The idea behind EDI is very simple. EDI seeks to take what has been a manually prepared form or a form from business application, translate that data into a standard electronic format and transmit it. At the receiving end, the standard format is “untranslated” into a format that can be read by the recipient’s application. Hence output of one application become input to another through the computer-to-computer exchange of information. The result is an elimination of the delays and the errors inherent in paper-based transactions.



Benefits of EDI can be seen by comparing the flow of information between organizations before and after its implementation. For the purpose the purchasing application provide on ideal scenario. In general, EDI has been used extensively in the procurement function to streamline the interaction between he buyer and seller. Other uses for EDI to exchange transcript quickly. Auto manufacturers use EDI to transmit large, complex engineering designs created on specializing computers. Large multinational firms use EDI to send online price catalogs to customer listing products, prices and terms and make direct orders by EDI.

The information flow when the paper documents are shuffled between organizations via the mailroom.

EDI can substantially automate the information flow and facilitate management of the business process, as illustrated in. The EDI transactions for a phrase, shipment and corresponding payment are as follows:

Step 1. Buyer’s computer sends purchase order to seller’s computer.

Step 2. Seller’s computer sends purchase order confirmation to buyer’s computer.

Step 3. Seller’s computer sends booking request to transport company’s computer.

Step 4. Transport company’s computer sends booking confirmation to seller’s computer.

Step 5. Seller’s computer sends advance ship notice to buyer’s computer.

Step 6. Transport company’s computer sends status to seller’s computer.

Step 7. Buyer’s computer sends Receipt advice to seller’s computer.

Step 8. Seller’s computer sends invoice to buyer’s computer.

Step 9. Buyer’s computer sends payment to seller’s computer

The purchase order confirmation is the seller’s acceptance of the price and terms of sale. Not that the various internal departments are agreed and called buyer and seller to simplify the description. All the interaction occurs through EDI forms and in most cases are generated automatically by the computer.

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