A more thorough explanation:

An EDI agreement, or Electronic Data Interchange agreement, is a contract that outlines the terms and conditions for exchanging data electronically between two or more parties. This data can include things like purchase orders, invoices, and shipping notices.

When data is transmitted under an EDI agreement, it is usually formatted according to an agreed-upon standard, such as the American National Standards Institute (ANSI) X12 standard or the United Nations Electronic Data Interchange for Administration, Commerce, and Transport (EDIFACT) standard. These standards ensure that the data is structured in a consistent and easily readable way, regardless of the computer systems used by the parties involved.

For example, a company that sells products to a retailer may have an EDI agreement in place to exchange purchase orders and invoices electronically. The agreement would specify the format for the data, the frequency of exchanges, and any other relevant details. By using an EDI agreement, the two companies can streamline their ordering and payment processes, reducing the need for manual data entry and paperwork.