Imagine a big-box retailer preparing for the holiday rush. Orders are pouring in, warehouses are in overdrive, and shipments need to move fast. Doing all this manually would mean endless emails, phone calls, and stacks of paperwork. But for this retailer, that’s not the case, thanks to Electronic Data Interchange (EDI).
EDI processes everything — purchase orders, shipping updates, invoices, and more — almost instantly, keeping operations on track and ensuring customers get their orders on time.
In this guide, we’ll explain what EDI means in shipping, how it works, and how it can transform the way your company manages logistics and streamline your supply chain.
What Is EDI Shipping? How EDI Shipping Works
EDI shipping automates the exchange of logistics data across the supply chain. It converts key documents like invoices and bills of lading into standardized electronic formats, making it faster and easier for trading partners to share information.
With EDI, tasks like scheduling shipments and tracking deliveries happen in real time. EDI tracking allows documents to move quickly between senders and receivers, improving collaboration, keeping operations on schedule, and reducing delays.
EDI transportation data also integrates with e-commerce platforms and marketplaces, syncing shipping schedules, inventory, and partner relationships. By digitizing workflows and eliminating manual processes, EDI allows businesses to operate more efficiently and focus on delivering better results for their customers.
Key EDI Shipping Processes
Here’s a closer look at the steps that EDI in shipping involves:
Data Preparation
This is the first step in the EDI shipping process. The EDI system gathers all relevant information from other internal systems, like an enterprise resource planning (ERP) platform, It then formats the data into specific EDI format types, such as EDIFACT (Europe) or ANSI X12 (in North America), that meet EDI standards.
Document Transmission
Next, the EDI system transmits the formatted documents via a communication protocol like VAN, AS2, FTP, or SFTP. Encryption protects the data during transmission, while acknowledgment messages, such as an EDI 997 or CONTRL message, confirm successful delivery and flag any issues for correction.
Document Translation
Next, the receiver’s internal system processes the transmitted data, converting it into a standardized EDI format and verifying its compatibility with the receiver’s EDI system.
Message Validation and Acknowledgment
This step is one of the most important in EDI shipping because it validates the data’s accuracy and integrity. During validation, the receiver’s EDI system checks messages against predefined standards and business rules, identifying issues such as missing data, mismatched information, or incorrect syntax.
Once validated, the receiver’s system generates an acknowledgment notification for the sender, such as an EDI 997, to confirm they received the data and report any errors that need to be addressed.
Data Integration
In the final step of EDI shipping, the validated message is integrated into the recipient’s internal system (again, such an ERP). The EDI system then automatically updates all relevant databases.
9 Common EDI Shipping Document Formats
Across all industries that use EDI, every action and response — such as invoices, purchase orders, and confirmation messages — involves a standardized electronic document format, each with a unique code name. Hundreds of formats exist, but many are specific to sectors like retail, automotive, and healthcare.
Here's a closer look at some of the most common EDI shipping documents formats:
EDI 204 (Load Tender)
Shippers use this document to formally request freight services from motor carriers. It includes details such as the type of goods, pickup and delivery locations, and required delivery timelines.
EDI 210 (Motor Freight Invoice)
Carriers send this document to shippers to request payment for their freight services. An EDI 210 invoice is issued for each shipment and includes billing details like the amount owed and payment terms.
EDI 211 (Bill of Lading)
This document is sent by shippers to carriers and serves as a detailed delivery description. It specifies the type and quantity of goods, their origin and destination, the date of shipment, and shipping terms.
EDI 214 (Transportation Carrier Ship Status Message)
Carriers use this document to update shippers on the status of their shipments. It provides real-time notifications, such as when the freight leaves the pickup location, is in transit, or arrives at its destination.
EDI 810 (Invoice)
Carriers send this invoice to shippers to bill them for shipping services. It follows a standardized format and includes key information like the total cost, payment terms, and other relevant details.
EDI 850 (Purchase Order)
This document is sent by buyers to sellers to request goods or services. It serves as the initial step in the ordering process, detailing items, quantities, and agreed-upon prices.
EDI 855 (Purchase Order Acknowledgement)
Vendors send this document to buyers in response to a purchase order. It indicates whether the order can be fulfilled as requested, requires adjustments, or is declined, and is vital to maintaining clear and transparent communication between both parties.
EDI 856 (Advanced Shipping Notice)
Suppliers use the EDI 856 document to notify retailers or distributors about an upcoming shipment. It includes shipment details such as size, delivery date, carrier information, and the shipping date.
EDI 997 (Functional Acknowledgement)
This document serves as a receipt between trading partners to confirm the successful delivery of EDI data. It also notifies the sender of any formatting errors in the transmitted data, ensuring compliance with EDI standards.
7 Benefits of EDI Shipping for the Supply Chain
To understand the advantages that EDI in shipping offers, let’s take a look at a few real-life examples:
Increased Efficiency in Supply Chain Processes
When suppliers receive an EDI 850 (Purchase Order) from retailers, their system automatically generates an EDI 855 (Purchase Order Acknowledgment) in response. This eliminates the need for phone calls or emails, providing retailers with confirmation within minutes and speeding up the process for both parties.
Improved Accuracy in Shipping Documentation
Instead of manually entering order details, logistics companies use EDI to process shipping orders with EDI 211 (Bill of Lading) documents. By automating data transfer, these documents provide accurate details like item quantities and delivery addresses, significantly reducing errors and the costly returns they can cause.
Enhanced Communication with Supply Chain Partners
Freight carriers use EDI 214 (Transportation Carrier Ship Status Message) documents to notify retailers when their shipment reaches the port. These real-time updates help retailers avoid delays by ensuring their distribution centers are prepared to receive and process the goods as soon as they arrive.
Cost Savings from Improved Logistics
Manufacturers using EDI 210 (Motor Freight Invoice) benefit from automated billing processes that eliminate overcharges and minimize the need for manual invoice reconciliation. This reduces labor costs and prevents disputes with carriers over billing errors.
Increased Customer Satisfaction
E-commerce companies use EDI to give customers real-time tracking updates for their orders. When a package ships, an EDI 856 (Advance Shipping Notice) triggers an automated email with tracking information, ensuring customers stay informed every step of the way.
Reduced Carbon Footprint and Waste
Switching from paper-based invoices and purchase orders to electronic formats like EDI 810 (Invoice) and EDI 850 (Purchase Order) eliminates significant amounts of paper annually — potentially hundreds, thousands, or more, depending on the company’s size. This reduces waste and supports sustainability.
Optimized Inventory Management
When a warehouse’s stock of a fast-selling product falls below a set threshold, the system automatically sends an EDI 850 (Purchase Order) to reorder the item. This way, distributors stay well-stocked, keeping both them and their customers satisfied.
4 Challenges of Implementing EDI Shipping
While EDI shipping offers many perks, it’s not without its challenges. Here are some common drawbacks to be aware of:
Initial Set-Up Costs
Getting started with EDI in shipping can be pricey and time-consuming. Freight companies need to invest in software licenses, integrate the system with their existing set-up, and train a team to manage it all. The process can take months and requires both capital and expertise.
Data Privacy and Security Concerns
EDI systems rely on internet connections to share data between partners, which can leave systems vulnerable if proper security measures aren’t in place. A weak spot in one partner’s system could open the door to cyberattacks, putting sensitive data at risk.
Cross-Compatibility Issues
EDI is great for standardizing data, but it’s not foolproof. Problems can pop up when trading partners use outdated systems, mismatched document formats, or different versions of EDI standards. These compatibility issues can disrupt data exchange and slow things down.
An EDI Shipping Partner That’s Shipshape
EDI makes shipping processes faster, more accurate, and easier to manage—and it’s even more effective (and also easier to manage) with the right partner on your side.
Ready to discover what a cloud-based EDI solution can do for your logistics company? Connect with an EDI expert today to learn more.