Role of EDI in Supply Chain

EDI stands for Electronic Data Interchange. It’s a standard that has been evolved to integrate disconnected systems, such as the multitude of systems in the world of business.

In this world, each company uses its own systems to manage its business; the disconnect between these systems requires a common protocol that can help these systems interact well with each other. This standard, developed by a consortium of industries, is known as EDI.


In supply chain management, trading partners need to constantly communicate with each other; the communications are usually recorded within their systems for further processing. For example, when a supplier receives an order from a customer, he/she replies with the confirmation and/or modifications. This interaction needs to get into the customers’ systems so that the production planning can be accurate, and promises to these customers can be made.
Currently, manually receiving these changes by phone or email, and then having an operator key in the data is a viable option. Unfortunately, this method is very time consuming and is highly prone to human error. Beyond that, any lapses in communication anywhere within this process could lead to wrong future planning.
This is where EDI comes into the picture. If a company implements EDI for communication with its trading partners (such as its suppliers, logistics providers, warehouse operators, customers, etc.), the supply chain gets integrated electronically to all the users in the system.
The major EDI messages that are used in Supply Chain Management are

1. 850 Orders – Buyer sends new order information to supplier
2. 855 Order Acknowledgement – Supplier acknowledges the order with or without any suggested changes
3. 860 Order Amendment – Buyer amends an existing order and sends it to the supplier
4. 865 Order Acknowledgement – Supplier accepts an amendment or proposes changes
5. 856 Shipment Notification – Supplier sends Advance Shipment Notification
6. 810 Invoice – Supplier sends invoice to Buyer
7. 820 Remittance Advice – Buyer informs supplier of the payment status for the Invoice

So, what does it take to implement an EDI system? Essentially, what are the components of an EDI system? An EDI system consists of the following processes:

1. Data Conversion
2. Transmission
3. Receiving

Data conversion is the process whereby data, which is present as a different format (e.g. an Excel file), is converted to the EDI standard format. This allows for a constant platform for communication. After this, transmission takes place; transmission is the process whereby the EDI message is communicated to the other parties. Finally, the receiving process takes place. This is where the system receives other EDI messages generated from other members of the party.

TpSynergy.com provides integrated supply chain management services that includes EDI processing. This platform masterfully combines all three processes, and many others, into one amazing solution.
For more information, and for product trials, visit EDI Case study to see details of how companies have implemented EDI solutions.