What is EDI
For a layman, electronic data interchange (EDI) simply refers to a way in which trading business partners exchange information through the use of computers. It can be explained as the exchange of daily business data using computers between trading businesses. The data that is shared is normally the routine data like daily orders or purchases, invoices. This does not include data like contract forms or any other data intended to be read by humans which are not routine. There is a format in which the data has to be structured for it to become EDI otherwise sharing will not be possible. This makes data transfer from a computer to another between business partners more efficient and easier.
EDI is currently the most preferred method of exchange of data due to its efficiency in that it is more accurate as opposed to the traditional methods. The traditional methods are prone to human errors while the machines accuracy limits any forthcoming errors. The time it takes for a paper based order in the traditional method to reach a recipient is reduced in the EDI method. For a traditional method if you some up the time you send an order to the time it takes for the shipment to be effected and delivery to the recipient it can be up to 10 days while for the EDI it takes less than a day.
Great acknowledgment should be given to the advent in technology since it has enabled process like EDI make data sharing more easily as opposed to some of the traditional methods like use of fax machines and mails. Most of these traditional techniques are still used to present but EDI remains to be the most preferred method. EDI technique has managed to successfully overpower other techniques due to the many benefits that come with it. Electronic data interchange is cost effective. Exchange of information from a computer to another is less expensive as opposed to the traditional methods and also processing of orders that are paper based is more expensive unlike EDI which is very cheap.
The speed and convenience of the EDI has helped to make better use of the warehouses. It has reduced the problems related to goods of out of stock and last minute urgent deliveries. EDI also ensures security of data since there is software that runs on the background ensuring that all documents are accurate. Also there is the use of passwords and encryptions to ensure data is safe from fraud.
EDI has some limitations in that it can only work if everyone in the company has a computer that is using the same software. Nevertheless EDI has proven to be a powerful tool that supports today’s electronic commerce.