What is EDI?
EDI is a process for the digital exchange of business documents between companies (B2B) or with public authorities (B2G). Orders, invoices or delivery notifications are automatically transmitted in a standardized format – without any manual intermediate steps.
Advantages of EDI for companies
EDI is an important building block in the digital transformation of the economy. This is because the technology enables companies to make their internal processes and collaboration with business partners much more efficient.
With traditional methods of data transmission such as email or fax, documents had to be processed and forwarded manually. With workflow via EDI, processing takes place on the basis of technically implemented rules. Data can be transferred in real time and processes can be automated end-to-end.
7 Advantages of Electronic Data Interchange (EDI)
- Future-proof: EDI is an established method for automated data transfer, the standards of which are regularly updated. It is becoming economically more urgent for companies to optimize their processes. EDI will therefore continue to gain in importance in the future.
- Fewer errors: typos, duplicates or incorrect documents – EDI eliminates the risks of manual data processing. Processes run more smoothly and reliably thanks to automation.
- Faster processes: With EDI, business documents are transmitted in real time. Waiting times are eliminated and processing times are significantly reduced. This not only benefits companies with just-in-time processes.
- More security: In contrast to e-mail, EDI protocols work with strong encryption and authentication, which improves the protection of sensitive business data.
- More time for value creation: Automated processes relieve employees of routine tasks. Companies can use the time gained to assign value-adding tasks to their staff or drive innovation projects forward.
- Transparency: EDI gives companies a comprehensive insight into their supply chain. They can call up data on deliveries, stocks and processes in real time – the basis for planning more efficiently and making forward-looking decisions.
- Legal compliance: In many countries, the electronic exchange of certain documents is required by law. EDI ensures that companies can easily comply with regulatory requirements, for example for e-billing.
More on the topic: Does your company need EDI ?
How does EDI work?
EDI data exchange takes place in two steps: Conversion and transmission.
A company creates a document, for example an invoice. This is first automatically converted into an EDI data format. The file is then sent to the business partner via an EDI interface and an EDI communication protocol – either directly to their ERP or merchandise management system or to an upstream platform.
Thanks to the standardized EDI data format, the systems can read the file. They convert them into the data format used by the recipient and automatically forward them to the relevant internal IT applications. No human intervention necessary!
EDI and ERP – a strong team
The ERP system is the central hub for all company processes – and therefore also essential for the use of EDI. Business documents such as orders, delivery bills or invoices are created directly in the ERP and automatically converted from there into a standardized EDI format. The data is forwarded to business partners via defined interfaces and protocols – without any manual intervention. Conversely, incoming EDI documents seamlessly into the ERP system, where they are processed directly. This not only ensures consistent processes without media discontinuity, but also reduces This also significantly reduces the error rate and processing effort. Especially in complex supply chains or with high document volumes, the combination of EDI and ERP is a decisive factor for efficiency and transparency.
The most important EDI formats
The standardization of the data format is at the heart of electronic data exchange. As all parties involved use a common format for files and communication, the process runs seamlessly, efficiently and error-free across companies.
Different EDI standards are used depending on the geographical region and industry. In practice, which standards are used is usually decided by the business partner with the stronger market position, who then links cooperation to compliance with the data format.
Here is an overview of the most common EDI formats – without any claim to completeness:
UN/EDIFACT (United Nations/Electronic Data Interchange for Administration, Commerce and Transport)
The EDIFACT format is widely used in the EU and Asia. It was adopted by the United Nations back in the 1980s and is the first global EDI standard. It has since been revised several times. EDIFACT is used across all industries.
ANSI ASC X12 (American National Standards Institute Accredited Standards Committee X12)
The EDI format was developed back in 1979 for use in North America and is still primarily used in this region today. The standard covers a wide range of industries and is used by more than half a million companies worldwide.
UBL (Universal Business Language)
UBL is a generalist file format based on XML. It can be easily adapted and can therefore be used for the exchange of business documents in various industries. XML is mainly used internationally in the area of invoice exchange (e-invoicing). Beyond that, it is less established. One reason for this is that XML files are larger than other EDI formats, which can affect process speed.
ODETTE (Organization for Data Exchange by Tele Transmission in Europe)
The EDI format was developed specifically for the European automotive industry. As the industry relies on just-in-time production and complex supply chains, it needs automated data exchange for efficient supply chain management. With ODETTE, manufacturers and suppliers can receive and send business documents reliably and quickly along the entire supply chain.
HL7 (Health Level Seven International)
One example of a successful industry-specific EDI format is HL7. It is used to exchange information in the healthcare sector. Originally developed in the USA, the standard is now being promoted by organizations in over 50 countries worldwide.
The most important EDI protocols
While the EDI format determines the structure of a file, the EDI protocol regulates how the file is technically transmitted. Different standards are also used for this. Many have been developed for specific industries.
AS2 (Applicability Statement 2)
The EDI protocol is primarily used in retail and logistics. It transmits data securely over the internet and offers encryption and digital signatures. However, it requires a relatively complex configuration and a deep understanding of IT.
FTP/SFTP
The classic transfer protocols for data exchange via the Internet can also be used for EDI. The most common are the File Transfer Protocol (FTP) and the Secure File Transfer Protocol (SFTP). Their disadvantage is that they do not support any EDI-specific functions.
OFTP (Odette File Transfer Protocol)
The OFTP communication protocol was developed to match the ODETTE EDI format. Its use is therefore largely limited to the automotive industry. The protocol supports high compression and can process large volumes of data quickly.
X.400
An older EDI protocol is X.400, but it is still frequently used. This is because it offers a high level of security and reliability for data transmission, even in complex networks. Message tracking is also possible. Because of these properties, X.400 is mainly used in highly regulated industries such as finance and aviation.
| Important EDI formats | Important EDI protocols |
| UN/EDIFACT | AS2 |
| ANSI ASC X12 | FTP / SFTP |
| UBL (Universal Business Language) | OFTP |
| ODETTE | X.400 |
| HL7 |
Use cases: How EDI is used in companies to add value
EDI is indispensable in a variety of industries and drives automation and efficiency in business communication. Here are some examples of its use:
Retail trade
EDI ensures smooth collaboration between retailers and suppliers. Not only can invoices and delivery confirmations be sent automatically and quickly . If products fall below a certain stock level, retailers can automatically trigger a repeat order via EDI. This ensures that they are always able to meet customer requirements.
Automotive industry
The automotive industry is one of the pioneers in the use of EDI. The integration of EDI into ERP systems ensures that the complex supply chains are optimally coordinated and that material is always available at the right time in production (just-in-time production).
Logistics and transportation
In logistics, EDI facilitates communication between freight forwarders, carriers and customers. Shipping orders, delivery status reports and customs declarations are exchanged automatically. This speeds up processes and contributes to short delivery times . At the same time, the parties involved can view the transport progress at any time, which in turn minimizes coordination communication and frees up personnel capacities.
Healthcare
Data exchange between clinics and insurance companies or medical practices and laboratories can take place securely and quickly digitally via EDI systems. Especially in the medical environment, rapid processing can be decisive for the success of treatment. This is where EDI makes a valuable contribution to improving the quality of care.
Industrial production
In smart factories, networked machines and systems (Industrial Internet of Things) transmit their data to IT systems via EDI. These evaluate the data in real time and can initiate follow-up activities. With this automated data transfer, EDI is a key component in enabling companies to set up “intelligent production“.
Choosing and implementing the right EDI software
If you want to set up digital data exchange via EDI with your business partners, the best way is to implement a specialized EDI system. This must fulfill four central functions:
- The software receives data from your ERP system via an interface.
- It converts the data to be sent into the EDI format you require.
- It technically maps the data transfer to your business partner.
- It imports received data into your ERP system.
The implementation of EDI software can be demanding and time-consuming, depending on the compatibility of the ERP system and EDI software and the complexity of your IT infrastructure. If you want to benefit from automated processes quickly and without errors right from the start: Work with an EDI manufacturer. They can support you with the integration or take care of it completely for you. It is an investment that pays off.
Tips for choosing the right EDI partner
So how do you find the right EDI provider for your company? A structured selection process combined with clear requirements is a prerequisite for a good decision.
Take the time to look behind the EDI partner’s advertising messages. Does the EDI vendor have proven relevant industry experience? It’s important that they understand your specific requirements and that their solution can meet them. Ask about their approach and ask to see reference reports.
Ein guter EDI-Anbieter liefert nicht nur die Software, sondern auch Beratung, Service und Support. Von der Implementierung über regelmäßige Wartung bis hin zu schneller Problemlösung – im Idealfall erhalten Sie alles aus einer Hand. APplus arbeitet mit den EDI-Lösungen von Seeburger. Nutzen Sie unser ERP-System, kümmern wir uns bei Bedarf um die Integration der benötigten EDI-Funktionalitäten.
The scalability and flexibility of the application also play a key role. The EDI solution should be able to grow with your company in order to cover future requirements such as higher transaction volumes or additional integrations. The manufacturer should also regularly develop the solution further and integrate new technological possibilities.
Cloud or on-premise installation? Consider which setup is better suited to your strategy. Cloud systems score points for flexibility and lower maintenance costs, while on-premise solutions offer more control and security.
Last but not least, the cost-benefit ratio must be right. Compare the initial project costs with the long-term savings through process automation, reduced error rates and greater efficiency. A well-chosen EDI system usually pays for itself after a short time.
The future of EDI: these trends are emerging
EDI is not a new technology, but formats and protocols are constantly evolving. It is not foreseeable that electronic data interchange will become less important. Although dynamic industries are increasingly relying on APIs for data exchange, EDI will probably remain the first choice, especially in highly regulated and established industries. As EDI is a key to the effective use of AI in many business areas, its use will even tend to increase.
Artificial intelligence
Für Unternehmen sind Automatisierung und künstliche Intelligenz die großen Themen des nächsten Jahrzehnts. Denn sie versprechen Kostensenkungen, Effizienz und freie Ressourcen für strategische Zukunftsarbeit. Kurz: Wer seine Prozesse optimiert, wird im Wettbewerb die entscheidende Länge vorn liegen.
Companies that want to optimize their decisions and workflows with the help of AI-based data analysis receive the necessary data basis through automated data exchange via EDI in real time. Artificial intelligence can detect anomalies in processes at an early stage, provide information and reduce troubleshooting costs.
Blockchain
The linking of EDI and blockchain also opens up new opportunities for logistics to ensure the integrity of the supply chain. Transactions are stored unalterably on the blockchain in real time. This makes fraud more difficult and gives business partners and supervisory authorities a reliable overview of current data and processing statuses at all times.
There are many conceivable application scenarios for blockchain, but few have been established to date. However, this is likely to change in the coming years.
Sustainability
What will not change in the future: Companies are required to improve their sustainability . EDI makes a valuable contribution here too: electronic data exchange reduces paper consumption and energy consumption. Companies can thus not only save costs, but also improve their environmental footprint.
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