This will be explained in a later section.

The use of EDI is not limited by differences in companies or communication methods. Instead, EDI bridges the information gap that exists between companies using different computer systems.

Although this information makes many references to the ANSI X12 standards, note that other standards exist. For instance, EDIFACT is commonly used in Europe and in the automotive industry. HIPAA (Health Insurance Portability and Accountability Act) is designed for the healthcare industry.