Technical standards for EDI exist to facilitate parties transacting such instruments without having to make special arrangements.
The formatted data representing the documents may be transmitted from originator to recipient via telecommunications or physically transported on electronic storage media."
It distinguished mere electronic communication or data exchange, specifying that "in EDI, the usual processing of received messages is by computer only.
Human intervention in the processing of a received message is typically intended only for error conditions, for quality review, and for special situations.
"[1] In short, EDI can be defined as the transfer of structured data, by agreed message standards, from one computer system to another without human intervention.
The complexity of the 1948 Berlin airlift required the development of concepts and methods to exchange, sometimes over a 300 baud teletype modem, vast quantities of data and information about transported goods.
However, EDI is not confined to just business data related to trade but encompasses all fields such as medicine (e.g., patient records and laboratory results), transport (e.g., container and modal information), engineering and construction, etc.
The standards prescribe the formats, character sets, and data elements used in the exchange of business documents and forms.
Just as two kitchens can be built "to code" but look completely different, two EDI documents can follow the same standard and contain different sets of information.
For example, a food company may indicate a product's expiration date while a clothing manufacturer would choose to send colour and size information.
EDI can be transmitted using any methodology agreed to by the sender and recipient, but as more trading partners began using the Internet for transmission, standardized protocols have emerged.
In most cases, these non-internet transmission methods are simply being replaced by Internet protocols, such as FTP, HTTP, telnet, and e-mail, but the EDI documents themselves still remain.
In 2002, the IETF published RFC 3335, offering a standardized, secure method of transferring EDI data via e-mail.
Initially, this was through ad hoc conventions, such as unencrypted FTP of ASCII text files to a certain folder on a certain host, permitted only from certain IP addresses.
Often in a large company, these EDI guidelines will be written to be generic enough to be used by different branches or divisions and therefore will contain information not needed for a particular business document exchange.
To address the limitations in peer-to-peer adoption of EDI, VANs (value-added networks) were established decades ago.
The next step is to convert/transform the file that the translator creates into a format that can be imported into a company's back-end business systems, applications or ERP.
Another critical component of any EDI translation software is a complete "audit" of all the steps to move business documents between trading partners.
For the retailer, they have a stock outage and the effect is lost sales, reduced customer service and ultimately lower profits.
EDI and other similar technologies save costs for businesses by providing an alternative to, or replacement for, information flows which would require a great deal of human interaction and 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.
One very important advantage of EDI over paper documents is the speed at which the trading partner receives and incorporates the information into their system greatly reducing cycle times.
[9] A study published in 1996 by Kenneth Kahn and John T. Mentzer observed the use of EDI alliances among companies linked within a supply network, where EDI facilitated more transparent information sharing than had been customary among businesses who only shared information of a "need-to-know" basis.
[10] According to a 2008 Aberdeen Group report, "A Comparison of Supplier Enablement around the World", only 34% of purchase orders were then transmitted electronically in North America.
The report also stated that the average paper requisition to order costs a company $37.45 in North America, $42.90 in EMEA and $23.90 in APAC.
For example, allowing a supplier to update a retailer's accounts payable system without appropriate checks and balances would put the company at significant risk.