EDI (Electronic Data Interchange)

What is EDI?

EDI (Electronic Data Interchange) is a collective term for technologies that enable businesses to exchange business documents electronically in a standardized format. The concept emerged as early as the 1960s in the US transport industry, and by the 1980s and 90s, EDI became widespread in retail, automotive, and logistics, where major players required suppliers to send orders and invoices electronically. The most important EDI format in Europe is UN/EDIFACT, maintained by the UN Economic Commission. In North America, many still use ANSI X12. Both formats are compact and designed for machines—they are not meant to be opened in a standard text editor.

How EDI works

A classic EDI setup typically involves a VAN (Value Added Network)—a private network that functions as a post office between trading partners. Company A sends a purchase order to the VAN provider, which converts and forwards the document to Company B in the format B's system understands. This process is reliable but also relatively expensive and "closed." Every new trading partner requires a specific connection setup (often called a trading partner agreement), making it historically difficult for smaller businesses to justify the investment.

EDI vs. Modern e-invoicing

The decisive difference between traditional EDI and modern e-invoicing via networks like Peppol is openness. Peppol is an open network: any business can join via a certified Access Point, and there is one common XML-based standard instead of hundreds of bilateral formats. However, EDI is far from dead. Major retail chains, car manufacturers, and logistics companies still handle enormous volumes of EDIFACT traffic and will continue to do so for years. But for most SMEs, Peppol is a far more accessible path into electronic invoicing.

Common EDI formats

UN/EDIFACT: The international standard, featuring message types like INVOIC (invoice), ORDERS (purchase order), and DESADV (despatch advice). ANSI X12: The North American counterpart with equivalent transaction sets (e.g., 810 for invoices). TRADACOMS: An older British standard still used in parts of the UK retail sector. All these formats share the principle that data is structured according to a fixed schema.

The future of EDI

The EU's ViDA (VAT in the Digital Age) regulation and national e-invoicing mandates are pushing the market toward open, XML-based standards. This doesn't mean EDI will disappear; rather, the two worlds are merging. Many businesses now use integration platforms that can receive both EDIFACT and Peppol documents and convert them into a single format for their ERP system, bridging the gap between legacy and modern technology.