November 22, 2022

What Is Electronic Data Interchange (EDI) Software?

Transportation Management System

Businesses are constantly on the hunt to attract new clients, save money, and streamline their operations. One solution that stands to do all of the above is electronic data interchange software. Consider this your guide to EDI software and how it supports a stronger business.

Definition: Electronic Data Interchange (EDI) Software

Electronic data interchange (EDI) software simplifies and streamlines the transfer of data between trading partners. It allows businesses to exchange information quickly and securely. Organizations in almost every industry (especially transportation, retail, and warehousing) use it to automate business processes, reduce operational costs, and improve customer service.

EDI software provides a secure, reliable way to electronically send and receive documents, such as purchase orders, invoices, shipping notices, inventory updates, payment remittances, and more. It replaces paper-based documents and eliminates much of the manual labor associated with paper-based processes while ensuring the data is accurate and up to date. EDI software also helps companies comply with government regulations regarding data security and privacy.

What is EDI Software Used For?

EDI software has practical uses in multiple industries. Any time you need to quickly share forms, data, or large volumes of information, EDI provides a practical solution. Most large companies already have the necessary infrastructure to leverage EDI capabilities, making it an easy process to send and receive data.

Use cases for EDI software include, but are not limited to:

  • Requests for quotes
  • Bank loan applications
  • Purchase orders
  • Invoices
  • Transactional data

Let’s look at some of these use cases in greater detail.

EDI in Retail

Large retailers often need to exchange a large amount of data with their suppliers and distributors on a daily basis. By using EDI software, they can automate this process and streamline their business operations. EDI eliminates manual tasks like printing, scanning, and faxing documents. Also, EDI tools enable companies to securely store transactional data in one place, where users access it whenever they need it.

EDI in Transportation

The transportation industry has seen incredible growth and increasing demand over the last several years. Time is always of the essence when it comes to delivering goods. And with so many shipments coming and going at any given time, it’s clear that good communication and data sharing are key to successful operations.

However, high-volume communications can lead to opportunities for error. This may include a late shipment arrival, missed data, poor customer service, or a myriad of other inefficiencies, all of which could result in a loss of business and even reputational damage.

An EDI software solution can fill the gaps by streamlining communication and data sharing while ensuring a high level of data quality and reliability. EDI processes automate many of the manual tasks that leave room for error, allowing employees more time to focus on profitable tasks. What’s more, you’re in a better position to deliver optimal customer service while providing your trading partners with ongoing visibility.

Among the tasks that EDI software can automate include:

  • Manual inputs to avoid double entry or mistakes
  • Sending data and documents to trading partners
  • Updating the status of documents and data
  • Organizing the data in a usable format

Today’s transportation leaders require EDI capabilities. Having such a system in place allows smaller operators to compete on a much larger playing field without having to take on the overhead of a large company.

EDI in Warehousing

With EDI software, warehouses can efficiently manage their inventory and electronically exchange data with third-party vendors. This allows warehouses to streamline their processes, reduce labor costs, and improve customer service.

To get the most out of EDI software in warehousing, it is important to understand how the technology works and what features are available. For instance, some EDI systems allow users to capture product information from suppliers or generate shipping labels automatically. Advanced features of EDI software make it easy to track transactions across multiple locations and even integrate with other business applications, such as Enterprise Resource Planning (ERP).

EDI in Customer Service

As a company grows its product portfolio and annual sales, antiquated tools like spreadsheets simply can’t do the job they once did. EDI systems can prove useful in all areas of a business, including customer service. With more sales comes more risk for orders to get lost or delayed. Customers that haven’t received their shipments may reach out to the company for answers, resulting in higher call volumes and longer wait times.

With EDI, customer service teams can more easily track orders and products throughout the transportation lifecycle. Documents like invoices and shipping notifications are converted instantly and uploaded to the various systems used by different roles. So when a customer calls in to check the status of an order, a customer service agent can easily look up the order using various pieces of data (e.g., order numbers, names, addresses, etc.) and provide timely updates.

How EDI Works

In an EDI software transaction, information in a business’s computer application moves to a computer application used by another organization. The EDI framework ensures consistency when sending and receiving data so that all information arrives in the same document format. Compared to paper-based processes, EDI processing occurs rapidly, helping businesses to save time and money.

All cases of EDI transmissions are defined by a standard framework. If information is missing, the EDI documents may not be processed or transmitted correctly. Multiple agencies and organizations have contributed to EDI governance and the standard framework, including the Accredited Standard Committee X12, ODETTE, Peppol, GS1, and TRADACOMS.

As a result, EDI provides seamless, predictable communications that don’t require extensive guesswork or setup.

There are several ways you can send EDI communications. Let’s look at them in more detail.


Also called a point-to-point connection, this direct system does not require an intermediary to translate the data. Messages can be sent safely and securely, flowing from the sender’s application directly to the receiver’s application.

This method is intended to replace inefficient, time-consuming methods like email, postal mail, and fax. Emails can get very disorganized and are usually specific to one person or a small group of recipients. Only the people who receive the email can access the data. With postal mail, the data shared is not in an electronic format and it may take days or weeks to reach the recipient. With faxing, there can be a loss in image quality. It’s also a manual process that requires extensive effort to organize and prepare documents for sending.

EDI automates the entire process, removing the human role and allowing information to flow as needed. It reduces the potential for human error, eliminates paper waste, and allows processing to begin immediately.

Value-Added Network (VAN)

Another method uses a third-party network (a value-added network) to manage the data transmission. It provides a secure, digital platform for businesses to exchange data and documents with one another in a timely and efficient manner. VANs are often used for financial transactions, order processing, shipping information sharing, contract management, and more.

With a VAN in place, all transactions are conducted electronically without any physical documentation involved. This reduces costs associated with printing, mailing, or faxing documents back and forth. In addition, VANs provide access to an extensive network of other business partners who may be interested in engaging in electronic commerce activities.

Understanding How EDI Software Transmits Data

Because of the lack of the human element, EDI software follows a common structure so that it can be read and understood by a computer. It uses internet protocols like the Secure File Transfer Protocol (SFTP), AS2, Simple Object Access Protocol (SOAP), and others to send and receive data.

The common structure describes each piece of information and its purpose. Otherwise, one company’s version might be different than another company’s format, leading to confusion, data loss, and errors.

Within the protocols are data elements, which contain singular pieces of information, as well as data segments, which combine two or more data elements. For example, the data element FNAME and the element LNAME might combine into a segment to form CUSTOMER NAME. These structures can be applied to a range of different document types – a must-have feature as companies grow in size, scope, and complexity.

Benefits of EDI Software

Automation is the beating heart of EDI software, allowing companies to take advantage of having fewer hands-on tasks that time up valuable time. Let’s unpack what these benefits mean to organizations.

Time Savings

EDI software is a popular and efficient tool for businesses to streamline their operations. Businesses using EDI software benefit from increased transaction accuracy and improved customer service levels. All parties involved have access to real-time updates, preventing delays in order fulfillment.

What’s more, companies can save time by improving accuracy levels across various departments. The technology accelerates business process cycles such as order processing, inventory management, invoicing, payment tracking, and more. Automating these processes keeps operations running smoothly while saving time by eliminating costly mistakes caused by manual data entry.

Money Savings

The use of EDI software in businesses is constantly on the rise as more organizations recognize its potential to save money. It helps organizations reduce costs associated with manual data entry and related processes.

Among those cost savings are those associated with document printing and postage, as well as the labor costs of having to fix manual errors or double-check for data accuracy. When time is taken away from other value-adding tasks, a company’s bottom line can suffer.

EDI solutions are cost-effective as they do not require additional hardware or personnel costs associated with manual tasks such as inputting data into multiple systems or faxing documents back and forth between parties.

Fewer Errors

With EDI software, companies can quickly send and receive secure digital information between different computer systems, enabling them to keep their data up to date. Automated processes are much less prone to errors than manual ones because they are consistent each time they are used.

Less Waste

In the past, businesses relied on manual methods such as fax machines or postal mail to send documents back and forth. With an EDI system in place, companies can quickly send invoices, orders, and other important documents without having to wait for physical copies or manually enter information into their systems. There’s much less paper waste since all documentation is stored electronically.

There’s also the matter of less wasted space in the office. You don’t need dedicated server racks, file storage, or a huge paper supply to take care of business.

Greater Traceability

EDI software solutions provide an added benefit of increased traceability between parties. For example, if one company sends out an order to a supplier via EDI software, that company can easily track when the order was sent, received, and processed by the supplier. Any changes made to the order along its journey can be tracked in real-time as well. This helps ensure accuracy in orders while providing transparency throughout both companies’ processes.

Access to Reporting Features

With every transaction documented electronically and in great detail, users can run reports via EDI software to gain insights into their operations. Built-in analytics and reporting can be useful when making business decisions and tracking your company’s growth. For instance, you might run a report to see how many purchase orders you received in a given time period or the length of the average delay for deliveries.

Businesses can quickly analyze and process vast amounts of data from various sources in a central location. This makes it easier for companies to identify trends and correlations between different sets of data, which can then be used when making decisions about their operations.

Positive Customer Experiences

For a business to run efficiently, they need to be able to quickly transfer important information between departments and suppliers. EDI software provides a secure channel for these transactions that reduces manual entry errors and increases accuracy. This ensures that customer orders are fulfilled correctly and in a timely manner – leading to better customer experiences overall.

Additionally, EDI software allows businesses to track customer interactions across different channels. This delivers valuable insights into how users engage with the company’s products or services so they can tailor future interactions accordingly. With EDI software, businesses can focus on providing their customers with tailored solutions that meet their needs and expectations.

A Competitive Advantage

Historically, EDI software has been out of reach of smaller businesses due to the investment. Trading partners tend to choose large companies because they have EDI infrastructure in place, which saves them time and money. However, investing in EDI can give smaller enterprises a competitive advantage by being able to compete for trade contacts on an even playing field.

How MessageXpress Supports a Better Approach to EDI

When it comes to using EDI software in trade contracts, trading partners tend to prefer companies that have EDI capabilities. Doing so makes life easier for them by saving them time and money, not to mention the confidence they gain by reducing errors.

MessageXpress’s forms-based application allows smaller businesses to take advantage of EDI capabilities in a cost-effective way. Get customer support and EDI functionality for one affordable price.

Implementing your own EDI system comes with many risks and challenges. To launch an on-premise solution requires a sizeable investment (in terms of both money and time). For starters, you’d need to explore EDI solutions, reach out to and vet vendors, compare pricing structures, and gain C-suite approval for the purchase. From there, you’d need to implement the software and learn how to use it. This requires extra time to train your end users. This process repeats itself when current employees leave your company and new ones are hired.

In some cases, your EDI software may need to be updated, which means you’ll need to continue training your staff in new features and functions. There’s also the matter of maintaining on-premise servers, ensuring reliable and secure operations, and providing all the computer hardware and backup systems needed to keep your EDI system humming.

What’s more, you must also take into account the level of support that comes with your software investment. Some companies may charge extra for support, while others may only provide limited options that aren’t in your preferred channels. There may also be challenges integrating your chosen EDI software with your existing legacy systems.

MessageXpress’s innovative EDI solutions allow you to skip these classic headaches and get straight to the benefits of EDI transmissions. There’s no integrations to figure out, no hardware to maintain, no ongoing maintenance, and no extensive training to learn.

Only pay for what you need. Our pricing is straightforward and transparent, allowing you to budget accordingly and avoid the ongoing costs that come with system ownership.

Learn more when you schedule a demo and see how EDI can transform your business.


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