ELECTRONIC DATA INTERCHANGE (EDI)

ELECTRONIC DATA INTERCHANGE (EDI)

It involves the electronic transmission of business transactions over the telecommunication network between trading partners, covering the firm and its suppliers, customers, etc. A large variety of business transactions of firms are transmitted electronically using a standard message format of the firm. The technology is called „packet switching‟ viz., data is transmitted in a sort of envelope without any changes made to it.

Transmission of documents can be between:
 Computer of one firm to the computer of another company
 Through a third-party value-added service provider

The bulk of the documents that are sent through EDI by packet switching are:
 Purchase orders
 Invoices
 Requests for quotations
 Quotations
 Shipping notices etc

Use of EDI has expanded very fast as it ensures the following benefits:
1. Reduction in paperwork
2. Reduction in expenses in postage expenses
3. Reduction in labor costs
4. A faster flow of communication on transactions
5. Reduction in inventory levels
6. Better customer service

EDI is ringing in a new revolution in the way the business is done. The talk that is a buzz in the marketplace is, „Link up or lose out‟.
It is already being said the, ‟Doing business without EDI will soon be like trying to do business without a telephone‟. EDI, because of its capability to exchange information and speed up the flow of communication in a multi-lateral direction, is promoting strategic business partnerships among partners. The way we are moving, it will soon be, „No EDI, No Business‟.