EDI - Electronic Data Interchange

Development | Integration

EDI - Electronic Data Interchange

Electronic data interchange (EDI) is the concept of businesses electronically communicating information that was traditionally communicated on paper, such as purchase orders and invoices. Technical standards for EDI exist to facilitate parties transacting such instruments without having to make special arrangements.

EDI has existed at least since the early 70s, and there are many EDI standards (including X12, EDIFACT, ODETTE, etc.), some of which address the needs of specific industries or regions. It also refers specifically to a family of standards. In 1996, the National Institute of Standards and Technology defined electronic data interchange as "the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. EDI implies a sequence of messages between two parties, either of whom may serve as originator or recipient.

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ELECTRONIC DATA INTERCHANGE

EDI is used for electronic funds transfer (EFT) between financial institutions, which facilitates such common transactions as the direct deposit of payroll checks by employers, the direct debit of consumer accounts to make mortgage or utility payments, and the electronic payment of federal taxes by businesses. Another common application of EDI involves the direct exchange of standard business transaction documents—such as purchase orders, invoices, and bills of lading—from one business to another via computer. EDI is also used by retail businesses as part of their electronic scanning and point-of-sale (POS) inventory replenishment systems. Overall, EDI offers a number of benefits to businesses and—thanks to the rapid evolution of the related technology—is becoming more readily available to small businesses all the time.

BENEFITS OF EDI

"EDI saves money and time because transactions can be transmitted from one information system to another through a telecommunications network, eliminating the printing and handling of paper at one end and the inputting of data at the other," Kenneth C. Laudon and Jane Price Laudon wrote in their book Management Information Systems: A Contemporary Perspective. "EDI may also provide strategic benefits by helping a firm 'lock in' customers, making it easier for customers or distributors to order from them rather than from competitors." EDI was developed to solve the problems inherent in paper-based transaction processing and in other forms of electronic communication. In solving these problems, EDI is a tool that enables organizations to reengineer information flows and business processes. It directly addresses several problems long associated with paper-based transaction systems:

Time delays— Paper documents may take days to transport from one location to another, while manual processing methodologies necessitate steps like keying and filing that are rendered unnecessary through EDI.

Labor costs— In non-EDI systems, manual processing is required for data keying, document storage and retrieval, sorting, matching, reconciling, envelope stuffing, stamping, signing, etc. While automated equipment can help with some of these processes, most managers will agree that labor costs for document processing represent a significant proportion of their overhead. In general, labor-based processes are much more expensive in the long term EDI alternatives.

Accuracy— EDI systems are more accurate than their manual processing counterparts because there are fewer points at which errors can be introduced into the system.

Information Access— EDI systems permit myriad users access to a vast amount of detailed transaction data in a timely fashion. In a non-EDI environment, in which information is held in offices and file cabinets, such dissemination of information is possible only with great effort, and it cannot hope to match an EDI system's timeliness. Because EDI data is already in computer-retrievable form, it is subject to automated processing and analysis. It also requires far less storage space.

INFRASTRUCTURE FOR EDI

Several elements of infrastructure must exist in order to introduce an EDI system, including: 1) format standards to facilitate automated processing by all users, 2) translation software to translate from a user's proprietary format for internal data storage into the generic external format and back again, 3) value-added networks to solve the technical problems of sending information between computers, 4) inexpensive microcomputers to bring all potential users—even small ones—into the market, and 5) procedures for complying with legal rules. It has only been in the past several years that all of these ingredients have fallen into place.

FORMAT STANDARDS - To permit the efficient use of computers, information must be highly organized into a consistent data format. A format defines how information in a message is organized: what data goes where, what data is mandatory, what is optional, how many characters are permitted for each data field, how data fields are ordered, and what codes or abbreviations are permitted.

Early EDI efforts in the 1960s used proprietary formats developed by one firm for exclusive use by its trading partners. This worked well until a firm wanted to exchange EDI documents with other firms who wanted to use their own formats. Since the different formats were not compatible, data exchange was difficult if not impossible. To facilitate the widespread use of EDI, standard formats were developed so that an electronic message sent by one party could be understood by any receiver that subscribes to that format standard. In the United States the Transportation Data Coordinating Committee began in 1968 to design format standards for transportation documents. The first document was approved in 1975. This group pioneered the ideas that are used by all standards organizations today.

North American standards are currently developed and maintained by a volunteer organization called ANSI (American National Standards Institute). The format for a document defined by ANSI is broad enough to satisfy the needs of many different industries. Electronic documents are typically of variable length and most of the information is optional. When a firm sends a standard EDI purchase order to another firm, it is possible for the receiving firm to pass the purchase order data through an EDI translation program directly to a business application without manual intervention. In the late 1990s, international format standards were established and introduced as well to facilitate international business activity.

TRANSLATION SOFTWARE - Translation software makes EDI work by translating data from the sending firm's internal format into a generic EDI format. Translation software also receives a sender's EDI message and translates it from the generic standard into the receiver's internal format. There are currently translation software packages for almost all types of computers and operating systems.

VALUE-ADDED NETWORKS (VANS) - When firms first began using EDI, most communications of EDI documents were directly between trading partners. Unfortunately, direct computer-to-computer communications requires that both firms 1) use similar communication protocols, 2) have the same transmission speed, 3) have phone lines available at the same time, and 4) have compatible computer hardware. If these conditions are not met, then communication becomes difficult if not impossible. A value-added network (VAN) can solve these problems by providing an electronic mailbox service. By using a VAN, an EDI sender need only learn to send and receive messages to or from one party: the VAN. Since a VAN provides a very flexible computer interface, it can talk to virtually any type of computer. This means that to conduct EDI with hundreds of trading partners, an organization only has to talk to one party. In addition, VANs provide important security elements for dissemination of information between parties.

INEXPENSIVE COMPUTERS - The fourth building block of EDI is inexpensive computers that permit even small firms to implement EDI. Since microcomputers are now so prevalent, it is possible for firms of all sizes to deal with each other using EDI.

PROCEDURES FOR COMPLYING WITH LEGAL RULES - Legal rules apply to the documents that accompany a wide variety of business transactions. For example, some contracts must include a signature or must be an original in order to be legal. If documents are to be transmitted via EDI, companies must establish procedures to verify that messages are authentic and that they comply with the agreed-upon protocol. In addition, EDI requires companies to institute error-checking procedures as well as security measures to prevent unauthorized use of their computer systems. Still, it is important to note that some sorts of business documents—such as warranties or limitations of liability—are difficult to transmit legally using EDI.

EDI documents and transactions

Here’s some common EDI transactions that are supported within the X12 and EDIFACT EDI world.

Supplier Collaboration

X12 Transaction Number

EDI - FACT Transaction ID

Transaction name

Transaction Usage

832

PRICAT

Price/Sales Catalog

Used in general retail to obtain supplier item information and load to their Item master file for new good, item updates or discontinued product notification

879

Price Information

Used in grocery to share item price updates

888

Item Maintenance

Used in grocery to obtain supplier item information and load to their Item master file for new good, item updates or discontinued product notification

889

Promotion Announcement

Used in grocery to share item promotion price updates/alerts

830

Planning Schedule

Used in retail to share with the suppliers forecast/future purchase plans

846

INVRPT

Inventory Inquiry/Advice

Most commonly used by suppliers to provide available and future inventory quantities, corporately or by ship from location

852

SLSRPT

Product Activity Data

Used in retail and grocery to provide sales and store inventory to suppliers. Also used by grocery to report sales for scan based trading relationships (in this usage, the grocer also create an internal invoice to pay the supplier), also known for use with consignment relationships

Order Cycle

X12 Transaction Number

EDIFACT Transaction ID

Transaction name

Transaction Usage

850

ORDERS

Purchase Order

Used in retail for order products to be shipped to a DC/store or end consumer. Can contain a single ship to or a single order with multiple ship to and provided marked for/cross dock packing details

875

Grocery Product Purchase Order

Used in retail for order products to be shipped to a DC/store

855

ORDRSP

Purchase Order Acknowledgment

Used by retail as an acknowledgement of the purchase order. Also used by retail and grocery as a suggested PO from the supplier to the buyer for VMI (Vendor Managed Inventory)

869

ORSSTA

Order Status Inquiry

Used by retail to request the status of an order with the supplier

870

ORDREP

Order Status Report

Used by retail as the suppliers response to a retailers request for the status of the order.

860

ORDCHG

Purchase Order Change – Buyer Initiated

Used in retail to communicate order changes to the supplier.

865

Purchase Order Change Acknowledgement/Request – Seller Initiated

Used in retail (primarily in the vendor direct to consumer model) to confirm acknowledgment of PO change or order cancelation

876

Grocery Product Purchase Order Change

Used in grocery to communicate order changes to the supplier.

856

DESADV

Shipment Notification

Used as advance ship notice or shipment confirmation. From supplier to retailer. retailer will use as visibility to inbound shipments, receiving automation or confirmation of shipment for vendor direct to consumer orders

857

Shipment and Billing

Used primarily in book retail as both an advance ship notice and an invoice

Finance

X12 Transaction Number

EDI - FACT Transaction ID

Transaction name

Transaction Usage

810

INVOIC

Invoice

Used by retail where supplier requests payment for products or services rendered

880

Grocery Product Invoice

Used by grocery where supplier requests payment for products

811

Consolidated Service Invoice/Statement

Used by retail where supplier requests payment services rendered

812

Credit/Debit Adjustment

Used in retail and grocery as either a credit memo from the supplier to the retailer or as a debit memo (deduction notice) from the retailer to the supplier.

820

REMADV

Payment Order/Remittance Advice

Used by all buying organizations to report to the suppliers that payment has been made on the details of what makes up that payment

823

Lockbox

Used by banks to report deposits made to a suppliers account from retailer payments

894

Delivery/Return Base Record

Used by grocery and specialty retailers where suppliers are invoicing what was delivered to the store in the direct store delivery model. Often used with NEX/DEX systems

895

Delivery/Return Acknowledgment or Adjustment

Used by grocery and specialty retailers where retailer provides details of the acceptance of the 894 invoice or provide a reconciliation against the 894 invoicing

210

Motor Carrier Freight Details and Invoice

Used by motor carriers to invoice either retailers, suppliers, manufacturers etc for freight services

882

Direct Store Delivery Summary Information

Used in grocery as a summary invoice billing. Details represent a single invoice charging multiple locations

Transportation / Logistics Management

X12 Transaction Number

EDI - FACT Transaction ID

Transaction name

Transaction Usage

204

Motor Carrier Load Tender

Used by shipper or consignee requesting a shipment to be picked up and routed. Used for single stop routes , LTL (less than truck load) or TL (truck load)

211

Motor Carrier Bill of Lading

Used by shipper or consignee requesting a shipment to be picked up and routed. Used for multiple stop routes , LTL (less than truck load)

990

Response to a Load Tender

Acceptance of the load tender (204, 211)

215

Motor Carrier Pickup Manifest

Used by retailers and suppliers to communicate contents of a dropped trailer that is ready for pickup with a carrier

214

Transportation Carrier Shipment Status Message

Used in retail and grocery where the carrier provide the status of a shipment moved by a transportation carrier

753

Request for Routing Instruction

Used in retail when the retailer is managing their inbound freight from suppliers. suppliers will send this transaction to indicate a shipment is ready for pickup and the window of time the product is available

754

Routing Instructions

Used in retail when the retailer is managing their inbound freight from suppliers. retailer will send this transaction to suppliers indicating the carrier and when the shipment will be pickup

300

Reservation/Booking Request

Used by import freight forwarder/consolidators for suppliers to book space for a shipment on an ocean container

301

Confirmation

Used by import freight forwarder/consolidators to communicate acceptance of booking request to the suppliers for a shipment on an ocean container

315

Status Details (Ocean)

Used in retail and grocery where the ocean carrier provide the status of a shipment moved by a ocean liner

Warehouse Fulfillment

X12 Transaction Number

EDI - FACT Transaction ID

Transaction name

Transaction Usage

940

Warehouse Shipping Order

Used in warehouse fulfillment service providers. Represents a request from the retailer or supplier to have the 3PL DC fill/pick products to be shipped

943

Warehouse Stock Transfer Shipment Advice

Used in warehouse fulfillment service providers. Represents a notification by the 3PL DC about products transfers being shipped

944

Warehouse Stock Transfer Receipt Advice

Used in warehouse fulfillment service providers. Represents a notification by the 3PL DC about products transfers being received

945

Warehouse Shipment Advice

Used by a third party remote warehouse to inform a supplier that the shipment has been sent out to the end user.

947

Warehouse Inventory Adjustment Advice

Used in warehouse fulfillment service providers to indicate product movement within the warehouse. Includes recalls, damage, obsolesces or cycle inventory counts adjustments or levels

861

RECADV

Receiving Advice/Acceptance

Used to report what has been received against an inbound shipment

Manufacturing / Material Handling

X12 Transaction Number

EDI - FACT Transaction ID

Transaction name

Transaction Usage

840

REQOTE

Request for Quotation

Used to request a quote for product or services (Bid)

843

QUOTES

Response to Requested Quotation

Used to respond to a quote for product or services (Bid)

830

DELFOR

Planning Schedule with Release Capability

Used in manufacturing to indicate future planned and current committed quantities of an item against a contract. suppliers will ship against the release request

862

DELJIT

Shipping Schedule

Used in manufacturing to request a supplier to schedule a shipment against an order

Other

X12 Transaction Number

EDI - FACT Transaction ID

Transaction name

Transaction Usage

180

Return Merchandise Authorization and Notification

Used by retailers to request return authorization for products and by suppliers to authorize return or disposition of product

816

Organizational Relationships

Used by retailers to report the store number and addresses of their locations. Can be a complete list or an update of the store details

845

Price Authorization Acknowledgement/Status

Primarily used in medical/pharmaceuticals where a manufacturer is reporting the award of a bid or contract and the locations/customers supporting the bid to a distributor

844

Product Transfer Account Adjustment

Primarily used in medical/pharmaceuticals where a distributor reports or requests a rebate for products shipped/sold at bid price below purchase price to the Manufacturer for reimbursement

867

SLSRPT

Product Transfer and Resale Report

Primarily used in medical/pharmaceuticals where a distributor reports products movement/shipped/sold

849

Response to Product Transfer Account Adjustment

Primarily used in medical/pharmaceuticals where a manufacturer reports acceptance or a reconciliation of the rebate request (844)

824

BANSTA

Application Advice

Used by buying organizations to report an error in the processing of data from a supplier

864

Text Message

Also used by buying organizations to report an error in the processing of data from a supplier. But is also used for mass communications to a trading partner community

997

Functional Acknowledgement (FA)

Serves as a response, or electronic receipt, between EDI transactions.

Source: https://www.spscommerce.com/resources/edi-documents-transactions/