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What Is EDI (Electronic Data Interchange)

EDI is the electronic exchange of standard business documents between computer systems of business partners. Common documents include invoices, purchase orders, shipping requests, and acknowledgements. In EDI, these documents are converted to an agreed standard format and sent electronically without paper. This allows automatic processing and reduces costs, errors, and processing time compared to traditional paper-based systems.

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282 views3 pages

What Is EDI (Electronic Data Interchange)

EDI is the electronic exchange of standard business documents between computer systems of business partners. Common documents include invoices, purchase orders, shipping requests, and acknowledgements. In EDI, these documents are converted to an agreed standard format and sent electronically without paper. This allows automatic processing and reduces costs, errors, and processing time compared to traditional paper-based systems.

Uploaded by

Ankur Jain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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What is EDI (Electronic Data Interchange)?

EDI is the computer-to-computer exchange of business documents in a standard electronic


format between business partners.
EDI is an electronic way of transferring business documents in an organization internally,
between its various departments or externally with suppliers, customers, or any
subsidiaries. In EDI, paper documents are replaced with electronic documents such as word
documents, spreadsheets, etc.

EDI Documents
Following are the few important documents used in EDI −

 Invoices
 Purchase orders
 Shipping Requests
 Acknowledgement
 Business Correspondence letters
 Financial information letters

Steps in an EDI System


 A program generates a file that contains the processed document.
 The document is converted into an agreed standard format.
 The file containing the document is sent electronically on the network.
 The trading partner receives the file.
 An acknowledgement document is generated and sent to the originating organization.

Advantages of an EDI System


Following are the advantages of having an EDI system.
 Reduction in data entry errors. − Chances of errors are much less while using a computer
for data entry.
 Shorter processing life cycle − Orders can be processed as soon as they are entered into
the system. It reduces the processing time of the transfer documents.
 Electronic form of data − It is quite easy to transfer or share the data, as it is present in
electronic format.
 Reduction in paperwork − As a lot of paper documents are replaced with electronic
documents, there is a huge reduction in paperwork.
 Cost Effective − As time is saved and orders are processed very effectively, EDI proves to be
highly cost effective.
 Standard Means of communication − EDI enforces standards on the content of data and its
format which leads to clearer communication.
By moving from a paper-based exchange of business document to one that is electronic, businesses
enjoy major benefits such as reduced cost, increased processing speed, reduced errors and improved
relationships with business partners. Learn more about the benefits of EDI
Each term in the definition is significant:

 Computer-to-computer– EDI replaces postal mail, fax and email. While email is also an
electronic approach, the documents exchanged via email must still be handled by people rather
than computers. Having people involved slows down the processing of the documents and also
introduces errors. Instead, EDI documents can flow straight through to the appropriate
application on the receiver’s computer (e.g., the Order Management System) and processing can
begin immediately. A typical manual process looks like this, with lots of paper and people
involvement:

The EDI process looks like this — no paper, no people involved:

 Business documents – These are any of the documents that are typically exchanged between
businesses. The most common documents exchanged via EDI are purchase orders, invoices and
advance ship notices. But there are many, many others such as bill of lading, customs
documents, inventory documents, shipping status documents and payment documents.

 Standard format– Because EDI documents must be processed by computers rather than
humans, a standard format must be used so that the computer will be able to read and
understand the documents. A standard format describes what each piece of information is and in
what format (e.g., integer, decimal, mmddyy). Without a standard format, each company would
send documents using its company-specific format and, much as an English-speaking person
probably doesn’t understand Japanese, the receiver’s computer system doesn’t understand the
company-specific format of the sender’s format.
 Business partners – The exchange of EDI documents is typically between two different
companies, referred to as business partners or trading partners. For example, Company A may
buy goods from Company B. Company A sends orders to Company B. Company A and Company
B are business partners.

What is ALE ?

ALE supports the distribution of the business functions and process across loosely coupled SAP R/3
systems (different versions of SAP R/3). Connections from R/2 and non SAP systems is also
supported.

ALE supports-

 Distribution of applications between different releases of R/3 Systems


 Continued data exchange after a release upgrade without requiring special maintenance
 Customer-specific extensions.
 Communication interfaces that allow connections to non-SAP systems.
 Coupling of R/3 and R/2 Systems.

Difference between ALE and EDI ?

ALE is used to support distributed yet integrated processes across several SAP systems whereas EDI
is used for the exchange of business documents between the systems of business partners (could be
non-SAP systems)

ALE is SAP's technology for supporting a distributed environment whereas EDI is a process used for
exchange of business documents which now have been given a standard format

Both ALE and EDI require data exchange. An Idoc is a data container which is used for data
exchange by both EDI and ALE processes.

What is IDOC?

IDOC is simply a data container used to exchange information between any two processes that can
understand the syntax and semantics of the data.

In simple words , an idoc is like a data file with a specified format which is exchanged between 2
systems which know how to interpret that data.

IDOC stands for " Intermediate Document"

When we execute an outbound ALE or EDI Process, an IDOC is created. In an inbound ALE or EDI
process, an IDOC serves as input to create an application document. In the SAP System, IDOCs are
stored in database. Every IDOC has an unique number(within a client).

IDOCs are based on EDI standards, ANSI ASC X12 and EDIFACT. In case of any conflict in data size,
it adopts one with greater length. IDOCs are independent of the direction of data exchange e.g.
ORDERS01 : Purchasing module : Inbound and Outbound. IDOCs can be viewed in a text editor.
Data is stored in character format instead of binary format. IDOCs are independent of the sending
and receiving systems.(SAP-to-SAP as well as Non-SAP)

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