EDI Technology

There are three steps in the process of sending EDI documents: prepare the documents, translate them into an EDI format and transmit them to a partner.

One common process automated with EDI is the exchange of purchase orders (POs) and invoices. To give you a good example of how EDI works, we'll illustrate the EDI process for POs and invoices.

1. Document Preparation

Following the example of a PO and invoice, this is where a buyer prepares an order in a purchasing system.

  • The buyer collects and organizes the data so it will work with EDI
  • For example, instead of printing a PO, the system creates an electronic file with the necessary information to build an EDI document

So how would you properly prepare documents? There are several approaches, including:

  • Exporting computer-based data from spreadsheets or databases
  • Reformatted electronic reports into data files
  • Enhancing apps to create output files ready for EDI standard translation
  • Purchasing EDI software that can turn documents from your systems into EDI files
  • Human data entry

Ideally, you would want your system to eliminate as much human data entry as possible to save time and improve accuracy.

2: EDI Document Translation

The next step is to feed your document through EDI translation software to convert your internal data format into the EDI standard format using the appropriate segments and data elements. Alternatively, you can send your data to an EDI service provider, who handles translation to and from the EDI format on your behalf.

In our example, the PO is translated into an EDI 850 purchase order document.

3: Connect & Transmit EDI Documents

Once the PO is translated to the EDI 850 purchase order format, it's ready for transmission to the supplier. There are several ways to connect to a partner via EDI. The most common of include:

  • Direct, point-to-point EDI connection via a secure Internet protocol, such as AS2
  • Connect to an EDI network provider, also referred to as a Value Added Network (VAN) provider
  • A combination of both Direct EDI and VAN, depending on the partners involved and the transaction volume

In the case of an EDI network provider, or value-added network (VAN), the buyer uses their preferred communications protocol, ensuring reliable, secure EDI transmission. Then, the network provider connects to the supplier using the supplier's preferred communications protocol, ensuring the supplier receives the order. VANs can reduce setup and maintenance in some cases but tend to be more expensive than point-to-point integration for many use cases, as they charge a fee for each transaction or even line item.

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Data security and control are maintained throughout the transmission process using passwords, user identification and encryption. Both the buyer and vendor EDI applications automatically edit and check documents for accuracy.

In our full guide to the types of EDI protocols, we unpack the various EDI file transfer options and the technologies they use to help you select the right protocol(s) for your organization.