Electronic Data Interchange (EDI) is a paperless method of communication used between businesses to transfer or exchange documents such as invoices, shipping notices and purchase orders.
Imagine for a second if everything you sent was hand delivered or mailed. The cost of these activities alone might be enough to send a company into early retirement. Among the costs of postage and rather wasteful transportation, EDI reduces costs that are associated with paper, ink, storage and document retrieval. While these costs seem rather trivial think of it this way, the average piece of paper costs $0.08 per sheet. That adds up if you were to calculate all the paper used within a year. Then add in the cost of labor (about $39.00 manualy transmitted) compared to EDI (about $1.32) and you have quite a savings. Other benefits associated with electronic data interchange are improvment of information flow. The most obvious benefit is that EDI can speed up the flow of information in a value stream by more than 60% while also reducing the amount of defects or transactional errors by more than 30%.