EDI (Electronic Data Interchange) offers a single, standardized format for exchanging information and documentation, such as purchase orders and shipping confirmations. Leveraging this technology saves importers and exporters time and money while reducing risk of non-compliance.
Companies that still haven't pivoted to a digital-first approach will find themselves falling behind the competition. As a technology that revolutionized the industry, EDI replaced slower forms of paperwork and communication with a lightning-fast network that connects shipping across the globe.
When it comes to shipping, EDI streamlines communication processes by using a digital exchange of business documents in a standard electronic format between trading partners and organizations related to trade, like the Canada Border Services Agency (CBSA) when importing into Canada.
EDI in shipping dates back to the 1960s, when businesses sought to replace paper with electronic communication. As trade expanded around the world and supply chains grew more complex, EDI emerged as a solution that enabled businesses to transmit essential documents. By the 1980s, shipping and logistics companies had widely adopted EDI to streamline operations, reduce errors, and accelerate the flow of goods across borders.
Automating and digitizing critical data transactions minimizes manual errors and delays, while enhancing the efficiency of shipping operations and supply chain relationships. It’s been the go-to technology for logistics providers to track shipments, manufacturers for supply chain management, suppliers for inventory management, and order fulfillment for e-commerce.
Here are some of the shipping and logistics documents that EDI can generate and manage:
Purchase Order (EDI 850)
Sent by the buyer to order a specific number and type of goods at an agreed price, this document begins the purchasing process by specifying items, quantities, and pricing. Automating purchase orders can speed up procurement, reduce manual entry errors, and enhance supply chain visibility.
Purchase Order Acknowledgement (EDI 855)
Sent by the seller to confirm that they’ve received and processed the buyer’s purchase order, this document confirms receipt and the acceptance or changes of the order, ensuring both parties are aligned. This can improve order accuracy, shorten response times, and support better production planning.
Advance Ship Notice (EDI 856)
Sent by the seller to allow the buyer to confirm all details before the cargo is shipped, this document provides shipment details such as packaging, contents, carrier information, and estimated arrival. This can enhance warehouse scheduling, improve receiving efficiency, and help prevent delivery discrepancies.
Invoice (EDI 810)
Sent by the seller to outline the charges due and include payment terms, this document lists the products delivered, including quantities, pricing, and payment instructions. This can streamline billing processes and reduce disputes.
Bill of Lading (EDI 211)
Sent by the shipper to the carrier, providing a description of the delivery, this document acts as a contract between shipper and carrier, detailing goods for transport. This can ensures legal compliance, facilitate cargo tracking, and minimize transportation disputes.
Functional Acknowledgement (EDI 997)
Sent by the payee/shipper in response to each transaction request, this document confirms the receipt of another EDI document, ensuring communication was successful. This can support audit trails, prevent transaction failures, and ensure data integrity across systems.
Payment Order/Remittance Advice (EDI 820)
Used by payers to provide sellers with information about pending payments, this document informs the payee of the payment amount, method, and associated invoices. This can reduce reconciliation time, improve cash flow transparency, and simplify accounts receivable processes.
There are countless benefits that EDI has enabled. Here are our top three for :
EDI adds automation for the exchange of crucial shipping documents including bills of lading, purchase orders, shipping notices, customs documents, inventory records, payment documents, and shipping status updates. This automation enables faster processing and significantly reduces document cycle time by minimizing errors from manual processes.
In addition to time savings, EDI eliminates much of the manual paperwork that was traditionally involved in business operations. This efficiency has greatly improved delivery processes and other supply chain workflows.
Building trust is essential to nurturing positive relationships across the supply chain. EDI enables reliable communication and collaboration with trading partners, allowing you to facilitate more efficient and predictable trade processes. If issues arise, the use of EDI provides data that can help to solve misunderstandings. This type of clear communication goes a long way in moving towards enhanced collaboration and better efficiency while tapping into valuable business partnerships.
EDI can provide real-time data transmission, increasing visibility across the supply chain. This transparency helps businesses better track and manage inventory, ensuring all stakeholders are informed about shipment statuses and schedules. Real-time tracking identifies potential bottlenecks and enables timely decisions. Enhanced visibility leads to better customer service, reduced uncertainty, improved logistics coordination, and smooth operations.
Older EDI formats like ANSI X12 are still used, but more versatile options like XML continue to become more popular. The XML standard for EDI provides a self-descriptive, text-based format that uses tags to define data elements. Unlike EDI standards, XML enhances clarity and flexibility, making it easier for developers and analysts to interpret the meaning of the data.
This accelerates development and testing, simplifies troubleshooting, and streamlines system integration. The adaptability of XML makes it a practical choice for businesses seeking to streamline operations and scale efficiently in dynamic environments.
Speed, accuracy, and agility drive success in logistics, and EDI remains a cornerstone of digital transformation in shipping. In fact, EDI is no longer optional: it's a strategic enabler for business competitiveness across the globe.
As the global trade environment continues to evolve, businesses that fully leverage technology such as EDI not only future-proof their operations—they also unlock new opportunities for growth, innovation, and stronger customer experiences.
Cole aligns with how your company works. If your supply chain operations change, we provide solutions tailored to help you adapt and thrive. Connect with Cole today!