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What is Electronic Data Interchange?

By Carol Francois
Updated May 16, 2024
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Electronic data interchange is a tool used to facilitate the passing of data between two separate systems. There are several rules and protocols surrounding this type of data exchange that must be coordinated in advance. The most common reason for setting up an electronic data interchange is to provide a secure, low-cost way to provide sensitive information to either a client or business partner. This type of data transfer is often found in banking, government, or other industries where a great deal of detail is required.

In order to create an electronic data interchange, the supplier and receiver must be in frequent communication. This type of project typically takes four to six weeks of dedicated effort on both sides to complete. Each side should build a project team that includes a developer or programmer who is experienced with the software that will be receiving or transmitting the data file. In addition, security or infrastructure staff are often required to determine how the information will be exchanged and what security protocols need to be in place, on both sides.

The first step in developing an electronic data interchange is to identify the format and layout of the file to be transmitted. This includes the exact data that will be provided in the file, the effective date, and how often the file will be sent. For example, a data file of books purchased by a library from a publisher must include the identification number, quantity, amount, currency, date of purchase, customer account number, and a unique file identifier. The format can vary, but is often comma separated values (CSV) or text (TXT).

Once the format has been confirmed, the layout of the data must be reviewed. In an electronic data interchange, the file is typically uploaded directly into a computer system. A program is required to translate each column of data in the file to the correct field. This translation is often quite time consuming, especially for the first file. Once a template is established, the process moves much faster.

Security of the file and access to the different systems is the next issue that needs to be addressed. This is most commonly achieved through the creation of a file transfer site or FTP. This site is really just a network drive that is accessible via the Internet. A user name and password is provided to the sender, who can then upload the file as required. The receiver is notified that a file is available and is then able to download the file from the site and upload it into the main system.

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