Electronic Data Interchange (EDI) is the exchange of standardized information between business partners typically communicated electronically between computers. It is used to transfer electronic documents or business data from one computer system to another computer system. EDI also is used within individual organizations that want to transfer data between different divisions or departments, including finance, purchasing, and shipping.
Definition: Electronic data interchange (EDI) is the electronic communicating of information between organizations and entities in lieu of traditional paper communications (invoices, bill of sales, purchase orders…).
Electronic Data Interchange (EDI) Characteristics
There are two (2) characteristics that set EDI apart from other ways of exchanging information. 
- EDI only involves business-to-business transactions; individual consumers do not directly use EDI to purchase goods or services.
- EDI involves transactions between computers or databases, not individuals. Therefore, individuals sending e-mail messages or sharing files over a network do not constitute EDI.
Electronic Data Interchange (EDI) Standards
It’s Department of Defense (DoD) policy that DoD component EDI applications shall conform to the American National Standards Institute (ANSI) Accredited Standards Committee (ASC) X12 standard.
Electronic Data Interchange (EDI) Advantage
EDI and other similar technologies save company money by providing an alternative to, or replacing, information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc. Even when paper documents are maintained in parallel with EDI exchange, e.g. printed shipping manifests, electronic exchange and the use of data from that exchange reduces the handling costs of sorting, distributing, organizing, and searching paper documents. EDI and similar technologies allow a company to take advantage of the benefits of storing and manipulating data electronically without the cost of manual entry.
Another advantage of EDI is reduced errors, such as shipping and billing errors, because EDI eliminates the need to rekey documents on the destination side. One very important advantage of EDI over paper documents is the speed in which the trading partner receives and incorporates the information into their system thus greatly reducing cycle times. For this reason, EDI can be an important component of just-in-time production systems. 
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