What is EDI Model?
EDI stands for Electronic Data Interchange model. It is the exchange of documents between companies through computers in a standard format using networks, such as the internet. It replaces the paper-based exchange of business documents. In EDI a standard format is used because the computer will be able to read and understand the documents as it is a computer-based data exchange method. It is widely used for ecommerce purposes. The Various benefits of this model are:
- This model reduced the cost.
- It increased the processing speed.
- This model provides information security.
- This model reduced errors.
- This model helps in improved relationship between business partners.
The basic process of EDI-based transactions is the same as their manual. The only difference that EDI makes is that its transactions are done electronically, and data packets are formatted according to the standards of EDI. The following figure describes the basic process of the EDI model:
- In EDI model, firstly the sender must generate the application file using its business application system. This file contains the processed documents. The document sent by the sender has to be translated into an agreed EDI standard format. The process of translating EDI documents into EDI standard format is called mapping.
- The translation software uses this mapping to translate the transaction of EDI so that it can easily understand y the receiving organization.
- The document file is sent electronically either through a value-added network using EDI software, a web-based EDI tool, or outsourcing with an EDI service provider.
- The trading partner receives the file. The receiver translates the file from the EDI standard format to a file usable by their Business Application Software.
- An acknowledgement document is generated to the originating organization.
The most common documents exchanged via EDI model are:
- Purchase Orders
- Financial Information letters
- Transaction Bills
- Shipping requests and notifications
- Acknowledgement and Feedback
- Business Correspondence letters
The most common EDI users are:
- Central and state government agencies