What Exactly Is EDI and How Does It Work?
What Exactly Is EDI and How Does It Work?
EDI (Electronic Data Interchange) is the structured transmission of data between businesses in a standardized electronic format. Instead of exchanging documents by mail, fax, or email—like purchase orders, invoices, or shipping labels—EDI lets systems talk directly to each other, automatically.
What Does EDI Actually Do?
At its core, EDI automates transactions between trading partners. Imagine a supplier receives an electronic purchase order (PO), processes it, then sends an invoice—all without a human typing anything. That’s EDI in action.
EDI replaces manual data entry with machine-to-machine data flow. It reduces errors, speeds up order fulfillment, and strengthens supply chain efficiency.
How Does EDI Work?
Here’s a simplified step-by-step of the EDI process:
- Document Creation: A buyer generates a business document (e.g., a purchase order) using their internal ERP or accounting system (like Sage or QuickBooks).
- EDI Translation: The document is translated into an EDI standard format (e.g., ANSI X12 or EDIFACT).
- Transmission: The translated document is securely transmitted to the supplier via EDI protocols like AS2, FTP, or APIs.
- Reception and Integration: The supplier’s EDI system receives the document, translates it back into a readable format, and integrates it into their internal system for fulfillment.
Real-World Example
E-commerce Seller → Distributor:
An Amazon merchant sends an electronic purchase order to their distributor. Within seconds, the distributor’s system auto-generates an Advance Shipping Notice (ASN) and a UCC-128 label, then sends an electronic invoice—all via EDI.
Without EDI, this process would take hours of manual data entry and back-and-forth emails.
Why Is EDI Important?
- Speed: Automated transactions = faster fulfillment
- Accuracy: Eliminates manual errors
- Scalability: Handle 10 or 10,000 orders the same way
- Compliance: Required by big retailers (e.g., Walmart, Target, CDW)
- Cost-saving: Reduces labor and operational costs
ActionEDI: EDI Made Simple for SMEs
Unlike legacy systems like SPS Commerce, ActionEDI was built specifically for small and medium-sized businesses. You don’t need an IT department to get started.
With prebuilt integrations (Sage, QuickBooks, Shopify), email PO parsing, and real-time automation, ActionEDI lets you do EDI like the big players—without the big price tag.
- ✅ Flat pricing
- ✅ Fast onboarding
- ✅ 24/7 real support
Final Thought
If your business still sends PDFs manually or logs into clunky vendor portals, it’s time to upgrade. EDI is not just a tool—it’s a game-changer for modern supply chains.
Simplify EDI. Scale your business. Start with ActionEDI.
Next Steps
Book a free demo at actionedi.com or explore how our plug-and-play tools can cut your EDI costs by 50%.
