What is electronic data interchange (EDI) used for in supply chain management?

Electronic Data Interchange (EDI) serves as a standard format for the electronic exchange of business information between organizations. In supply chain management, it allows for the seamless transfer of documents such as purchase orders, invoices, and shipping notices between suppliers and retailers, streamlining communication and reducing the chances of errors that can occur with manual data entry.

The standardized format is crucial because it ensures that different business systems can understand and process the information being exchanged without the need for complicated conversions or custom integrations. By utilizing EDI, organizations benefit from increased efficiency, faster transactions, and improved accuracy in their supply chains, all of which are vital for maintaining smooth operations and competitive advantage in a fast-paced market.