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Electronic Data Interchange (EDI) is a set of standards for formatting information that is electronically exchanged between one business and another, or within a business. These standards describe how documents for conducting certain aspects of business—such as purchase orders and purchase order acknowledgements—are structured.
By specifying a standardized, computer-readable format for transferring data, EDI enables the automation of commercial transactions around the world. It provides a common, uniform language through which computers can communicate for fast and efficient transaction processing.
Before the development of standards, many businesses used proprietary systems to exchange trading information such as purchase orders and invoices. However, they recognized the economic need for a faster, less costly way to process information in order to stay competitive in the business world. Business sectors such as transportation, grocery supply, and banking drove the creation of standards for the communication of data.
In 1968, the United States Transportation Data Coordinating Committee (TDCC) was formed to oversee the design and development of format standards for transportation documents. In 1975, the TDCC released its first standard, the Rail Transportation Industry Application.
The Rail Transportation Industry Application focused on the content of a message—rather than the means of transmission—through the use of transaction sets. A transaction set is a business document that consists of an arrangement of data segments. The data segments include data elements in an exact order. The concept of the transaction set is the basis of the EDI ANSI X12 standard created later and widely used today.
About the same time that the TDCC was formed, the United Kingdom started its own effort to develop standard transaction documents for trans-Atlantic trade. The U.K. Department of Customs and Excise, with the help of the British Simplification of Trade Procedures Board (SITPRO), developed a competitive document standard for international trade, named TRADACOMS.
Standards development progressed in 1979, when the American National Standards Institute (ANSI) chartered the Accredited Standards Committee (ASC) X12 to develop a uniform standard for electronic, inter-industry business transactions. The United States Electronic Data Interchange (EDI) ANSI X12 standard, which resulted from the efforts of the committee, extended and ultimately replaced the standards created by the TDCC.
In 1988, the United Nations chartered UN/EDIFACT (United Nations Electronic Data Interchange for Administration, Commerce, and Transport) to develop a worldwide, internationally approved standard structure for exchanging information among partners. The UN/EDIFACT standards are called United Nations Standard Messages (UNSM). They are comparable to the ANSI ASC X12 transaction sets.
EDI is the standardized data format used for the majority of the world electronic business transactions. Many companies use either the ANSI X12 or UN/EDIFACT standard, or both.
With over 275 transaction sets, the ANSI X12 standard is used to perform nearly every aspect of business operation such as order placement and processing, shipping and receiving, invoicing and payment, pricing and sales, and inventory. It streamlines the communication of data to and from a broad range of entities, including financial and education institutions, insurance providers, food and pharmaceutical suppliers, retailers, automotive manufacturers, and federal and state government.