Are you overwhelmed by the endless paperwork involved in shipping your cargo? Well, thankfully, there’s a ‘superhero’ in the logistics world here to bring things into the digital age: Electronic Data Interchange (EDI)!
EDI is a game-changer that streamlines how businesses in the shipping industry communicate. This technology is rapidly adopted by retailers and shippers around the world.
In fact, the global (EDI) software market size was valued at USD 2.08 billion in 2024 and it’s projected to grow from USD 2.31 billion in 2025 to USD 5.30 billion by 2032, at a CAGR of 12.6%.
That said, let’s dive into what EDI shipping is all about and how it benefits the logistics industry.
What Is EDI Shipping?
EDI (meaning Electronic Data Interchange) is a standardized way for shipping companies and their partners to exchange important documents electronically. Instead of shuffling paper for bills of lading, delivery receipts, shipping notices, and the like, they can send this information back and forth in a consistent digital format.
This eliminates the need for paper-based processes and manual data entry, helping everyone stay on the same page.
EDI files adhere to common standards like ANSI ASC X12 or EDIFACT, which act as the standardized ‘languages’ for EDI transactions, facilitating seamless communication among the various stakeholders involved in a logistics transaction.
On top of that, EDI transmits data almost instantaneously and thus serves as a fast and efficient mode for exchanging business documents digitally. As a result, EDI in shipping streamlines the entire supply chain, enhancing visibility and control over logistics operations.
At the same time, it helps reduce errors and delays and also decrease costs by over 90% compared to manually processing business transactions.
How Does EDI Work?
Think of a typical cargo shipping scenario where numerous paper documents must be created and exchanged.
With EDI shipping, the entire process becomes digital. Let’s see it step-by-step:
Document Preparation
The company that acts as the consignor creates a standard EDI message, such as an Advance Ship Notice (ASN) or a Bill of Lading (BOL). The message is typically sent in an ANSI ASC X12 or EDIFACT format – the common language that both parties understand.
ANSI X12 is a North American EDI standard, while EDIFACT is used mostly in Europe and Asia.
Document Transmission
The EDI message is then transmitted electronically over a secure protocol. This can occur directly between the two involved parties (e.g., a client and a 3PL provider) using FTP, AS2, or SFTP – which are data and file transfer protocols between two endpoints, in this case, between two businesses.
Alternatively, data transmission can go through an EDI Value Added Network (VAN).
What Is An EDI VAN?
An EDI VAN (Value Added Network) is a secure, private hosted service through which companies can exchange EDI documents among a network of business partners.
This solution reduces the complexity of managing direct and secure connections between a company and its numerous partners.
Today, VANs offer additional services like message encryption, secure email, compliance checking, reporting, etc.
Document Translation
Once an EDI message (or sender data) is received, the recipient’s EDI software kicks in and translates the incoming message into a format their internal computer systems can understand.
Document Processing
The receiver’s internal systems process the information contained in the EDI message. Such information could be anything from cargo type and quantities to commercial invoices.
Confirmation
Once the shipment is received and processed, the consignee or the notify party can send an EDI 861 or RECADV message back to the shipper confirming that everything’s received as it should – or not!
Just like the EDI 861 code used in the AINSI ASC X12 (and its equivalent RECADV code in the EDIFACT system), there’s a long list of EDI codes used to transmit different messages between logistics partners.
What Are The EDI Codes?
The EDI Codes are standardized transaction codes used in Electronic Data Interchange to represent specific types of business documents. In place of PDFs or emails, businesses use EDI to exchange standardized documents digitally, quickly, and securely in a machine-readable format.
What’s The Difference Between X12 And EDIFACT Codes?
ANSI X12 transaction sets use three-digit numeric codes, while EDIFACT messages use six-character alphanumeric codes.
So, for example, an EDI advance ship notice is 856 in AINSI X12 and DESADV in EDIFACT, and a commercial invoice message is 810 and INVOIC, respectively.
Benefits Of EDI In Shipping And Logistics
In today’s fast-paced and booming world trading scene, using EDI in shipping brings numerous advantages.
Data Accuracy And Reliability
By reducing manual data entry, there’s a much smaller chance for human error and discrepancies in vital data such as shipping and billing information. Moreover, modern EDI systems incorporate data validation processes to identify and correct errors proactively.
Logistics Operational Efficiency
Thanks to EDI data transmission automation, logistics operations are improved from origin to delivery. Here are a few reasons why:
- EDI helps shorten lead times.
- It facilitates the handling of larger transaction volumes.
- Using EDI shipping helps avoid fines related to service level agreements.
- Because everything is done digitally, EDI helps lower costs related to errors and resources.
Supply Chain Visibility
EDI shipping facilitates real-time tracking and shipment monitoring. It thus provides better insight into all the details of logistics processes. Plus, it offers an integrated system for managing various shipping operations, including purchase orders and invoicing.
Such capabilities not only enhance visibility but also ensure traceability and account for better supply chain management and more informed decision-making.
Partner Collaboration And Communication
EDI streamlines communication between shippers, carriers, and other stakeholders through standardized electronic exchanges, fostering better collaboration and stronger partner relationships.
Plus, thanks to its instant communication capabilities, EDI improves responsiveness, customer service, and overall efficiency.
Environmental Sustainability
EDI shipping reduces the use of paper and all associated resources such as printing (ink, printers, electricity), document storage, postage, and disposal of old archives and packaging material.
Challenges And Complexities Of EDI Shipping
While offering numerous benefits, EDI in shipping and logistics can present some challenges.
Implementation
A typical complexity is technical compatibility. Because different partners may use different EDI standards and versions, there can be data translation errors with costly implications. However, modern solutions cater for suck incompatibilities and help streamline communications even more.
Integration
Another issue can be the EDI implementation and integration with existing software and IT infrastructure, which may require detailed planning, extensive customization, and careful implementation and maintenance that ensures, among other things, data privacy and security.
Skills & Costs
Another important thing to note is that operating EDI systems effectively often requires specialized knowledge and skills, along with continuous learning on evolving standards and technologies.
This needs to be calculated on top of implementation and running costs that vary depending on the infrastructure and business needs.
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