Electronic Data Interchange (EDI)

What is EDI?

Electronic Data Interchange (EDI) automates order entry from large retailers and manufacturers, eliminating manual data entry for those specific customers. When Walmart mandates EDI, they're forcing you to automate their orders. But that still leaves every order from smaller customers coming through email, phone, and portals, which is why EDI is just one piece of order entry automation.

What is EDI and How Does It Work?

The Basics of Electronic Data Interchange

Electronic Data Interchange (EDI) replaces manual order entry with computer-to-computer document exchange. Instead of your team typing Walmart's purchase orders into SAP, Oracle NetSuite, or Microsoft Dynamics, their computer sends standardized documents (850 for purchase order, 810 for invoice) directly to yours. Your system reads it, processes it, creates pick lists, all without human touch.

Common EDI documents that eliminate manual entry:

Why EDI Only Solves Part of the Problem

But here's the rub: Target sends their department number in REF*DP, Home Depot wants specific label formats, and Amazon requires precise delivery windows. Miss any of these requirements? Hello, chargebacks.

The problem is EDI only automates order entry from EDI-capable customers. Target sends automated EDI orders. Your local chain still emails Excel sheets. Amazon requires their format. Small customers text orders. You end up with automated order entry for some customers, manual entry for everyone else.

How EDI Actually Processes Orders

When Target needs inventory, here's their automated order entry process:

  1. Automatic generation - Target's system creates a purchase order based on inventory levels

  2. Format translation - Software converts to EDI format (X12 850)

  3. VAN transmission - Sends through Sterling, OpenText, or direct AS2 connection

  4. Automated entry - Your system receives and processes without manual intervention

  5. Confirmation - 855 acknowledgment automatically sent back

This eliminates manual order entry for that specific customer. But here's what vendors don't tell you - integration with your ERP (whether Epicor, NetSuite, or Dynamics) often requires custom mapping. Every field needs to be translated. Every business rule needs configuration. And when your ERP updates? Hope the integration doesn't break.

Why Do Companies Use EDI for Order Entry?

Major retailers and manufacturers require EDI to eliminate order entry errors and delays. If you're selling to any big retailer or distributor, EDI isn't optional - it's mandatory.

These companies have learned that manual order entry kills efficiency. When you're processing thousands of orders daily, even a 1% error rate means dozens of problems. So they mandate EDI, pushing the automation requirement onto suppliers.

But while EDI automates order entry for enterprise accounts, you're still manually entering every order that comes via email, phone, or portal from other customers. You've automated the easy part (big customers who invested in EDI) and left the messy part (everyone else) manual.

Your team now manages two parallel processes - automated EDI orders that flow through and manual everything else that needs typing. It's like having a Tesla in the garage but still riding a bike to work because only some roads allow cars - and guess which roads you actually need to take every day?

What Does EDI Actually Cost?

Cloud EDI Solutions

Starting around $99-500/month plus VAN charges. Sterling Commerce (IBM), OpenText, and Kleinschmidt charge setup fees per trading partner. You're looking at $2,000-5,000 per connection, plus monthly VAN charges. These Value Added Networks charge by the kilocharacter - yes, you pay by the character like it's 1987. Expect $0.10-0.25 per KC, which adds up fast with high volume.

Enterprise EDI Systems

For high-volume operations processing thousands of daily transactions, you're talking six figures annually. SAP's EDI module, Oracle's B2B Gateway, or standalone solutions from Cleo or TrueCommerce require IT resources but provide complete control.

The Hidden Costs Nobody Mentions

  • Staff still needed for non-EDI order entry

  • Dual systems (automated EDI, manual everything else)

  • Integration challenges between automated and manual processes

  • VAN charges that mysteriously increase every year

Smart manufacturers look at comprehensive order entry automation that handles all order sources, not just EDI. Modern platforms can handle EDI plus email, portal, and even phone orders in one system.

How Should You Think About EDI and Order Automation?

Pure EDI (Partial Automation)

Automates order entry only from EDI customers

  • Pros: Satisfies enterprise requirements

  • Cons: Leaves all non-EDI order entry manual

Comprehensive Order Entry Automation

Automates orders from all sources: EDI, email, portal, phone

  • Pros: Complete order entry automation across every channel

  • Cons: Requires evaluation of different platforms

Manual Hybrid (The Worst of Both Worlds)

EDI for big customers, manual entry for others

  • Pros: Minimal technology change

  • Cons: Maintains inefficient dual systems

Frequently Asked Questions About EDI

Does EDI fully automate order entry?

Only for customers using EDI. You'll still manually enter orders from customers using email, portals, or phone until you implement comprehensive order entry automation.

Can small companies afford order entry automation?

Cloud-based order entry automation has become accessible for small teams. Even 10-person companies can eliminate manual entry from both EDI and non-EDI sources. SPS Commerce offers starter packages, though watch for their aggressive upselling.

What's the difference between EDI and order entry automation?

EDI is one type of order entry automation, specifically for standardized electronic documents. Complete order entry automation handles all sources: EDI, email, PDF, Excel, portals, and more.

How long until we eliminate manual order entry?

With EDI alone: you won't (it only automates EDI customers). With comprehensive order entry automation: most companies achieve 80% automation within 90 days.

EDI handles some customers, but what about the rest? See how comprehensive order automation eliminates manual entry from all sources - EDI, email, portals, PDFs - without forcing customers to change how they order. Because your customers shouldn't need technical infrastructure just to place an order.

EDI 850
Invoice