How Does an EDI System Work? Everything You Should Know

The market for EDI software is worth $1,547.2 million and expected to reach $3,451.3 million by 2027. Businesses continue to adopt this new technology to save time and automate their daily tasks.

Integrating an EDI system into your current workflow can be difficult to do on your own. You may wonder what the technology does, what benefits it provides, and how to choose the right one.

Read our EDI system user guide to have all your questions answered.

What Is an EDI System?

EDI is an acronym that stands for electronic data interchange. An EDI system ensures you send and receive data in the right format.

Knowing what type of information an EDI system can process helps you know how you can use it. This begins by defining the word “data.”

The business world uses the term data to refer to any type of information, not just scientific findings or statistics.

An EDI system works by using automation to process documents and other information. They detect, read, and process each one almost instantly.

What Are the Benefits of an EDI System?

Online marketplaces are booming, with 63% of 1.8 million shoppers checking websites before they go anywhere else. Managing this influx of customers is only one reason that EDI system usage continues to increase.

Whether you run an online business or a traditional shop, you should consider integrating an EDI system. The benefits they provide are numerous because they make it easier to manage all your information and keep customers coming back.

Inventory Management

EDI systems help businesses keep up in a world where customers and clients expect everything instantly. They automate payments, streamline communication, and allow for faster order response times.

Effective software also makes it easier to manage your inventory. You’ll have access to every product you sell and be able to provide this information to your business partners.

Inventory management is essential because 75% of monthly searches are for new products. If you can’t keep up with their desire for constant renewal, customers will move on to someone else.


EDI security systems keep all data you send or receive safe from hackers. This is especially important if you manage sensitive information like credit card numbers or healthcare data.


An EDI system can also protect you from human error. Their data management processes are highly accurate and will reduce your hiring costs.

Paper Usage

Office workers use 8.5 million tons of paper per year in the UK alone. An automated system can help you make the transition to a paperless workplace.


The best way to see how new technology improves your business is to look at analytics. An EDI system makes this easier to do.

Analytics allow you to see changes in profit, inventory, and more. This information helps you know what you’re doing well and how to make changes to counteract your weaknesses.

How Do I Choose an EDI System?

When choosing an EDI system, there are several factors to consider. Remember them all to get the best system for your needs.

Before integrating an EDI system, know who your business partners are, what endpoints you need to transfer data, what documents you need to transfer, and what standards and protocols you want to use.

Consider Your Data Needs

The most common EDI standards are ANSI X12, Tradacoms, and EDIFACT. Other common options include XML, CSV, and JSON. Choose the standard in your area for fast, accurate data transfers.

Data transaction volume refers to the amount of information you need to transfer every day. Your software must be able to handle your current needs without being so large and expensive that you pay for more than you need.

Scalability is another important consideration. Consider both your current and future data transaction volumes. This ensures that your EDI system doesn’t end up holding your business back and angering customers with long wait times or missing features.

Choose the Right Type 

You have several options for the type of EDI system you choose. The major distinctions to keep in mind are in-house vs. managed and direct vs. VANS.

Having a few skilled members of your organization handle EDI can increase training and hiring costs while also making you dependent on a few skilled employees. A dedicated service provider costs more initially but provides a large pool of professionals to help you.

Recent data show at least a 20% increase in the number of outsourced EDI systems. They improve security, auditing, and response times while lowering cost, risk, and training requirements.

Direct EDI systems send information back and forth between you and your clients. They’re the most affordable option but require more time because you need to agree on a protocol with each of your trading partners.

A VAN or value-added network translates messages for you, allowing you to use whichever protocol you prefer. They offer lower startup costs but charge a fee for each document they process.

Choose the type of EDI software you use carefully. Make sure it’s compatible with the systems you use and fits your needs so you don’t invest time and energy into unnecessary additions.

Consider Cost and Time

EDI system cost varies based on brand, complexity, and a range of other factors. Going for the cheapest option isn’t worth it if the price is low because of a lack of features.

The more time you spend integrating an EDI system, the less you have to spend on your business. Make sure that your system isn’t too complex so that the setup will be simple.

Where Can I Get an EDI System?

Online shopping continues to increase, and managing a business is becoming difficult and expensive. Any technology that can automate common business functions is a worthwhile investment.

An EDI system makes it simpler and faster to send and receive all forms of data. This allows you to become more efficient and meet customer demands.

Choosing the right EDI system involves more than finding the cheapest option. You need to consider which one will meet your needs now and in the future and what provider can integrate it for you.

AdvanceFirst Technologies is an industry leader that can get you the software you need. Browse our EDI system solutions to get started today.

AdvanceFirst Technologies

AdvanceFirst Technologies

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