UNDERSTANDING EDI – BASICSRavi SundarRajan
If you are a small business owner, doing business with large retailers like Amazon, Walmart, or Home Depot – you might have heard this – “Can you become EDI compliant to do business with us. We prefer EDI compliant vendors”. So you start looking around what is EDI and how to become EDI compliant
What is EDI
EDI stands for Electronic Data Interchange. This is the standards provided for machine to machine communication of business documents.
To explain further, if someone mentions ‘Purchase Order’ you understand it as an order from a company to another business or individual to buy certain material or service. It is the authorized contractual document laying down the terms and condition like what is being ordered, when , how much etc.
Look at the picture below. This is a typical purchase order issued by companies.
Components of EDI
This PO is easy for humans to read. When we look at the PO, we know what is needed and when it is to be supplied, at what price etc.
So after getting the PO from customer, data need to be entered into the supplier’s system. Many small businesses uses QuickBooks as their accounting system. So the data need to be entered into this system. If the number of purchase orders handled are small, say 5-10 in a month, it is possible to enter the data manually. But if it is more than 100 per month, it becomes difficult to enter the data manually as it is time consuming and also error prone.
This is where EDI helps
EDI Document is a text file and it looks something like below
All the information we see in the regular purchase order is also there in this file but it is difficult to read for humans like us. For example the PO number will be in the row starting with BEG segment position 3 etc. But machines can read this and understand the PO structure.
This is the basic concept of EDI. Business information provided in a structured format that can be easily read by machines and processed.
TPSynergy provides a simple tool to use for generating EDI messages for supply chain.