What Is EDI? A Practical Guide for SMEs

What is EDI? EDI stands for Electronic Data Interchange. It is the automatic exchange of business documents between two company systems, in a fixed format that both parties agree on in advance. An order leaves your customer’s system and arrives as an order in your own system, without anyone retyping a thing.

Most companies do not arrive at EDI on their own initiative. They receive an email from a large buyer: from next quarter onwards, orders will be placed through EDI. This article explains what is expected of you at that point, which messages exist, and what you need in order to keep up.

What is EDI, and what is it not?

What is EDI in concrete terms? A PDF invoice in an email attachment is not it. Someone has to open that file, read it and retype it. With EDI, one system sends a message that the other system understands immediately: every field sits in an agreed place, with an agreed meaning.

The difference is machine readability. Your customer does not send a document that looks good, but structured data. The item number, the quantity, the delivery date and the delivery address all arrive as separate values. Your system can process, validate and post them straight away.

EDI started in retail and the automotive industry, where thousands of orders pass through every day. Today you also find it in food, building materials, packaging and medical supply. The reason is simple: the more order lines you handle, the more expensive every manual keystroke becomes.

How does EDI work between two companies?

What is EDI in practice? An EDI project follows the same steps at almost every customer.

1. Agree on the setup. Which messages will you exchange, in which standard and which version? Your customer usually documents this in an EDI manual.
2. Identify the parties. Companies and delivery addresses get a GLN, articles get a GTIN. That way each system knows which site and which product is meant.
3. Map the articles. Your internal item codes are linked to your customer’s codes. This step usually takes the most time.
4. Choose a channel. Messages travel over AS2, SFTP or through an EDI service provider that acts as an intermediary.
5. Test and go live. You exchange test messages until everything checks out. GS1 Belgium & Luxembourg describes this route in its guidance on electronic data interchange.

Expect a few weeks of lead time, mainly because you depend on your customer’s testing slots.

Which EDI messages are there?

Most SMEs get by with a handful of messages. These are the common ones, listed under their EDIFACT names.

A customer rarely starts with everything at once. In practice it begins with ORDERS and INVOIC, after which DESADV follows as the goods flow grows.

EDIFACT, ANSI X12 or XML: which standard does your customer use?

What is EDI according to your customer? That depends on the standard they impose. EDI is not a single format but a family of standards. UN/EDIFACT is the international standard of the United Nations and dominates in Europe. ANSI X12 is the American counterpart, which you meet at companies with a parent in the United States. There are also XML variants, which developers find easier to read.

Within EDIFACT there are further agreements per sector and per country. In the Benelux, retail works with the harmonised order-to-cash guidelines from GS1. Two customers can therefore both use EDIFACT and still expect a different implementation.

For you as a supplier that means one thing: you do not choose the standard yourself. Your customer sets it, and your system has to handle it.

EDI or Peppol: what is the difference?

These two often get mixed up. Peppol is a network with a fixed set of agreements for electronic invoicing, maintained by the non-profit OpenPeppol, on which every participant is reachable through an access point. Since 1 January 2026, structured electronic invoices have been mandatory between Belgian VAT-registered businesses.

EDI covers wider ground. It is not only about the invoice, but about the full chain from order to receiving advice. EDI also tends to work with bilateral agreements per customer, whereas Peppol applies one set of rules to everyone.

The two do not exclude each other. Many companies receive their orders through EDI and send their invoices through Peppol. If you want to know what that invoicing rule means in practice, read our explanation of the Peppol obligation for your business.

Why your customer imposes an EDI integration

What is EDI for your buyer? Mostly a way to keep their own warehouse on schedule. Large buyers work with fixed supplier terms. Manual orders fit those terms badly, because every exception costs their team time. Suppliers who cannot deliver through EDI eventually drop off the vendor list or stay stuck with smaller volumes.

There is a substantive argument as well. An order that arrives automatically contains exactly the data your customer entered. Disputes about wrong quantities or wrong articles largely disappear, because nobody retypes anything.

The gain on your side is just as concrete. Order entry that used to cost half a day per week leaves your sales desk’s schedule. That time goes to customers instead of to keyboard work.

What do you need for an EDI integration?

Have these points ready before you sit down with your customer.

• An EDI system or ERP that can receive and send the messages, and that puts orders straight into your stock.
• GS1 numbers: a GLN for your company and your delivery addresses, GTINs for your articles.
• An article mapping between your codes and your customer’s codes.
• An owner who follows up the test phase, because questions about field content will come.
• Clarity on costs: a setup fee per customer, plus a recurring fee with an EDI service provider.

EDI without connected stock delivers only half the benefit

We see one pitfall regularly. Companies let EDI messages arrive in a separate program, print them and retype them into their own system anyway. The retyping simply moves from the mailbox to the EDI portal.

The gain sits in the flow. An incoming ORDERS reserves stock immediately, picking starts from there, and the DESADV leaves automatically at despatch. The invoice follows from the quantities actually delivered, so amounts match the order and the delivery.

For that to work, EDI has to live in the same system as your stock, your orders and your invoicing. At Deskflow, EDI customers work with the same stock and the same order flow as their webshop, their sales reps and their B2B portal. You can see how that central processing works in our article on central order processing across channels.

Frequently asked questions

What is EDI in one sentence?

EDI is the automatic exchange of business documents such as orders, despatch advices and invoices between two company systems, in a standardised format that requires no manual entry.

Which EDI messages are used most?

The most common are ORDERS (purchase order), ORDRSP (order confirmation), DESADV (despatch advice), RECADV (receiving advice) and INVOIC (invoice). For consignment stock, INVRPT is often added as an inventory report.

Is EDI the same as e-invoicing through Peppol?

No. Peppol is a network for structured electronic invoices and has been mandatory between Belgian VAT-registered businesses since 1 January 2026. EDI covers the full order flow, from purchase order to invoice, usually based on bilateral agreements per customer.

What does an EDI integration cost?

The cost consists of a one-off setup per customer and a recurring fee for the message traffic, often with an EDI service provider. The price depends on the number of messages and the number of customers you connect. Always ask for the price per additional customer, because that is where the total adds up.

Can a company with ten employees handle EDI?

Yes. The technology sits in the software package and with the service provider, not with you. What you need is a system that processes the messages and someone who follows up the test phase with the customer.