As e-commerce businesses grow, everyday operations often get more complicated — fast. A single order from a major retailer might trigger dozens of follow-up actions, such as checking inventory, confirming shipping details, issuing invoices, updating records, and tracking payments. When teams rely on email threads or spreadsheets to manage it all, mistakes happen.
That’s where Electronic Data Interchange (EDI) helps. It connects systems so businesses can exchange key documents automatically — and scale into wholesale or B2B without hitting unexpected roadblocks.
In this guide, we’ll explain EDI for e-commerce operations, where it fits into the order process, and how implementing an EDI solution typically unfolds.
What’s EDI?
EDI is a digital system businesses use to exchange important documents — such as purchase orders, invoices, and shipping notices — between trading partners. Instead of printing, mailing, or manually entering this information, companies use EDI to send data directly from one system to another in a standardized format.
EDI replaces time-consuming paperwork with automated, real-time communication. It adheres to industry standards such as ANSI X12 (commonly used in North America) and EDIFACT (used internationally). These standards define the structure and format of electronic documents so that different companies — even if they use different software or are located in different countries — can share data in a format both sides understand. By following these rules, EDI systems are able to communicate accurately without needing custom integrations for each partner.
Thanks to EDI, e-commerce businesses like online retailers, suppliers, and logistics providers can work together more efficiently by speeding up order processing, reducing errors, and keeping systems in sync.
How EDI Works
Once two businesses agree to use EDI, the document exchange process is mostly automated. Instead of emailing PDFs or entering data by hand, systems communicate directly – sending and receiving information through a secure connection.
There are two common ways to transmit EDI documents:
Direct EDI (point-to-point):This approach links two companies directly using secure protocols like AS2. It works well for businesses that exchange high volumes of data with trusted partners.
Value-added network (VAN):A VAN is a third-party provider that routes EDI documents between companies. It acts like a digital mailbox and can be useful for businesses managing many partners or varying transaction volumes.
Here’s how a typical EDI exchange works in an e-commerce context:
1. Document Creation
A buyer creates a purchase order inside their enterprise resource planning (ERP) or e-commerce system. It includes information like item numbers, quantities, pricing, and delivery details.
2. Translation to EDI Format
Middleware or translation software converts the document into the required EDI format so the receiving system can understand it.
3. Data Transmission
The EDI file goes through a secure connection — either through a VAN, an AS2 link, or an API-connected platform.
4. Receipt and Acknowledgement
The recipient’s system checks the file for errors and confirms receipt with an acknowledgment message that it sends to the buyer.
5. Data Integration
The recipient’s system converts the buyer’s purchase order and feeds it into its order management or ERP system.
6. Automated Processing
Finally, the recipient’s system processes the order automatically. It checks available inventory, starts the fulfillment process, and generates an invoice for the customer.
8 Benefits of EDI for E-Commerce
As online businesses grow, so do the demands on their operations — especially when dealing with large order volumes, retail compliance, and complex supply chains common to e-commerce. EDI supports that growth in several important ways — here are some of the key advantages EDI offers:
1. Greater Efficiency Through Automation
EDI eliminates the need for many manual processes like typing in order details or handling paper documents. Routine tasks like sending purchase orders, confirming shipments, and creating invoices happen automatically.
2. Faster Order Processing and Fulfillment
Because EDI systems exchange information in real time, trading partners receive, review, and respond quicker. During busy periods — like holiday sales or major promotions — this helps businesses keep up with demand.
3. Fewer Errors and More Reliable Data
Manual data entry often leads to mistakes, but EDI systems use standardized formats to keep data consistent as it moves from one system to another. This helps trading partners avoid shipping the wrong items or losing track of orders.
4. Lower Operational Costs
By automating document exchange, businesses reduce the time employees spend on repetitive tasks. They also avoid extra costs from delays, rework, and late shipment penalties. Over time, these savings add up — especially for high-volume operations.
5. Easier Compliance with Retail Partners
Large retailers and marketplaces like Walmart and Amazon often require specific EDI formats. Businesses that use compatible systems can meet these requirements more easily and avoid chargebacks or removal from key platforms.
6. Better Communication Across the Supply Chain
With EDI, suppliers, warehouses, and retailers can access the same information in real time. This shared visibility helps each partner monitor inventory, track orders, and respond quickly to any changes or issues.
7. Stronger Data Tracking and Recordkeeping
Every EDI exchange creates a digital record. Businesses use these records to monitor performance, resolve disputes, and prepare for audits. Reliable data also makes financial reporting and operational analysis more accurate.
8. Scalability and Integration
As a business grows, EDI systems need to handle more orders, partners, and data without slowing down. EDI platforms must also connect with other tools — like ERPs and warehouse management systems — so teams can stay in sync across departments.
3 Examples and Use Cases of E-Commerce EDI
EDI in e-commerce comes into play almost whenever businesses exchange documents. From processing orders to managing inventory, it helps companies save time, reduce errors, and stay organized. Below are several common ways EDI shows up in daily operations.
1. B2B Transactions
Large retailers often rely on EDI to coordinate purchases with suppliers. Instead of exchanging emails or PDFs, the systems on both sides pass along order details automatically. Once an order is placed, the supplier can respond, confirm, and follow through—without re-entering data by hand.
For sellers, this means following strict retailer timelines and reducing the risk of processing errors. EDI also helps standardize returns: Once a return is authorized, the system updates the supplier and begins the process of restocking or issuing a refund.
2. Wholesale Fulfillment
In wholesale, order volume is often high, and repeat business is common. EDI makes it easier to manage this flow by letting systems communicate with each other directly. Orders move from one platform to another without needing to be retyped. This saves time and keeps records aligned across parties.
Many wholesalers also work with outside warehouses. EDI allows them to send packing instructions, receive shipping updates, and keep inventory numbers accurate without constant check-ins. The less time spent tracking things down, the easier it is to focus on getting orders out the door.
3. Retail Inventory and Supply Chain Management
When products are stocked across multiple warehouses or sales channels, staying on top of inventory is more complicated. EDI helps by feeding updates into a shared system so stock levels reflect what’s actually available. If inventory drops in one location, the update goes system-wide, helping avoid overselling or ordering too much.
That same visibility supports the broader supply chain, too. Retailers can react faster to demand shifts, spot delays, and make adjustments without waiting for someone to flag an issue manually.
6 Types of EDI Documents for E-Commerce
EDI uses specific document types that serve a specific function for different transactions. Hundreds exist, but most e-commerce businesses rely on a core set that supports the order-to-cash cycle, such as purchasing, fulfillment, invoicing, and payment.
Here's an overview of six of the most widely used EDI documents in e-commerce:
1. EDI 850 (Purchase Order)
The purchase order initiates the transaction. When a buyer wants to place an order, it sends an EDI 850 to the supplier that specifies the items, quantities, agreed prices, and shipping details.
2. EDI 855 (Purchase Order Acknowledgement)
After receiving the purchase order, the supplier responds with an EDI 855 to confirm the order or propose changes. This acknowledgment helps clarify whether the order is accepted as submitted, partially accepted, or needs adjustment. In B2B settings, it ensures both parties are aligned before fulfillment begins.
3. EDI 856 (Advanced Shipping Notice)
Once the goods are ready for shipment, the supplier sends an EDI 856. This document informs the buyer that the order is en route and includes shipment details such as packaging information, contents, and estimated delivery timing. The ASN allows receiving teams to schedule and prepare for incoming shipments.
4. EDI 810 (Invoice)
After the shipment is delivered, the supplier issues an EDI 810 to request payment. The invoice includes line-item details, total cost, tax, and payment terms.
5. EDI 820 (Payment Order/Remittance Advice)
The buyer uses the EDI 820 to confirm that payment has been made. It may include details about full or partial payments, adjustments, or credits. This document helps both parties maintain accurate financial records and track payment status.
6. EDI 997 (Functional Acknowledgement)
While it doesn’t include order, payment, or shipment details, it confirms that the transaction was received and properly formatted. This acknowledgment reduces uncertainty and helps prevent communication errors.
7 Steps for Implementing EDI in E-Commerce
Setting up EDI for e-commerce involves more than just installing software. It requires careful planning, system integration, coordination with trading partners, and ongoing support. Below are seven key steps businesses typically follow when implementing an EDI system:
1. Assess E-Commerce Needs and Requirements
Start by evaluating where EDI can improve your current operations. Look at transaction volume, system compatibility, and future scalability. Make sure internal teams are aligned on goals and responsibilities.
2. Select an EDI Solution
Choose a solution that fits your budget and tech environment. Options include cloud-based platforms, in-house systems, and VANs. Focus on ease of integration, document support, and long-term flexibility.
3. Set Up EDI Standards
Decide which EDI standards to use (such as ANSI X12) and how you’ll transmit documents (e.g., AS2 or SFTP), and map data fields between your system and each trading partner’s.
4. Integrate with Existing ERP and CRM Systems
Connect your EDI system to platforms like your ERP, CRM, or warehouse software. Use APIs or middleware to automate data exchange and reduce manual input.
5. Set Up and Test EDI Transactions
Begin with internal testing and then run a pilot with selected trading partners. Validate document formats, resolve errors, and check that all systems respond as expected.
6. Monitoring and Maintenance
Use dashboards to track transaction status, troubleshoot issues, and update document mappings as you onboard new partners or products.
7. Ongoing EDI Training and Support
Educate internal teams on how to manage EDI workflows, including challenges that may arise, and provide clear onboarding guides for new trading partners to ensure a smooth setup.
Automate EDI to Optimize Your E-Commerce
Scaling an e-commerce business requires more than just handling higher volumes — it demands fast, reliable communication between systems. EDI keeps operations organized, minimizes errors, and makes it easier to manage growing demands — whether you're tracking inventory, connecting with suppliers, or fulfilling customer orders.
Cloud-based EDI platforms simplify the process. They offer scalable tools to automate transactions, connect with your existing systems, and adapt as your needs evolve.
Exploring EDI for the first time or looking to improve how EDI works with your current setup? Connect with an EDI expert to find the right approach for your goals.