Final answer:
EDI, or Electronic Data Interchange, is the electronic exchange of business documents between trading partners. It offers benefits such as improved efficiency, cost reduction, increased accuracy, and faster processing times. However, there are limitations, including setup cost, system compatibility requirements, and suitability for specific business types.
Step-by-step explanation:
EDI, which stands for Electronic Data Interchange, is the electronic exchange of business documents between trading partners. It enables businesses to exchange data and documents in a standardized format, such as invoices, purchase orders, and shipping notices, electronically.
The major benefits of EDI include improved efficiency, cost reduction, increased accuracy, and faster processing times. Automation of manual processes and elimination of paper-based documentation lead to time and cost savings. EDI also helps minimize errors as data is directly transferred from one system to another.
However, there are limitations to EDI. One limitation is the initial setup cost, which can be expensive for smaller businesses. Another limitation is the need for trading partners to have compatible systems and agree on common standards. Additionally, EDI may not be suitable for businesses with low transaction volumes or those that require frequent changeso their business processes