What Is EDI?

What is EDI?

Electronic Data Interchange Helps You:

  • Standardize document transfer
  • Connect with business partners
  • Receive and send information securely
  • Increase the speed of data exchange

Standardize document transfer

EDI can help your business send important documents to partner organizations in a standardized format. This helps ensure that information is relayed correctly and efficiently while also reducing the transmission of errors.

Some of the commonly used EDI standards include:

  • ANSI ASC X12
  • RosettaNet
  • VDA
  • VICS
  • Tradacoms

Connect with business partners

EDI transfer is obsolete if it doesn’t effectively send a message from one company to another. The key to this process is making sure that information is communicated accurately, securely and to the appropriate location. Often, sending documents such as purchase orders to a business partner can get dicey because emails bounce back and files are sent in incorrect formats. The goal of EDI is to reduce these hindrances by creating an information highway that connects organizations.

Receive and send information securely

EDI ensures secure transmissions. EDI tools enable organizations to connect with business partners directly either through a point-to-point or outsourced implementation. This ensures that important documents such as invoices are sent to the correct locations and don’t get into the wrong hands. This also alleviates the need to email sensitive information to business partners or to give collaborators access to an internal repository, therefore reducing the potential for security breaches or for others to access information that isn’t relevant to them.

Increase the speed of data exchange

EDI programs can make the process of getting information from one company to another faster. It can help reduce transmission errors and bounce-back emails that notify you when a message can’t be delivered. Some reports estimate that EDI can increase the speed of business processes by 61%, largely because transfers can be done in minutes instead of the hours, days, or weeks associated with other delivery methods such as email and traditional mailing services.


What Is EDI?

EDI (also known as electronic data interchange) is a method of sending and receiving information among different organizations. The internal transfer of information is typically a lot easier than sending documents externally, which is why EDI was created to alleviate issues with document formats and inefficient transmissions. The sharing of data among business partners can be essential in developing effective and mutually beneficial partnerships.

How Do I Implement EDI?

There are two main methods of implementing EDI — through point-to-point or outsourced integration. Let’s investigate the differences between these two methods.

Point-to-point implementation requires organizations to install the EDI solution within their internal environments. The main benefit of this implementation method is that it gives companies control of their program and more flexibility. However, it does require more of an investment to get started than an outsourced implementation method would entail.

Outsourced implementation leverages third-party businesses known as interconnects to set up connections among partner organizations. The main benefit of using this implementation method is that the third-party establishes and manages your EDI connections, meaning that your business doesn’t have to deal with a high infrastructure investment. However, you will have less visibility of current connections and a slower onboarding time when configuring new communication channels if you go this route.

What Types of Information Can Be Exchanged Through EDI?

EDI connections enable the exchange of a variety of documents. Here are some of the commonly shared forms communicated through EDI programs:

  • Purchase orders
  • Purchase order acknowledgments
  • Invoices
  • Inventory inquiries
  • Shipping notices
  • Warehouse shipping orders
  • Product activity reports

How Does EDI Work?

Electronic data interchange works through the development of secure pathways for the flow of data and information from location to another. This is especially helpful when companies are doing business with other organizations and need to send sensitive information to an external area. The way the actual pathway is constructed depends on whether a business opts for point-to-point implementation or an outsourced implementation model. The core of EDI is that documents can be sent digitally and in an appropriate format to another location.

Which Industries Use EDI?

Companies in a variety of industries use EDI to more securely and efficiently share sensitive documents and information with business partners. Here is just a sampling of some of the industries that leverage this technological solution:

  • Financial services
  • Software
  • Manufacturing
  • Distribution
  • Retail
  • Automotives
  • Pharmaceuticals
  • Electronics

What Is EDI Compliance?

EDI compliance is a method of ensuring that your system will work effectively. This includes factors such as developing your EDI infrastructure, assuring that it aligns with the needs of your business partners and putting in place the standards that you will use in your system. For example, you will need to determine the document standards that your partners support in their platforms, the types of information that will be sent and received through the program, how you will implement the solution, and the hardware and security protocols that are necessary for efficient use.

How Do I Select EDI Software?

When it’s time to select the right EDI software for your business, there are a few factors that you’ll want to consider. For example, elements such as implementation method, business partner standards, industry and company size will all be important components to keep at top of mind when selecting between different vendors.

The process of choosing the right EDI system for your business and its partners can be tedious, which is why at SelectHub we’ve created an easy-to-navigate requirements list that will help you narrow down the vendors that best fit your needs. Check out our EDI Requirements Checklist to make the vendor selection process easier or our EDI Software Trends article to learn more about electronic data interchange options.

Recent Articles

Confidence Comes from Data

EDI software selection is complex and beset with problems for both IT buyers and solution providers. We do three things to make it fast and simple:

FREE Software Selection Platform

Our platform provides best-practices, including requirements templates & vendor comparisons, to help you make the right decisions for your unique needs, in a fraction of the time. Try it FREE.

Aggregated Reviews

We have collected every software review available online, crunched every last word using our proprietary Sentiment Analysis algorithms, all so we can tell you how a software product is viewed in its marketplace, retrospectively.

Professional Analysis

We relentlessly collect and analyze data about software, then compile and share it so every company has the same access to the information. The information we gain is then used in our Software Selection platform to help you find the right software.

Your Guides

Our industry journalists proudly distill the helpful information you read on SelectHub, always on the mission to share what matters so you can make your best decisions independently.

EDI articles are written and edited by:

Zachary Totah

Content Manager

As SelectHub’s Content Manager, Zachary Totah leads a team of more than 35 writers and editors in their quest to provide content that helps software buyers find the right system for their company.

Show More

Grace Savides


A digital specialist and content marketer, Grace joined the SelectHub team at the end of 2019. She’s an editor, and her team writes about learning management systems, talent management, payroll and other software.

Show More

Simran Yadav

Technical Content Writer

A Technical Content Writer by choice, yogi by heart, Simran finds sanity amidst the chaos of life by meditating, listening to sufi songs and reading romantic poetries.

Show More

Thought Leaders

SelectHub has sought out and invited thought leaders to contribute to our EDI industry articles and resources. These thought leaders ensure we deliver quality content with the most accurate information, focusing on what matters most. No thought leader is compensated for their contributions, but shares our belief that information should be democratized so everyone can make the best decision.

Erik Kiser

Erik Kiser

CEO, Orderful

At 25 Erik started a consulting firm focused on writing EDI and B2B integrations for manufacturers. Through scaling the company he realized that there is a great opportunity to improve business for the manufacturers by providing a software hub approach.

Show More

Top iPaaS Software Vendors: Features and Benefits

October 31, 2023
Cloud computing technology’s accessibility and ease of use have turned it into a booming element of the IT industry. But the rise of the cloud, coupled with competing technologies like APIs and EDI software, has brought on new challenges to companies as well.

Combining on-premise applications, cloud software solutions, and social platforms makes the integration process much more complicated. This has many companies turning to “integration platform as a service,” or “iPaaS,” vendors.

Peter LalushTop iPaaS Software Vendors: Features and Benefits
read more

EDI Requirements Checklist and Template

1 comment
October 19, 2023
Electronic data interchange (EDI) technology goes back as far as the 1960s, yet it’s still a common tool used by many businesses today. And while many have spoken of API’s ability to replace EDI software, it doesn’t look like it’s going anywhere soon: the EDI market is worth $1.88 billion today, projected to grow to $4.04 billion by the year 2029. As a result, it’s still a smart move to invest in these tools.

Dianna DragonettiEDI Requirements Checklist and Template
read more

EDI vs API in the Supply Chain

October 17, 2023

It’s hard to imagine an effective supply chain management solution that doesn’t rely on EDI or API. They both allow you to quickly and securely exchange data from system to system, which is a huge part of the supply chain management process.

But even though both API and EDI are widely used across many different business software solutions, they do have their differences. These differences need to be understood in order to make an educated choice when choosing a software solution that best suits your business needs.

Kim O'ShaughnessyEDI vs API in the Supply Chain
read more

3 EDI Alternatives Changing the Way B2B Business is Done

No comments
September 11, 2023

Exchanging data is an essential part of running a business. No matter your industry, technology that allows you to securely transfer data such as purchase orders, invoices and shipping information is crucial to success. For the past 40+ years, EDI software has been at the forefront of system-to-system data exchange for organizations across the world.

SelectHub3 EDI Alternatives Changing the Way B2B Business is Done
read more

The Future of EDI: Market Trends for 2023 and Beyond

August 29, 2023
Despite being a staple in many industries for decades, electronic data interchange software (EDI) is often cited by working professionals as a technology that’s soon to be obsolete. However, EDI trends remain steady even in the face of new data exchange tech such as APIs — most prominently, because EDI still gets the job done.

Peter LalushThe Future of EDI: Market Trends for 2023 and Beyond
read more