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What Is the Connection between ERP and EDI?

By Jess Rhodes
Updated May 16, 2024
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ERP systems often use EDI technology to facilitate communication between businesses. EDI, a technology released in the 1980s, was used to transmit electronic documents both inside and between businesses. ERP works to manage internal and external resources of an organization, helping enhance communication and decision making by consolidating business process and operations. ERP and EDI work together to make programs more efficient by adding potential communication facility and supply chain management technologies to businesses.

EDI replaced traditional methods of business communication, i.e. telephone and fax, with electronic means of document transmission. Using computers to electronically exchange communication and documents has greatly decreased administrative costs. Although ERP and EDI systems can work together to integrate all members of a business to the same communication and database system, EDI does not require ERP. EDI can run simply with a computer and access to the Internet.

ERP systems coordinate supply chain management with EDI communication exchange across organizations to streamline administrative tasks. ERP systems can reduce human error, make the business more cost efficient, and aid in communication, essentially amplifying the original benefits that EDI brought to traditional business. ERP and EDI systems together reduce the amount of paperwork needed to communicate between businesses.

Within supply chain management, EDI is the technology that focuses on the delivery of electronic communication between businesses. This communication can include orders, payment notices, and shipment verification. Since many companies use a form of EDI, many ERP systems include EDI technology in their programs. Together, ERP and EDI systems ensure that these documents are standardized based on industry and legal standards.

Consulting firms and organizations often have ERP and EDI specialists to help them handle system requirements. EDI specialists handle translation methodologies and interfacing techniques and support EDI partnership systems. ERP specialists understand the organization's needs and processes and work to construct an ERP system to meet these needs. Both ERP and EDI specialists may also work to train users to best take advantage of the systems operating within a business.

Extensible Markup Language, or XML, is argued by some to be a replacement for EDI in some organizations. While XML is similar in nature to EDI, it is considered different because of the way each technology structures the data it contains. Currently, XML format is too large and lacks standards to implement it on as wide of an industrial scale as EDI technology. XML is not a threat to EDI, however, as all forms of e-commerce support additional advancements in e-communication, thus supporting EDI technology.

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Discussion Comments
By hamje32 — On Jan 22, 2012

@NathanG - Contrary to popular belief, not every company is transmitting their documents in 100% electronic format. At least in our small business we still keep a lot of paper invoices. You hear people talk about the importance of the “paper trail” in handling transactions.

There may be electronic copies of these invoices, but the paper invoices are considered more important because they are not subject to file crashes (I suppose they could burn in a fire, however). Paper is slower than EDI, but at least in our workplace, it’s considered more secure.

By NathanG — On Jan 22, 2012

@David09 - We do a lot of stuff with XML at our company. I can’t really speak to the article’s point about whether or not it will replace EDI, as I don’t work with EDI software.

However, XML has made life a lot easier in the business domain. It’s an open standard and it can easily be transmitted. This is unlike some other documents like word processing files, which are proprietary in nature and cannot easily be modified except within the word processing application itself.

You can program against XML and this allows you to leverage your existing IT skills to create custom document management solutions for your organization.

By David09 — On Jan 21, 2012

As an IT professional I come across job ads for people with enterprise resource planning software experience all the time. I don’t have that experience, but would love to.

I once worked in a manufacturing company and supply chain management was an integral part of the operations. If you can manage your supply chain properly you can determine when is the right time to order new inventory and stuff like that.

You really get the big picture. I find that more and more companies want IT professionals who not only know how to use software but can also understand the larger business concepts in play.

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