How Does EDI Work?

Step 1: Prepare the documents to be sent

EDI (Electronic Data Interchange) requires electronic versions of files. Instead of printing a paper purchase order, you would organize the necessary information to build an EDI document within your system. The sources of the data and the methods available to generate the electronic documents can include:

• Data entry by human intervention 
• Exporting data from excel spreadsheets or internal databases
• Reformatted electronic reports into data files

Step 2: Translate documents into EDI format

Put your collected internal electronic data through a translation software to convert into the EDI standard format. EDI standards describe the format in which the data will be sent and received. Most common standard sets:

• American National Standards Institute (ANSI) X12 in North America
• UN/EDIFACT globally 

There is two ways to use translation software;

You can purchase EDI translation software that you have to manage and maintain on your premises. This requires dedicated IT resources with specialized mapping expertise in order to define how your internal data is to be mapped to the EDI data.

Alternatively, an EDI service provider would provide the translation services. Using this option you would send your electronic data to the EDI Service provider, who would then handle all mapping, translation and support to and from the EDI format on your behalf.