What is EDI (Electronic Data Interchange)?

Electronic Data Interchange (EDI) is a standardized framework for exchanging business documents between organizations electronically, using structured data formats that can be processed by computer systems without human intervention. Common EDI documents include purchase orders (EDI 850), invoices (EDI 810), advance ship notices (EDI 856), and inventory inquiry responses (EDI 846). EDI replaces paper-based and email-based document exchange with automated, system-to-system communication, enabling faster, more accurate, and more scalable B2B transactions.

Why It Matters

Despite the rise of modern APIs and cloud-based integrations, EDI remains the dominant standard for B2B document exchange in retail, manufacturing, healthcare, and logistics. Major retailers like Walmart, Target, Costco, and Amazon require their suppliers to communicate via EDI as a condition of doing business. For brands seeking wholesale distribution, big-box retail placement, or large-scale supply chain partnerships, EDI compliance is not optional—it is table stakes.

The reason EDI persists is scale and reliability. When a retailer processes thousands of purchase orders daily from hundreds of suppliers, manual email and phone-based communication is untenable. EDI automates the entire document exchange process, reducing order processing time from days to minutes, eliminating data entry errors, and providing an auditable trail of every transaction.

For suppliers, EDI compliance also opens doors to larger distribution channels and higher-volume partnerships that would be inaccessible without automated document exchange. The investment in EDI capability signals operational maturity and reliability, characteristics that large retailers value highly when evaluating potential suppliers.

How It Works

EDI communication follows a structured process that ensures documents are created, transmitted, and processed consistently between trading partners:

• Document Standards: EDI documents are structured according to established standards, primarily ANSI X12 (predominant in North America) and EDIFACT (common in Europe and international trade). Each standard defines the format, structure, and data elements for specific document types. For example, an EDI 850 Purchase Order specifies fields for buyer and seller identification, item details, quantities, prices, and shipping instructions.
• Translation: Before transmission, business data from the sender’s internal systems (ERP, OMS, or WMS) is translated from its native format into the appropriate EDI standard format. This translation is performed by EDI software or middleware that maps internal data fields to EDI segments and elements.
• Transmission: EDI documents are transmitted between trading partners through various methods. Traditional VANs (Value-Added Networks) act as intermediaries, routing documents between partners. AS2 (Applicability Statement 2) is a widely used protocol for secure, point-to-point EDI transmission over the internet. SFTP and web-based EDI portals are also common transmission methods.
• Receipt and Processing: The receiving system ingests the EDI document, translates it back into its internal format, and processes it automatically. A received purchase order might automatically create a sales order in the supplier’s OMS; a received invoice might post directly to the buyer’s accounts payable system.
• Acknowledgment: The receiving party typically sends a functional acknowledgment (EDI 997) confirming that the document was received and processed successfully, or flagging errors for correction.

Common EDI Document Types in Retail

Understanding the most frequently used EDI transactions provides context for how they fit into retail and supply chain workflows:

• EDI 850 – Purchase Order: The buyer sends a purchase order to the supplier specifying items, quantities, prices, and delivery requirements.
• EDI 855 – Purchase Order Acknowledgment: The supplier confirms receipt and acceptance of the purchase order, noting any changes to quantities, delivery dates, or substitutions.
• EDI 856 – Advance Ship Notice (ASN): The supplier notifies the buyer that a shipment has been dispatched, detailing contents, packaging, carrier, and expected delivery date. This document is critical for receiving efficiency at the buyer’s warehouse.
• EDI 810 – Invoice: The supplier sends an invoice for goods shipped, referencing the original purchase order and shipment details.
• EDI 846 – Inventory Inquiry/Advice: Used to share inventory status information between trading partners, enabling buyers to see supplier stock levels and plan orders accordingly.

EDI vs. API Integration

A common question is whether EDI is still relevant in an era of REST APIs and real-time webhooks. The answer is that both serve different needs and often coexist. APIs excel at real-time, bidirectional data exchange between cloud-based systems and are preferred for e-commerce platform integrations, SaaS tool connections, and custom workflows. EDI excels at structured, batch-oriented document exchange between large enterprises with established compliance frameworks. Many businesses use APIs for their e-commerce operations and EDI for their wholesale and retail partnerships.

How Nventory Helps

Nventory bridges the gap between modern commerce and traditional EDI requirements. For brands that sell through major retailers and wholesale partners requiring EDI compliance, Nventory provides built-in EDI translation and transmission capabilities, converting your order and inventory data into the required EDI formats and routing documents to trading partners automatically. This means you can manage your D2C e-commerce operations and your wholesale EDI relationships from a single platform without maintaining separate systems. Nventory eliminates the complexity of EDI compliance and lets you focus on growing your wholesale channel alongside your direct-to-consumer business.