What Exactly Is EDI and How Does It Work?

 EDI (Electronic Data Interchange) is the structured transmission of data between businesses in a standardized electronic format. Instead of exchanging documents by mail, fax, or email — like purchase orders, invoices, or shipping labels — EDI lets systems talk directly to each other, automatically.

What Does EDI Actually Do?

At its core, EDI automates transactions between trading partners. Imagine a supplier receives an electronic purchase order (PO), processes it, then sends an invoice — all without a human typing anything. That’s EDI in action.

EDI replaces manual data entry with machine-to-machine data flow. It reduces errors, speeds up order fulfillment, and strengthens supply chain efficiency.

How Does EDI Work?

Here’s a simplified step-by-step of the EDI process:

1. Document Creation: A buyer generates a business document (e.g., a purchase order) using their internal ERP or accounting system (like Sage or QuickBooks).
2. EDI Translation: The document is translated into an EDI standard format (e.g., ANSI X12 or EDIFACT).
3. Transmission: The translated document is securely transmitted to the supplier via EDI protocols like AS2, FTP, or APIs.
4. Reception and Integration: The supplier’s EDI system receives the document, translates it back into a readable format, and integrates it into their internal system for fulfillment.

Real-World Example

E-commerce Seller → Distributor:
An Amazon merchant sends an electronic purchase order to their distributor. Within seconds, the distributor’s system auto-generates an Advance Shipping Notice (ASN) and a UCC-128 label, then sends an electronic invoice — all via EDI.

Without EDI, this process would take hours of manual data entry and back-and-forth emails.

Why Is EDI Important?

• Speed: Automated transactions = faster fulfillment
• Accuracy: Eliminates manual errors
• Scalability: Handle 10 or 10,000 orders the same way
• Compliance: Required by big retailers (e.g., Walmart, Target, CDW)
• Cost-saving: Reduces labor and operational costs

ActionEDI: EDI Made Simple for SMEs

Unlike legacy systems like SPS Commerce, ActionEDI was built specifically for small and medium-sized businesses. You don’t need an IT department to get started.

With prebuilt integrations (Sage, QuickBooks, Shopify), email PO parsing, and real-time automation, ActionEDI lets you do EDI like the big players — without the big price tag.

• ✅ Flat pricing
• ✅ Fast onboarding
• ✅ 24/7 real support

Final Thought

If your business still sends PDFs manually or logs into clunky vendor portals, it’s time to upgrade. EDI is not just a tool — it’s a game-changer for modern supply chains.

Simplify EDI. Scale your business. Start with ActionEDI.

Next Steps

Book a free demo at actionedi.com or explore how our plug-and-play tools can cut your EDI costs by 50%.