EDI (Electronic Data Interchange)
Definition
EDI (Electronic Data Interchange) is the computer-to-computer exchange of business documents like purchase orders and invoices in a standard electronic format. It replaces paper, fax, and email so two trading partners' systems can transact directly, without anyone re-keying the data.
How EDI works
Two trading partners agree on a standard (ASC X12 in North America, EDIFACT internationally) and a transport method (AS2, SFTP, or a VAN). The sender's system maps an internal record, such as a sales order, into a structured EDI document built from segments and data elements. The receiver's system validates the file against the agreed specification and loads it straight into its ERP. A purchase order sent as an EDI 850 becomes a sales order in seconds with no manual entry.
Common EDI transactions
Each document type has a number. The 850 is a purchase order, the 810 is an invoice, the 856 is an advance ship notice, the 855 is a purchase order acknowledgment, and the 997 is a functional acknowledgment that confirms a file was received. Retailers like Walmart and Target mandate specific transaction sets and timing rules, and missing them triggers chargebacks.
Why it still matters
EDI is decades old but still carries the majority of retail and distribution order volume because it is fast, auditable, and standardized. Its weakness is that it only works when both sides are EDI-capable. Orders that arrive by email, PDF, or fax fall outside EDI entirely, which is why distributors increasingly pair EDI with AI extraction to cover every channel in one pipeline.
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Frequently Asked Questions
What does EDI stand for?
EDI stands for Electronic Data Interchange. It is the exchange of business documents between two companies' computer systems in a standard electronic format, without paper or manual re-keying.
Is EDI still used in 2026?
Yes. EDI carries most retail and distribution order volume and remains mandatory for trading with large retailers. It is increasingly paired with AI order processing to handle email and PDF orders that EDI cannot.
What is the difference between EDI and an API?
Both exchange data system-to-system. EDI uses standardized batch documents (X12, EDIFACT) and is the established standard for retail supply chains. APIs exchange real-time structured data, usually JSON, and are common in modern software integrations.
Automate every order format
OrderSync processes EDI, PDF, email, and fax orders into your ERP with AI extraction and validation. No VAN middleware.