The History of Electronic Data Interchange (EDI)
Explore the evolution of Electronic Data Interchange, its impact on business processes, and how it shapes today’s digital transactions. Read more now!
Before APIs and real-time dashboards, before cloud software and Slack messages, there was Electronic Data Interchange (EDI). And while it may sound outdated, EDI still powers much of today’s modern supply chain, especially in manufacturing, retail and consumer packaged goods (CPG).
This post explores the electronic data interchange history, how EDI evolved, why it continues to dominate business document exchange, and what lean CPG teams can do to make it work without drowning in complexity.
The Role of ANSI and EDIFACT
As more industries adopted EDI, the need for consistency became clear. The American National Standards Institute (ANSI) developed EDI standards like ANSI X12 in the U.S. and EDIFACT internationally.
These formats standardized the structure of common EDI documents, like purchase orders, invoices, and advance ship notices (ASNs), into consistent data elements that could be interpreted across systems. The result was structured, machine-readable data interchange at scale.
By the 1980s, EDI was essential for large-scale manufacturers and retailers. Global giants like Walmart, General Motors and Sears began requiring trading partners to use EDI to do business. If you couldn’t transmit EDI documents, you couldn’t be a supplier.
The Rise of Value-Added Networks (VANs)
During the 1990s and early 2000s, EDI became deeply embedded in business systems, but it was still expensive and hard to manage. Enter the value added network (VAN), a hosted EDI network that handled routing, queuing and delivery of EDI files for multiple businesses.
VANs helped companies process EDI transactions without building their own infrastructure. But they introduced new costs and dependencies. And while they supported secure file transfer protocol (SFTP) and data encryption, setup was still complex.
This era cemented EDI’s role in business processes, especially in the automotive industry, retail and manufacturing. But it also highlighted the rigidity and cost of traditional EDI implementations.
Modern EDI Systems
Today, EDI has evolved, but it’s far from obsolete. Modern EDI systems are cloud-based, lightweight and integrated with core business systems like ERPs, order management platforms and inventory tools.
While some large enterprises still rely on point-to-point integrations or hosted EDI solutions, newer platforms enable seamless integration across internal systems, trading partners and 3PLs. You no longer need a giant IT team to implement EDI.
Advanced tools use EDI translation software to convert between EDI files and readable formats for operators. Some use EDI mapping or even hybrid technologies like Simple Object Access Protocol (SOAP) or APIs to integrate with web-based platforms.
EDI in Today’s Supply Chain
If you’re a CPG brand selling wholesale into big-box retailers like Target, Walmart or Costco, you’re still dealing with EDI. These retailers use it to manage orders, shipping, invoicing and payment.
Typical EDI transactions in retail include:
850: Purchase Order
855: Purchase Order Acknowledgment
856: Advance Ship Notice
810: Invoice
820: Payment Remittance Advice
These documents must follow a standardized EDI format and meet the specific requirements of each business partner. If one field is missing or formatted incorrectly, the entire file can be rejected.
In other words: EDI is required. And it’s not user-friendly.
The Challenges of EDI
For many small to mid-size brands, especially those with lean teams, managing EDI is frustrating. The problems include:
Manual data entry to rekey EDI orders into internal systems
High fees for EDI software or VAN services
Lack of visibility into EDI document exchange status
Errors caused by mismatched formats or failed transmissions
Difficult and expensive onboarding with new trading partners
Despite these headaches, abandoning EDI isn’t an option. So how do you manage this legacy technology without wasting time or money?
Why Teams Should Use Automation
Traditionally, teams using EDI had to manually pull EDI transactions out of their systems, format or re-enter them into spreadsheets or ERPs, generate invoices separately, and update PO trackers by hand.
Modern tools like Buddy simplifies that. It connects these steps into a single, automated flow. You can view and manage EDI orders in the same dashboard as Faire, Shopify and email POs, sync data automatically to inventory, accounting and communication systems without jumping through hoops.
It gives your team real visibility into orders coming from multiple business partners — without switching tools or bouncing between platforms. You still meet retailer requirements. You just do it faster and with fewer errors.
EDI Doesn’t Have to Slow You Down
The electronic data interchange history shows how far we’ve come — from military shipments to modern automated exchange. EDI was a huge leap forward when it replaced paper based processes, and it still underpins global commerce today.
But that doesn’t mean you need to manage it the old way. With tools like Buddy, you get the benefits of EDI without the baggage. You can transmit EDI documents, ensure data accuracy, and maintain secure file transfers, all without building an EDI team.
Final Thoughts
EDI technology has been around for decades and for good reason. It standardizes business document exchange, improves data accuracy, and enables faster collaboration across the supply chain.
But for brands used to modern tools, legacy EDI feels out of step. It’s rigid, opaque and often expensive.
The future lies in EDI solutions that automate the EDI process, reduce errors and integrate with the rest of your stack. Whether you're just starting to implement EDI, or looking to improve how you process documents, the right partner can make all the difference.
Frequently Asked Questions
1. What is Electronic Data Interchange (EDI) and how does it work?
EDI is the computer-to-computer exchange of standardized business documents such as purchase orders, invoices, and shipping notices. It replaces manual data entry by using structured formats that integrate directly with internal business systems.
2. Why do manufacturers and consumer brands still use EDI today?
EDI remains essential for trading with big-box retailers and large distributors. It ensures compliance, reduces processing time, and enables seamless integration across supply chains — even as newer technologies emerge.
3. What are the most common EDI transactions in retail and manufacturing?
Typical EDI transactions include the 850 (Purchase Order), 855 (Order Acknowledgment), 856 (Advance Ship Notice), 810 (Invoice), and 820 (Payment Remittance Advice), all using standardized formats required by trading partners.
4. What are the benefits of automating the EDI process?
Automating EDI reduces manual data entry, eliminates costly errors, improves data accuracy, speeds up order processing, and ensures consistent compliance with partner requirements — especially critical for lean teams.
5. How does Buddy help with EDI management for CPG brands?
Buddy doesn't replace your EDI system - it enhances it. Buddy centralizes EDI orders, automates validation and fulfillment steps, syncs with your accounting and inventory systems and gives you full visibility without manual work.
