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What is EDI?

EDI (Electronic Data Interchange) is the automated exchange of business documents such as purchase orders, despatch advices and invoices between the IT systems of two companies. The data arrives in a format agreed in advance and goes straight into the recipient's ERP system without anyone having to retype it. GS1 Germany describes the advantage over paper as “fast automated processing” (our translation). This page explains how it works technically and when the effort pays off.

Last updated 18 October 2026 · fokus it solutions, Jens Musleh

What does EDI mean in a company's day-to-day work?

Without EDI, an order looks like this: your customer emails a PDF, someone in your sales team reads it and keys the items, quantities and delivery dates into the ERP system by hand. With EDI, your customer's ERP system generates a structured file and sends it to your system, where the sales order is created without any manual work.

The word “structured” is what matters. A PDF is made for people; an EDI message is made for machines. Every field in it has a fixed position and a fixed meaning: here the item number, there the quantity, there the unit of measure. That is why a program can read the message reliably.

EDI is not a single product but a method. It always involves three things:

  • a format, meaning the language the data is written in,
  • a transmission method, meaning the channel the file travels over,
  • an agreement between the partners on which messages are exchanged and in what form. Large customers usually set this out in an EDI implementation guide.

How does EDI work technically?

A message passes through four stages:

  1. Export from the sender's ERP system: the customer's system generates the order in its internal format.
  2. Conversion into the agreed EDI format: this step is called conversion or mapping. A mapping is the rule that says which field goes where.
  3. Transmission over a secure channel to the recipient.
  4. Conversion at the recipient's end into its internal format and handover to its ERP system.

GS1 Germany names two ways of organising steps 2 to 4: with your own converter or through a service provider (EDI clearing). A clearing centre is a service provider that handles conversion and sending for you and usually charges per partner.

Format and transmission method are two separate questions

Many misunderstandings in EDI projects arise because format and transmission method are confused. If your customer requires “EDIFACT over OFTP2”, those are two separate requirements.

The format determines what the data looks like. Widely used formats are:

  • UN/EDIFACT, the international United Nations standard whose syntax is defined in ISO 9735,
  • EANCOM, a subset of EDIFACT maintained by GS1, mainly for retail and consumer goods,
  • the VDA formats of the German automotive industry,
  • X12, a standard from X12, the US standards body accredited by ANSI,
  • and XML, CSV or JSON by agreement.

The transmission method determines how the file gets from one server to the other. Examples are AS2 (HTTP-based, described in RFC 4130), OFTP2 (widespread in the automotive industry, described in RFC 5024), SFTP or a web interface. You will find a comparison under EDI transmission methods.

This is what a short extract from an EDIFACT order looks like. The identifiers are fictitious (GS1 prefix 952 is reserved for examples):

UNH+1+ORDERS:D:96A:UN'
BGM+220+B-4711+9'
DTM+137:20261016:102'
NAD+BY+9520000000011::9'
LIN+1++9520000000028:SRV'
QTY+21:240'

With a little practice, a person can read it as: order number B-4711 dated 16 October 2026, buyer with GLN 9520000000011, line 1, item 9520000000028, quantity 240. The ERP system can process the file without any interpretation.

Purchase order, despatch advice and invoice as examples

Most EDI connections start with three messages that cover an order from start to finish. GS1 Germany names exactly these three as typical examples:

Document EDIFACT name Who sends it? What happens to it?
Purchase order ORDERS customer to supplier becomes a sales order at the supplier
Despatch advice (advance shipping notice) DESADV supplier to customer announces goods, packages and delivery note number before the lorry arrives
Invoice INVOIC supplier to customer is checked and posted automatically by the customer

The automotive industry adds the delivery schedule: instead of individual orders, the customer regularly sends updated requirements for the coming weeks. You will find the other messages under EDI message types.

Benefits and effort of EDI

The benefit lies mainly in process quality. GS1 Germany mentions fewer communication errors, faster processes and a low error rate in posted documents, among other things. In practice, this means no typing errors in item numbers, despatch advices that reach the customer before the goods, and invoices that go through without queries.

On the other side is an effort that is often underestimated:

  • Reading the implementation guide: every large customer has its own rules on which fields are mandatory and which codes apply.
  • Building mappings between the EDI format and your ERP system, for every message type and direction.
  • Creating an ERP interface through which orders come in and delivery notes and invoices go out.
  • Setting up the transmission method, including identifiers and certificates.
  • A test phase with the partner until it signs off the connection.
  • Operation: fixing errors, renewing certificates, keeping up with changes on the partner's side.

What this means in euros depends heavily on the route you choose and how many partners you have. An overview with documented prices is on What does an EDI connection cost?.

When does EDI pay off?

In many cases, the question does not arise: a large customer requires EDI, and without a connection you lose the business. What you can do then is described in My customer requires EDI.

If the decision is yours, these pointers help:

  • Few documents from a single retailer: web EDI is often enough. You type the data into a portal in your browser. GS1 Germany describes web EDI as a solution for companies that do not have their own EDI-capable system. It is inexpensive, but it is manual work again.
  • Many documents or several partners: the more often the same message occurs, the more automation saves.
  • Delivery schedules in the automotive industry: schedules change constantly. Maintaining them by hand risks wrong delivery quantities.
  • Invoices: with e-invoicing, the pressure to send invoices in structured form is growing. The difference between EDI and e-invoicing is explained in EDI, web EDI and e-invoicing.

Where edi-service.eu fits in

edi-service.eu is EDI software that you run on your own Debian 13 server under a subscription licence. An AI, for which you take out your own contract with a provider such as Anthropic or OpenAI, sets up the connections according to your partners' documents, in test mode first. It processes EDIFACT, VDA, XML, CSV and JSON over OFTP2, AS2, SFTP, HTTPS and email, inbound and outbound. X.400, VAN mailboxes, a web EDI portal and Peppol are not included. You will find the price on the home page.

Frequently asked questions

What does EDI stand for?

EDI stands for Electronic Data Interchange. It means the exchange of structured business documents between the systems of two companies. Strictly speaking, an email with a PDF attachment is not EDI, because someone still has to retype the data.

Do I need an ERP system for EDI?

For real EDI, you need a system in which the data arrives without manual work. That can be a large ERP system or a smaller inventory management system, as long as it has an interface for import and export. Without such a system, web EDI is usually the only option.

What is the difference between EDI and EDIFACT?

EDI is the method; EDIFACT is one of the formats for it. You can also do EDI with VDA formats, X12, XML or CSV. Which format applies is usually set by the partner in its EDI implementation guide.

How long does an EDI connection take?

That depends mainly on the test phase with the partner and on the ERP interface. The technology itself is rarely the bottleneck. Waiting for test data, queries about the implementation guide and the partner's sign-off determine the schedule.

Is EDI the same as e-invoicing?

No. E-invoicing only concerns invoices and follows its own standards, in Germany for example XRechnung or ZUGFeRD. EDI covers the whole process from order to invoice. How the two are related is explained on the page about EDI and e-invoicing.

If you would like to know whether your requirements are a good fit for edi-service.eu, you can send an enquiry.

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