What is EDI?
EDI (Electronic Data Interchange) is a set of definitions that determine how computers can exchange documents electronically without the need to have printed copies of such documents. The goal is to make the exchange of information more efficient, less prone to error and minimize human interaction. In a nutshell, EDI replaces the faxing and mailing of paper documents such as purchase orders, sales orders, shipping confirmation, invoices, medical documents, etc.
EDI documents use specific formats based on widely accepted standards. However, there is flexibility in the standards and each company can use this flexibility in a unique way to fit their business needs.
EDI is applicable to a wide range of businesses, large businesses use it because it saves them money and some small businesses have no choice but to use it because larger trading partners require it. In some cases a business is forced to pay a processing fee if they insist on not using EDI.
A typical EDI process goes like this:
A purchase order is entered in a buyer’s computer, the order gets translated into an EDI document called an 850 (purchased order). The document gets transmitted electronically to the supplier.
The supplier’s computer receives the document, processes it and converts it into a Sales Order.
If everything is correct and the merchandize is in stock, the order gets sent to the warehouse, it gets picked and made ready for shipping. The warehouse personnel create a shipping record and the computer system creates an Advanced Shipping Notification (ASN) which is known as form 856.
Once the merchandize leaves the seller’s facility, the system automatically produces an invoice, commonly known as form 810 which is then transmitted electronically via EDI, the invoice is received by the purchaser’s computer system and the cycle is completed.
Contrary to widespread belief, EDI is not very expensive to implement; there are many ways to comply with EDI requirements that do not entail a large investment in computer resources, at CompTech Westwe specialize in helping companies setup EDI in the most efficient and cost effective way.