Streamlining Business Transactions: Understanding Electronic Data Interchange (EDI)

EDI, which stands for Electronic Data Interchange, is the standardised business-to-business (B2B) communication of documents in an electronical format. The simple definition of EDI is a standard electronic format that replaces paper documents, such as purchase orders, deliveries, or invoices. By replacing paper transactions with EDI, organizations can save time and eliminate costly errors caused by manual processing.

In EDI transactions, information is moved from a system application in one organization to a system application of another. EDI standards define the location and order of information in a document format. This automated electronic functionality allows data to be shared quickly, rather than the hours, days or weeks required by paper documents or other methods.


Most Popular EDI Standards

EDIFACT stands for Electronic Data Interchange For Administration, Commerce, and Transport. It finds use in multi-country/multi-industry trading purposes and in an overall global context. The companies in Europe have been using EDIFACT for a very long time. Hence, the EDIFACT finds broad use in the European Union countries. This standard establishes a set of syntax rules that are used to structure the interactive exchange protocol. Enables secure exchange of business documents and files across multiple countries and industries. EDIFACT is widely used in Europe, as many companies have adopted it since its inception. However, it is beginning to have more adoption outside of Europe. It is especially experiencing strong growth within the United States and Asia-Pacific regions.

EANCOM came about in 1987 as a subset to EDIFACT. At first, EANCOM was only for the retail industry. Later, EANCOM was implemented in other industries such as health care and construction, etc. It soon became one of the most popular subsets of EDI due to its usage in various industries.

The automotive industries in Europe developed the EDI standard ODETTE (The Organisation for Data Exchange by Tele Transmission in Europe). It came about to facilitate the exchange of EDI documents with their trading partners. The comVDA munication standards such as OFTP and OFTP2.0 came about due to the popularity of ODETTE.

VDA stands for Verband der Deutschen Automobilindustrie. It is the German automotive EDI standard. Widely used by the German Automobile companies for the transfer of their business documents, this EDI standard was very much popularized in Germany. Though they do not contain all the characteristics of a typical EDI message, the UK automobile supply industry accepted it.


The American National Standards Institute created the EDI format ANSI X12. The ANSI X12 is more popular compared to other EDI standards. This is because ANSI X12 covers a wide range of industries ranging from healthcare to retail to even the automotive industry. The use of ANSI X12 started in the North American region. The other regions of the world also make use of ANSI X12 now.


HIPAA stands for Health Insurance Portability and Accountability Act. It is a standardized format for electronically transmitting healthcare transactions between different entities, such as providers and payers. It includes specific requirements for data content, structure, and transmission protocols to ensure the confidentiality, integrity, and availability of protected health information in compliance with HIPAA regulations. HIPAA is mainly used in the healthcare industry in the United States.


TRADACOMS is a messaging standard that for electronic data interchange (EDI) transactions. It defines the structure and content of messages exchanged between trading partners in the UK retail industry. TRADACOMS supports a limited set of data types and syntax rules, and is considered an outdated standard that has largely been replaced by newer EDI standards such as EDIFACT and XML.

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