EDI is a general name for a number of techniques to communicate electronically (via e-mail or an FTP server) with your supplier. By linking your POS system of business software directly to the sales software of the supplier you save a lot of time and you have less errors in your supply chain.
EDI documents contain the same data that would normally be found in a paper document used for the same organisational function. An EDI document may contain a ship to address, bill to address, a list of product numbers (usually a UPC code) and quantities. It may have other information if the parties agree to include it.
Electronic Data Interchange is not single standard; there are several EDI standards, like UN/EDIFACT, ANSI ASC X12 and UCS. To make the subject even more complicated, EDI standards only tell which pieces of information are mandatory for a particular document, which pieces are optional and give the rules for the structure of the document. The standards are like building codes. 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. Organizations that send or receive documents from each other agree on the specific information to be transmitted and how it should be used. This is very important to know, as many people buying a Point Of Sale solution that includes EDI assume that they are ready to send and receive documents from their suppliers.
Though more modern technologies as XML and ‘web services’ have been developed to facilitate data interchange, EDI is still the data format used by the vast majority of electronic commerce transactions.