What Is An EDI System And How Can It Benefit Your Business?

Electronic Data Interchange has become such an essential part of business-to-business document based communication, that any business not implementing it is basically forcing itself to lag behind the competition.

An EDI system, as the name may suggest, facilitates interchange, or exchange, of electronic data. This data is in the form of documents and the transfer takes place digitally over a network, connecting business partners in varying geographical locations.

The system extracts information from the internal data structure of the firm, translates it into an EDI standard format, and transmits it over a network. The EDI format can be CSV, or follow the ANSI X12 specification.

The alternative to an EDI system is either the archaic method of postal services, or the less archaic fax. The other option is naturally email, but even with that, it’s not possible to make the process fully automated, and requires a human operator. Communication through the archaic methods, or even email, is taxing both on the finances, and the employees. In this post, we look at some of the ways in which an EDI system can benefit your business.

Cost Benefits

The expenses involved with physical handling of documents are minimized, as paper use, printing, filing, etc, is no longer needed except in some internal processes. The costs included with processing transactions are reduced to a small fraction of the original cost.


As the accuracy of the documents goes up, the managers are able to better manage stocks and schedule orders for optimization of fulfillment times. The employees are also relieved in being overloaded with mundane paper-handling, and instead allocating their time in crucial processes.


Transaction processing with EDI is done in negligible time, when compared to days and weeks that it takes for processing an order through postal transactions. This ultimately results in faster order fulfilment and delivery times, especially in case of logistics for ecommerce businesses.

Physical handling of documents is slow and error prone. EDI increases efficiency by making transaction documents fully electronic. The data becomes more reliable and speedy retrievals eliminate delays.


Since the data is handled in an automated process by computers, the scope of human errors is reduced. The threat of data leaks and hacks is also exponentially reduced, if the system rightly implements encryption. Events that lead to data corruption also become extremely improbable.

The information provided in this article is probably enough to explore the market for various service providers. You should not however, that you’ll need to hire inhouse personnel to manage the system for you. If your company is big enough, you may also require more than one employee. In most cases, it is beneficial to outsource the responsibilities to a provider that give EDI managed services.