What is EDI integration?

EDI provides a standardized method for the automatic exchange of documents between business partners. Organizations use EDI to share a range of EDI transactions (or “EDI messages”) and data types, such as requests for pricing quotes, purchase orders, inventory updates, invoices, loan applications or advanced shipping notices (ASNs).

EDI streamlines and simplifies the communication process by transforming data into EDI documents in standardized digital formats. EDI standards define the location and order of information in each document. EDI helps eliminate paper-based transactions and reduce human error, and enable the automatic data exchanges, adding reliability and security to data transfers.

EDI integration “completes the pipeline,” so to speak, enabling the automatic flow of data, not only between partners on an EDI platform exchanging standard EDI documents, but from a business partner all the way through to an organization’s back-end application and business systems.

With EDI integration, an organization does not need to re-key orders or shipping data received through an EDI platform. This information is automatically translated from EDI formats into an internal business system’s data structure and posted within integrated applications and systems. The same workflow and translation is performed for outbound data—system data is automatically moved from internal systems to EDI software, converted into an EDI standard and transmitted to a business partner.

The addition of artificial intelligence (AI) tools such as AI agents and low- or no-code capabilities to EDI systems and integration solutions such as iPaaS platforms, has helped simplify and accelerate EDI integration. These solutions can make it easier for organizations to set up and monitor integrations between EDI processes and other business systems, lowering the barrier to entry and improving scalability.

Despite the rise of application programming interfaces (APIs) and cloud-native integration, EDI remains essential for high-volume, mission-critical B2B transactions in retail, e-commerce, manufacturing, logistics, healthcare, energy and government sectors.

Yet, according to an IBM Institute for Business Value Study, only 19% of COOs say that their organization has fully developed the components of an enterprise data architecture and scaled data integration across all functions.¹ When they do integrate across functions and connect with the EDI software of business partners, the potential benefits of EDI integration include:

• Scale and maturity
• Predictability
• Compliance and governance
• Cost savings

EDI has been popular for decades, which means there is a massive installed EDI software base and standard EDI partner processes. This existing standardization might enable easier integration across partner EDI systems, providing end-to-end visibility into transactions with all connected business partners. This visibility assists in tracking order status, monitoring inventory and managing supply chains.

EDI integration often uses batch-based, stateful processing, which maintains data context for accurate calculations of totals or durations, and helps support reliable operations, efficiency and data accuracy. This reliability helps support frictionless commerce, eliminate manual data entry and deliver significant efficiencies through automation—helping reduce errors and accelerate business cycles.

Using structured standards enables efficient compliance with audit requirements in regulated environments. Many industries require EDI as a condition of doing business due to SLAs (service-level agreements) and supply chain efficiency demands.

EDI’s structured standards create a complete record of data flow that helps meet the governance and audit requirements of industry and government regulations on data compliance. These regulations include the General Data Protection Regulation (GDPR) The California Consumer Privacy Act (CCPA), Sarbanes-Oxley Act (SOX), Payment Card Industry Data Security Standards (PCI-DSS) and Health Insurance Portability and Accountability Act (HIPAA).

By reducing manual effort, EDI integration can help limit errors, drive faster cycles and improve inventory management—all benefits that can contribute to an increased ROI.

In addition, potential losses due to security threats might be reduced, with many EDI formats including robust security features. These features include data encryption, authentication and verification methods (including passwords and keys), in addition to audit trails that provide security compliance for high-volume and sensitive data.

Various architectures might be used to integrate EDI systems, with the choice depending on organization size, budget, industry standards, security needs and in-house expertise.

A single EDI integration layer can route, validate, and transform messages among internal systems and all trading partners. Benefits of integration across systems include uniform governance, centralized monitoring and economies of scale.

EDI logic can be embedded within individual applications or business units. This might be more agile, but less robust integration risks duplication, inconsistency and patchy controls.

EDI remains the partner-facing standard while APIs and event streaming—capturing real-time data from applications—connect to internal applications. This integration supports modern microservices architectures and faster internal innovation.

EDI might not only be integrated with external business partner systems, but also with other internal systems to create new efficiencies. For example, EDI can be integrated to work with APIs. While the APIs provide real-time, fine-grained integration, the EDI system provides standardized, high-volume batch exchange with governance and auditability.

Using APIs to connect directly to an ERP system makes the data transfer path simpler because the intermediary file transfer server and associated manual processes are eliminated. Implementing EDI with a hybrid integration of APIs can deliver:

• EDI outside, APIs inside: Using the partner-facing EDI while using APIs to communicate across internal microservices.
  
  
• Event-driven enrichment: An organization can augment EDI data flows with real-time signals, such as carrier status.
  
  
• Data lake integration: Archive EDI messages, acknowledgments and transformations onto analytics platforms for forecasting, chargeback analysis and partner performance scorecards.
  
  
• Schema evolution: Maintain backward-compatible canonical schemas for organizing relational databases. Automatically convert to or from EDI and API payloads.

A B2B integration backbone that handles EDI natively can extend to include API connectivity and provide an all-in-one approach that is efficient, effective and optimizes collaboration with trading partners. EDI integration can make data transfers possible across diverse systems and companies for efficient and reliable communication.

Third-party, managed services can take over the operational responsibility for EDI mapping, onboarding, monitoring and integration. This outsourcing can assist with, and even accelerate, setup and onboarding, but requires strong vendor governance and clear SLAs.

When connecting an EDI system, an integration platform as a service (iPaaS) solution might speed the EDI integration process. iPaas can support diverse data formats, protocols and systems to facilitate seamless interoperability and real-time data exchange.

“Under the hood” functions that are crucial to accurate data translation and successful EDI integration include:

Mapping converts external EDI formats into internal application schemas that define properties for data structures (and vice versa). Mapping best practices include:

• Canonical model: Use a stable, internal canonical data model to shield applications from partner variations.
  
  
• Reusable components: Build reusable map fragments—such as address, item and taxes—to speed onboarding.
  
  
• Version control: Store maps and partner profiles in source control with change history.
  
  
• Data enrichment: Inject missing data—such as general ledger codes (GL codes), cost centers, default ship-from—during translation.

Translation handles the structural conversion (such as EDIFACT—Electronic Data Interchange for Administration, Commerce and Transport—to XML or JSON).

Validation helps ensure compliance with standards and partner-specific implementation guidelines.

When selecting an EDI platform, organizations must decide on the structure and method of exchange that best suits their needs. This choice—for example, whether or not the service is outsourced to a service provider or handled in-house, or what transport protocol will be used—might have an impact on future integrations. 

• Direct EDI integration
• Indirect integration
• Hybrid integration
• Web EDI integration

This is an efficient but limited option, as it includes just two business partners. The document format is negotiated between exchange partners and compliance to the agreed upon standard format is required.Every point-to-point connection with another partner needs to be negotiated and configured separately.

The two systems must be fully compatible, using the same protocol—such as AS2, FTP or SFTP (Secure File Transfer Protocol)—to work correctly. Plus, the EDI software and EDI platform must be carefully managed by the on-premises IT team—requiring extra effort and in-house expertise. In addition, direct EDI integration can be used to connect data gathering systems within an organization, such as a CRM platform.

This normally means the use of a value-added network (VAN) supplied by a third-party service provider, which manages EDI mailboxes and routing, often with extra managed services, such as translation or archiving. By providing an EDI integration solution, a VAN translates EDI messages between partners, who might be using different protocols—helping to avoid issues like lost data.

This approach combines both direct and indirect integration. The direct EDI integration might manage the most sensitive data transfers, while the indirect EDI integration outsources some business processes to a third-party EDI service, including the added effort of onboarding business partners.

This integration enables business partners to exchange their EDI messages by using a web browser. The web connection might be more user-friendly and cheaper on the up-front price, but web integration is normally an option for smaller organizations who can manage with a less sophisticated system.

EDI integration capabilities continue to evolve with the advance of technology. Notable current and future trends include:

Integration with artificial intelligence (AI) and machine learning (ML) tools, and the use of AI agents, will help organizations seamlessly connect cloud and on-premises applications, enabling more agile and scalable digital transformation. In addition, these tools might help organizations accelerate and automate analysis and decision-making. For example, AI agents might be used to enable faster extraction of customer information and data mapping. 

As integration becomes easier, more organizations will likely connect EDI solutions with ERP systems to more fully automate data transfers, and improve the fluidity and accuracy of communication with trading partners. Integration with ERP systems can also provide a more complete picture of the marketplace, enhancing planning and potentially providing a competitive advantage.

Some EDI software packages now include features such as pre-configured connectors and pre-built maps that make the onboarding of trading partners easier, saving the effort of developers.