Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI) is a set of standards for structuring information that is to be electronically exchanged between and within businesses, organizations, government entities and other groups. The standards describe structures that emulate documents, for example purchase orders to automate purchasing. The term EDI is also used to refer to the implementation and operation of systems and processes for creating, transmitting, and receiving EDI documents.

Electronic Data Interchange (EDI) can be formally defined as 'The transfer of structured data, by agreed message standards, from one computer system to another without human intervention'. Most other definitions used are variations on this theme.

Advantages of using EDI

• EDI and other similar technologies save a company money by providing an alternative to, or replacing information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc.
• Even when paper documents are maintained in parallel with EDI exchange, e.g. printed shipping manifests, electronic exchange and the use of data from that exchange reduces the handling costs of sorting, distributing, organizing, and searching paper documents.
• EDI and similar technologies allow a company to take advantage of the benefits of storing and manipulating data electronically without the cost of manual entry

Barriers to ImplementationThere are a few barriers to adopting electronic data interchange.

• One of the most significant barriers is the accompanying business process change.
• Existing business processes built around slow paper handling may not be suited for EDI and would require changes to accommodate automated processing of business documents.
• The existing process may therefore assume that goods are typically received before the invoice.
• With EDI, the invoice will typically be sent when the goods ship andhttp://www.blogger.com/img/blank.gif will therefore require a process that handles large numbers of invoices whose corresponding goods have not yet been received.
• Another significant barrier is the cost in time and money in the initial set-up.
• The preliminary expenses and time that arise from the implementation, customization and training can be costly and therefore may discourage some businesses.
• The key is to determine what method of integration is right for your company, which will determine the cost of implementation.
• For some businesses, the implementation of an integrated EDI solution may be necessary as increases in trading volumes brought on by EDI force them to re-implement their order processing business processes.
• The key hindrance to a successful implementation of EDI is the perception many businesses have of the nature of EDI.