Data Interchange basically means the data that is exchanged by the

organisations. EDI means Electronic Data Interchange which is basically the

data exchanged by the organisations electronically. EDI indicates that the data
transactions require the computer to computer transactions directly into
vendor databases and ordering systems. EDI also refers to a exchange of
standardised business documents between trading partners.
National Institute of Standards and Technology defined electronic data interchange
as "the computer-to-computer interchange of strictly formatted messages that
represent documents other than monetary instruments. EDI implies a sequ ence of
messages between two parties, either of whom may serve as originator or
recipient. The formatted data representing the documents may be transmitted
from originator to recipient via telecommunications or physically transported on
electronic storage media."

Advantages of EDI:
1. It is very cost efffective as the costs are reduced by saving paper and
eliminating paper processing
2. time is saved as the transaction happens real time and a person does not
have to wait long for a reply
3. documents are transferred quickly and processing errors are decreased
resulting in more efficient business
4. leads ti improvised customer service which leads to expand the customer
base
Disadvantages of EDI:
1. No standard document formats for EDI
2. Standard bodies publish revisions to standard format of the EDI
document but the trading partners may still be using the older versions
of the same. This creates the problem browsing through the database
3. EDI implementation is expensive, this limits trading with companies who
do not have a EDI
4. Large organisations have their EDI prefixed and are willing to only work
with companies who utilize EDI, restricting small business companies to
trade with such organisations.
There are 3 major components of EDI, viz. Data Standards, Trading Partners,
and Translation Software and Communications.
Data Standards: They're necessary as the definition of EDI refers to electronic
exchange of standardized business documents between trading partners. A
standard document is one that has common information and should not be
confused with a document in a standard form.
Trading Partners: Trading partners are those with whom the electronic data or
information is shared with. This can be Customers, suppliers, distributors,
manufacturers, wholesalers, retailers etc.
Translation Softwares and Communications: Translation software converts
application software files into an acceptable, standard format for transfer to a

trading partner's EDI system.Translation software eliminates the need for

application software to be updated with each new set of EDI standards. The
trasmission and reception of the documents such way leads to greater
communication and trading partners can upgrade and resolve issues with
regards to standardized format for EDI and use compatible