Definition of Electronic Data Interchange in the Network Encyclopedia.

What is Electronic Data Interchange (EDI)?

Electronic Data Interchange, also known as EDI, is a standard format developed by the Data Interchange Standards Association (DISA) in which companies can exchange business data and financial transactions. Electronic data interchange (EDI) is defined in the American National Standards Institute (ANSI) standard called X.12.

How EDI works

The basic unit of an EDI transmission is the message, which consists of a transaction set with a header and footer attached. A transaction set is roughly equivalent to a typical business form, such as a purchase order, and consists of a number of data segments, each containing various fields delimited by some character. These fields represent individual elements of the business transaction, such as company name, account number, quantity, and so on; they are formatted according to a standard code. This code is implemented as a map between your business application’s data fields and the type of EDI standard that is appropriate for the transaction being performed.

EDI data can originate from any computing level, from mainframe to local area network (LAN) server. Systems communicate through EDI translation software that formats the data into standard EDI encoding and exchange information – either through a direct dedicated link between business partners or through an external third-party value-added network (VAN) service provider that acts as a clearinghouse for EDI transactions. If a VAN is used, as it normally is, the VAN processes EDI messages and routes them to the appropriate electronic mailbox for the destination business partner, who can then retrieve the EDI messages from the mailbox and process the transactions using business applications.