EDI Explained — Do You Need It?

Jamie Royce


October 15 2021


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If you are involved in any aspect of Business-2-Business (B2B) relations, you have most likely stumbled across the acronym EDI. Possibly you’ve even attempted to have EDI explained. In this article, we are going to clear up exactly what EDI is so you can determine how and if it applies to you.


What is “EDI”?

EDI is separated into three words you most likely know and deal with on a regular basis:

Electronic Data Interchange

Much, or all of your business communication is done electronically either by email or some sort of message or chat system.

When you communicate and deal with other individuals you are interchanging data between yourself and the receiver.

The receiver then replies and originates data back to you.

Simply put, you are involved in some sort of electronic data interchange every time you send an email.

When we refer to EDI, however, we are referring to the interchange of data that happens between computers alone.

Sending an email or inputting some data yourself and sending it to another involves manually inputting and sending data.

This is entirely a human process. With you removed from the equation, the work would never get done.

With EDI, everything is electronic and done between two or more computers.

Whether you show up that day or not, the computer will still do what it has been programmed to do.

Additionally, when these computers speak, they must speak the same language. It would be pretty hard if you were speaking French and someone replied to you in Hungarian.

The same thing goes for computers.

Whenever you are dealing with EDI, you are dealing with a specified format that is being used by both the sender and receiver in order to properly exchange the data and receive exact duplication amongst all units concerned.


A Non-EDI Example

First, let’s look at how a business transaction could be done manually without EDI.

Let’s say you worked for Joe’s Shoes.

In this example, Joe’s Shoes is a large distributor that places shoes in online retail stores and caters to sellers from around the world.

Your position is Orders Manager at Joe’s Shoes.


An order comes in from Heels-by-Holly, a small online store specializing in high-heel shoes.

This order comes to you via an email alert.

You check the email and see that she wants to order 50 pairs of hot pink high-heel shoes.

The orders manager at Heels-by-Holly sends you the payment.

You are ready to fulfill the order.

In order to fulfill this order, you place an order yourself with your own supplier — Everything Feet.

This order gets sent to Everything Feet and the orders manager there takes your order and ships the product directly to Heels-by-Holly.

Everything Feet also sends you a tracking number which you provide to the orders manager at Heels-by-Holly.

Heels-by-Holly receives the 50 pairs of hot pink high-heel shoes.

After confirming with Everything Feet that they still have additional hot pink high-heel shoes in stock, you then update your own inventory to reflect the recent purchase so the next person interested in this item can go through the same cycle again.

There are quite a few moving parts involved in just one order, right?

You can also see how any number of these points could easily break down due to human error.


How Does EDI Work?

Let’s take the same scenario above but place it in the hands of computers.

Heels-by-Holly makes an order for 50 pairs of hot pink heels.

This order is electronically submitted to Joe’s Shoes.

The computer at Joe’s Shoes accepts the order, the payment and transmits the order to Everything Feet.

The computer at Everything Feet is in sync and talking to the computer at Joe’s Shoes and accepts the order, processes it and ships the 50 pairs of hot pink heels to Heels-by-Holly.

A copy of the tracking number is automatically sent directly to Heels-by-Holly and also to you at Joe’s Shoes.

Heels-by-Holly receives the product.

The inventory is automatically updated and properly reflected at Joe’s Shoes as well as Everything Feet.

A bit simpler, right?


What are Common EDI Problems?

The above scenario is how everything should go with a perfect EDI system that’s in complete harmony with each segment of the process.

Unfortunately, it doesn’t always go that way.

EDI is known for being over-complicated and problematic.

Just as humans make errors executing daily transactions, the same errors can be programmed into an EDI system. Missing fields or omitted commands can wreak havoc.

There could be scenarios where the recipient doesn’t understand the originator. The language being used to link the two could be out-dated and not compatible with components within your overall system.

There might be security issues or breaches that occur during data transmission that puts your clients or your business at risk of being exposed.

At this point in our ever-expanding technological age, EDI is considered to be a rather old technology. It has actually been around since the 70’s.

While it beats you manually processing all your orders, there just might be a better solution for you and your business.


EDI & MindCloud

If you are using EDI, we can work with you. We have solutions that integrate.

We also have solutions that solve what EDI attempts to solve but doesn’t always accomplish.

At MindCloud, we are working hard to remove complications from your business life.

We assume you already have enough to deal with.

Why bother with complex administrative procedures that can be dealt with by a pre-determined solution?

Get the data out of your head and move it into the cloud.

Let us help you by first understanding your basic needs and unique scenarios.

Once we know that, we can program the right system that works for you.


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