What is EDI?
Electronic Data Interchange Explained for Developers
EDI (Electronic Data Interchange) is a standardized method for exchanging business documents between organizations electronically. Instead of sending paper purchase orders, invoices, or shipping notices by mail or fax, EDI enables companies to transmit these documents directly between their computer systems in a structured, machine-readable format.
Think of EDI Like This…
Imagine you’re ordering supplies for your restaurant. Without EDI, you’d write an order on paper, fax it to your supplier, they’d manually type it into their system, process it, then fax back a confirmation that you’d have to manually enter into your system. With EDI, your restaurant management system automatically sends a structured digital order directly into your supplier’s system—no paper, no manual typing, no errors from misreading handwriting. It’s like the difference between mailing letters versus sending text messages, but for business documents.
Why EDI Matters
Speed
Documents that took days to mail arrive in seconds. Real-time business communication replaces postal delays and manual processing bottlenecks.
Accuracy
Eliminates human data entry errors. Studies show EDI reduces errors by up to 30-40% compared to manual processing.
Cost Savings
No paper, postage, or manual labor costs. Companies typically save $30-50 per document processed through EDI.
Security
Encrypted transmissions with authentication ensure only authorized parties access sensitive business data.
Partnerships
Many large retailers and suppliers require EDI. Being EDI-capable opens doors to major business relationships.
Visibility
Automated tracking and audit trails provide complete visibility into every transaction and document exchange.
How EDI Works: The Complete Flow
Your System
ERP creates purchase order
Translation
Convert to EDI format
Transmission
Secure encrypted delivery
Translation
Convert from EDI format
Partner’s System
Auto-process order
Acknowledgment
997/999 confirmation sent back
Document Creation
Your business application (ERP, WMS, accounting system) generates a business document—like a purchase order, invoice, or shipping notice—in its native format.
Translation to EDI Format
EDI translation software converts your document into a standardized EDI format (like X12 850 for purchase orders) with specific segments, elements, and delimiters.
Secure Transmission
The EDI document is transmitted to your trading partner through a secure communication protocol like AS2, SFTP, or through a Value-Added Network (VAN).
Partner Receives & Translates
Your partner’s EDI system receives the document, validates it, and translates it from EDI format into their internal system format.
Automated Processing
The translated data automatically flows into your partner’s business system, triggering their internal workflows without manual intervention.
Acknowledgment & Response
Your partner’s system sends back a functional acknowledgment (997/999 in X12) confirming receipt, followed by response documents like order confirmations or shipping notices.
EDI Standards & Document Types
ANSI X12 (North America)
The predominant EDI standard in North America, developed by the Accredited Standards Committee X12. Used primarily in the United States, Canada, and Mexico.
Common X12 Transaction Sets
- 850 – Purchase Order: Request to purchase goods or services from a supplier
- 810 – Invoice: Billing information sent from seller to buyer
- 856 – Advance Ship Notice (ASN): Details about shipped products before delivery
- 855 – Purchase Order Acknowledgment: Supplier’s response accepting or rejecting order
- 997/999 – Functional Acknowledgment: Confirms EDI document was received and validated
- 214 – Transportation Carrier Shipment Status: Updates on shipment location and status
- 940 – Warehouse Shipping Order: Instructions to warehouse to ship goods
- 945 – Warehouse Shipping Advice: Confirmation that goods were shipped from warehouse
UN/EDIFACT (International)
United Nations Electronic Data Interchange for Administration, Commerce, and Transport. The international EDI standard used primarily in Europe, Asia, and globally outside North America.
Common EDIFACT Message Types
- ORDERS: Purchase order message (equivalent to X12 850)
- INVOIC: Invoice message (equivalent to X12 810)
- DESADV: Despatch advice message (equivalent to X12 856)
- ORDRSP: Order response message (equivalent to X12 855)
- CONTRL: Control message for acknowledgment (equivalent to X12 997)
- REMADV: Remittance advice message for payment details
Key Differences from X12:
- Uses different segment terminators and delimiters (+ : ‘ instead of * ~ 🙂
- Different envelope structure (UNB/UNZ instead of ISA/IEA)
- More flexible composite data elements
- Supports multiple character sets and languages
Other EDI Formats & Modern Alternatives
TRADACOMS
UK retail standard, primarily used by UK retailers and suppliers. Being gradually replaced by EDIFACT.
VDA
German automotive industry standard (Verband der Automobilindustrie), used throughout European automotive supply chains.
EANCOM
Subset of EDIFACT for retail and consumer goods, includes barcode standards. Used globally by retailers.
XML EDI
Modern XML-based alternatives like cXML and ebXML. More human-readable but larger file sizes than traditional EDI.
JSON EDI
Emerging JSON-based standards for web services and APIs. Easier for developers but not yet widely adopted for traditional EDI.
AS2/AS4
Not formats but communication protocols for secure EDI transmission over the internet with receipts and encryption.
Implementing EDI: What You Need to Know
EDI Components Stack
Your ERP, WMS, CRM, or custom applications
Translation software, mapping rules, data transformation
Converts between EDI formats and your data structures
AS2, SFTP, VAN, or API for document transmission
Implementation Approaches
Cloud EDI Platform
Examples: SPS Commerce, TrueCommerce, Cleo Integration Cloud
Best for: Small to medium businesses, fast implementation, minimal IT resources
Pros: Quick setup, managed infrastructure, automatic updates
Integration Platform (iPaaS)
Examples: Boomi, MuleSoft, Jitterbit
Best for: Companies with complex integration needs beyond EDI
Pros: Handles EDI plus APIs, databases, and applications
On-Premise EDI Software
Examples: IBM Sterling B2B Integrator, SEEBURGER BIS
Best for: Large enterprises, strict data control requirements
Pros: Maximum control, customization, data stays internal
Custom Development
Tools: EDI libraries (Edifact.js, X12Parser), custom code
Best for: Developers with specific requirements, budget constraints
Pros: Full control, lower ongoing costs, exact fit
Key Implementation Considerations
Each partner may have specific requirements for EDI formats, transmission methods, and business rules. Document these carefully.
Plan how your internal data fields will map to EDI segments. This is often the most time-consuming part of implementation.
Always test with sample data before going live. Most partners require testing periods to validate integrations.
Build robust error handling and alerting. You need to know immediately when EDI transmissions fail.
Implement comprehensive logging of all EDI transactions for troubleshooting and compliance auditing.
Consider future volume growth. Can your solution handle 10x or 100x your current transaction volume?
Getting Started: Your EDI Journey
Identify Your Trading Partners & Requirements
Contact partners to understand their EDI requirements: What document types? Which standard (X12/EDIFACT)? What transmission method? Get their implementation guides.
Choose Your Implementation Approach
Evaluate cloud platforms vs. integration platforms vs. on-premise vs. custom development based on budget, timeline, IT resources, and complexity.
Map Your Data
Create detailed mappings between your internal data structures and EDI segments. Define transformation rules and default values.
Build & Test Integration
Develop your integration, test with sample files, validate against partner specifications, and conduct end-to-end testing.
Go Live & Monitor
Start with a pilot, monitor transactions closely, establish alerting, and gradually increase volume as confidence builds.
Final Thoughts for Developers
EDI might seem archaic compared to modern REST APIs and JSON, but it’s the backbone of B2B commerce. While the format looks cryptic at first, once you understand the structure—envelopes, segments, elements—it becomes logical. Think of EDI as a highly optimized, battle-tested protocol that’s been moving trillions of dollars in commerce for decades. Your job as a developer is to bridge the old and the new: translating between EDI’s structured formats and your modern applications. Master this, and you’ll be invaluable in the integration space.