Electronic Data Interchange (EDI) is a system of electronic communications used to transfer documents or business data from one business partner to another without human intervention.
Electronic data interchange can help companies save money by digitizing the flow of documents and data that currently involve a great deal of human interaction and materials such as paper documents, faxes and more.
EDI not only minimizes the handling expenses of distributing, organizing and searching paper documents — it also enables a company to efficiently store, access and retrieve, data electronically. EDI also reduces errors because it eliminates the need to reenter documents on the destination side. Another advantage of EDI is the speed at which the business partner receives and incorporates the information into its system. For this reason, EDI can be a significant component of just-in-time production systems.
Despite these and other advantages, there are a few barriers to EDI implementation. For example, EDI processes require a shift in business procedures. Existing business processes built around slow paper handling would require changes to accommodate automated processing of business documents; therefore, some organizations may not be well-suited for EDI. Another significant barrier involves the initial expenses and time associated with EDI adoption, customization and training. The cost — in terms of both money and time spent — may discourage some companies.