EDI 101 & Tutorials
Electronic Data Interchange (EDI) is the computer-to-computer exchange of structured information, by agreed message standards, from one computer application to another by electronic means and with a minimum of human intervention. In common usage, EDI is understood to mean specific interchange methods agreed upon by national or international standards bodies for the transfer of business transaction data, with one typical application being the automated purchase of goods and services.
Despite being relatively unheralded, in this era of technologies such as XMLservices, the Internet and the World Wide Web, EDI is still the data format used by the vast majority of electronic commerce transactions in the world.
EDI documents contain the same data that would normally be found in a paper document used for the same organizational function. For example an EDI 940 ship-from-warehouse order is used by a manufacturer to tell a warehouse to ship product to a retailer. It typically has a ship to address, bill to address, a list of product numbers (usually a UPC code) and quantities. It may have other information if the parties agree to include it. However, EDI is not confined to just business data related to trade but encompasses all fields such as medicine (patient records, laboratory results..), transport (container and modal information...), engineering and construction, etc.
There are two major sets of EDI standards. UN/EDIFACT is the only international standard (in fact, a United Nations recommendation) and is predominant in all areas outside of North America. ANSI ASC X12 (X12) is popular in North America and used worldwide.
These standards prescribe the formats, character sets, and data elements used in the exchange of documents and forms, such as purchase orders (called "ORDERS" in UN/EDIFACT and an "850" in X12) and invoices.
The standard says which pieces of information are mandatory for a particular document, which pieces are optional and give the rules for the structure of the document. The standards are like building codes. Just as two kitchens can be built "to code" but look completely different, two EDI documents can follow the same standard and contain different sets of information. For example a food company may indicate a particular product expiration date while a clothing manufacturer would choose to send color and size information.
Organizations that send or receive documents from each other are referred to as "trading partners" in EDI terminology. The trading partners agree on the specific information to be transmitted and how it should be used. This is done in human readable specifications (also called specs or spec sheets). While the standards are analogous to building codes the specifications are analogous to blue prints. (The specification may also be called a mapping but the term mapping is typically reserved for specific machine readable instructions given to the translation software.) Larger companies have existing specification sheets and are usually unwilling to negotiate. Often in a large company these sheets will be written to be used by different branches or divisions and therefore will contain information not needed for a particular exchange. (Deviations from and clarification to the specification sheets should always be obtained in writing.)
Service providers provide global platforms (also known as trading grids) to connect and integrate "business partners" around the world. They provide integration platforms that make the exchange of EDI (or XML) documents transparent and easy between diverse constituents. These providers will track and reconcile documents to reduce errors and improve supply chain performance
Often missing from the specifications are real world descriptions of how the data should be interpreted. This is particularly important when specifying quantity. For example, suppose candy is packaged in a large box that contains 5 display boxes and each display box contains 24 boxes of candy packaged for the consumer. If an EDI document says to ship 10 boxes of candy it may not be clear whether to ship 10 consumer packaged boxes, 240 consumer packaged boxes or 1200 consumer packaged boxes. It is not enough for two parties to agree to use a particular qualifier indicating case, pack, box or each; they must also agree on what that particular qualifier means.
EDI translation software provides the interface between the internal system and the common standards. For an "inbound" document it typically takes the variable length fields of the EDI document, translates the individual pieces of data and then creates a file of fixed length fields. For an "outbound" document the translation software queries the internal system, as in the case of an SQL database, or it translates a fixed width file exported by the internal software. Translation software may also utilize other methods or file formats. The mechanism of translation is not part of the standard.
(In EDI terminology "inbound" and "outbound" refer to the direction of transmission of an EDI document in relation to a particular system, not the direction of merchandise, money or other things represented by the document. For example, an EDI document that tells a warehouse to perform an outbound shipment is an inbound document in relation to the warehouse computer system. It is an outbound document in relation to the manufacturer or dealer that transmitted the document.)
There are several advantages of using EDI all of which provide distinct benefits to the user. One of the most notable benefits to using EDI is the time-saving capability it provides. By eliminating the process of distributing hard copies of information throughout the company, easy access to electronic data simplifies inter-department communication. Also, another time-savings advantage is the ability to track the origin of all information therefore significantly reducing time spent on corresponding with the source of the information.
Another benefit for the user of this information system is the ultimate savings in costs for the company. Although the initial set-up costs may seem high, the overall savings received in the long run ensures its value. For any business, regardless of its size, hard-copy print outs and document shipping costs add up. EDI allows for a paper-less exchange of information reducing handling costs and worker productivity that is involved with the organization of paper documents.
Electronic data interchange has another strong advantage over paper-based information exchange which has to do with accuracy of information. When the information is already stored electronically, it speeds up an organization's ability to check for accuracy and make any necessary corrections as the data is already inputted in the system. Also, unlike paper-based methods, EDI allows for the ability to send and receive information at any time thereby tremendously improving an organization's ability to communicate quickly and efficiently.