What to Know About EDI

If you are working with EDI for the first time, you may have questions and concerns about it and about using it. The first part of working with any electronic system is getting to know about it and how it ticks. This will help you better understand the terminology and how it relates to your business. This way you can feel more comfortable with using it when the need arises. Here are some facts to take into consideration concerning EDI:

·        Why not use email? Basically, email is a communication device that transmits information from one person to another. You are bound by many rules and restrictions regarding email use and transmission. There are many protocols used in the communication medium like POP3 and SMTP. With EDI you don’t have all this to worry about.

·        What about using E-Commerce software instead? Business people may think that using E-Commerce systems is better because they can transmit it using secure transmission. This is true but EDI uses only one or two highly-structured formats that are suited for transmitting large documents. This makes it safer, more convenient, and secure.

·        What are EDI’s communication standards? Just as email has standards to follow, EDI has standards as well. These standards include ANSI X.12, UCS, and EDIFACT.

·        How does EDI work? EDI uses translation software that takes the document and converts it into data that can be sent between one computer and another. This way the data is recognizable by both parties. XML is an example of this type of software used in EDI transactions. Here is a breakdown of the EDI cycle using a product order: 

o       Step 1 – The user sends a purchase order.

o       Step 2 – The receiver gets the purchase order and sends a reply.

o       Step 3 – The receiver sends a shipping notice to the user.

o       Step 4 – The user receives the shipping notice and sends back a reply.

o       Step 5 – The receiver sends to the user an electronic invoice.

o       Step 6 – The user sends a reply to the receiver.

o       Step 7 – The user sends to the receiver payment by Electronic Funds Transfer (EFT).