Basics of EDI With Examples, Benefits & Working: Free PDF

As a developer in EDI technology, here are the insights that I learned over these years. These insights will help you get started with the electronic data interchange.

When I started with EDI, the articles/content I referred to was a bit complex and not at all beginner-friendly, I learned it the hard way but I'm sharing these learnings my hand-curated notes about EDI technology with you in very simple language.

I'll cover each topic in brief and will provide necessary examples, I struggled a lot to grasp these things but I'm gonna make sure you will get it with ease, and yes, I'll give you proper examples, PDF notes to help you understand better, and here's a quick summary of Electronic Data Interchange (EDI)

So without further ado, let's start learning the basics of EDI, how it's important, where it's used and what the most important concepts are there. let's begin our journey in the world of electronic data interchange.

EDI Basics

Let's start with the definition first, what EDI is, and what it stands for.

EDI stands for Electronic Data Interchange, is a process of exchanging information from one company to other company electronically, without using paper documents. Mainly used in supply chain management or e-commerce to handle transactions effectively and easily.

EDI is completely based on computer system, the data interchange happens over the network, using standard electronic format to communicate the data / information.

Key Benefits of Electronic Data Interchange

EDI has so many benefits over the traditional paper documents approach, let's see the benefits first:

1. These processes work without human intervention.
2. EDI is fast, efficient, and can be automated which also reduces errors.
3. It is cost-efficient.
4. EDI Can Increase Sales.

Difference between EDI & Paper-based Transactions

Okay, but how does traditional approaches work? You might ask me.

here's a quick comparison between the traditional approach (without EDI) and with EDI.

• Traditional methods require a lengthy and time-consuming process which is difficult to manage, has several drawbacks and has a cumbersome structure.
• The traditional methods take too long to process, it can be as long as 3 to 5 days.
• Traditional methods require a lot of human intervention, so there are chances of data manipulation. Also, the operation does not occur in real time.
• Whereas, EDI is time-saving and normally occurs overnight and can take less than an hour.
• EDI is fast, secure, and reliable as it doesn’t need human intervention and updates within very few minutes, we can say near real-time.

So, I hope you have understood the importance and benefits of EDI, now see where EDI is applicable.

Let's discuss what kinds of business categories can benefit from the EDI technology.

Applications in E-Commerce Business

Typically, there are two categories of a business:

B2C, i.e., Business to Customer:

EDI has less exposure to this Business type as the data or the processing can be comparatively smaller and done easily without the need to have the EDI tools.

An example would be (DMart to Customer)

B2B, i.e., Business to Business:

B2B has a great EDI exposure as the data needs to reflect both parties (Businesses). Also, there is slightly higher complexity and thus processing is not easier, hence we use EDI tools.

For example, DMart to Maggie.

EDI Standards

EDI standards define the structure and format of electronic documents exchanged between trading partners. They ensure that the data is consistent and can be interpreted correctly by both parties.

There are several EDI standards used for electronic data interchange. Here are some commonly used standards:

ANSI (American National Standards Institute): ANSI is a non-profit organization in the United States that governs a set of rules or standards for products, services, systems, or personnel.

Example: If the driver forgot to wear a seat belt, then give a beep sound as an alarm. An example could be if you are driving a car the speed exceeds the limit of 120KMPH then it starts beeping.

The ANSI-specified formats for EDI include:

• X12 transaction sets: Widely used in the United States and globally.
• EDIFACT: Mainly used in European countries, but can also be found globally in rare instances.
• Excel, CSV, JSON, IDOC: Other file formats that can be used for EDI.

Communication Modes / Protocols

To exchange EDI documents, various communication protocols can be used. Some common communication modes/protocols include:

1. AS2: Applicability Statement 2 is a widely used protocol for secure data transmission over the Internet.
2. FTP (File Transfer Protocol): A standard network protocol used to transfer files between a client and a server on a computer network.
3. SFTP (SSH File Transfer Protocol): A secure version of FTP that uses SSH to encrypt data during transmission.
4. HTTP (Hypertext Transfer Protocol): A protocol used for transmitting hypertext over the internet.
5. HTTPS (HTTP Secure): An extension of HTTP that provides secure communication over a computer network.
6. ROSET TANET: A proprietary communication protocol used for EDI exchange.
7. API Calls: Application Programming Interface (API) calls can be used to exchange data between systems.

These communication protocols ensure the secure and reliable transmission of EDI documents between trading partners.

In summary, EDI standards define the structure and format of electronic documents, while communication modes facilitate the secure exchange of these documents between trading partners.

How does Eelectronic Data Interchange work?

Let’s understand the working of EDI with an example, let’s say this is a B2B communication between DMart and Maggie. understand the flow below.

DMart adds a file in FTP and Maggie will have access to the same file and Maggie will update the file with the requirements. This communication will happen over any ANSI-specified communication mode (here consider FTP), and thus both parties will have the file with the updated requirements in an instant.

Tools used for EDI Transactions

We use many tools to handle these documents, edit, manage the documents, and work with them efficiently, there are several tools available:

Middleware Tools

These are used for communication purposes and are used at the front end

• Sterling Integrator
• Seeburger
• Web methods
• Dell Boomi
• AxWay
• Customized tools (Amazon, OpenText, GXS)
• SAP SD (Sales and Distribution)
• SAP WMS (Logistics)
• SAP HANA
• ERP (Enterprise Resource Planning) ERP is used by businesses/organizations to manage key parts such as accounting, manufacturing, sales, and marketing. It is used for backend operations such as order creation. ERP is used by businesses/organizations to manage key parts such as accounting, manufacturing, sales, and marketing. It is used for backend operations such as order creation.

Let’s understand this flow with the example:

EDI Messages and Their Flow

For General Store (Customer):

For Parle Industries:

For Parle Godown:

Difference between X12 and EDIFact

X12 and EDIFACT have the same messages and same documents, just that their notation is different.

following are the differences between X12 and EDIFACT

• X12 messages are numeric

Example: 850 (Purchase Order), 855 (Purchase Order Acknowledgement), 810 (Invoice), 940 (Warehouse Shipping Order) and many more.

• EDIFACTs are alphabetic

Example: ORDER, ORDRSP ( Order Response ), DISADV ( Disadvice ), INVOIC, ORDCHG ( Order Changed)

Package Structure

Identifying File Formats

• X12 File Structure - The X12 file starts with ISA and ends with IEA.
• EDIFACT File Structure - The EDIFACT file starts with UNA and ends with UNZ.
• IDOC File Structure - IDOC files start with IDOC. These are the positional files. ERP only understands the IDOC format. So we have to convert the given file into IDOC Format.

Document Envelope Structures

• ISA/IEA - Interchange Control: It shows the total number of functional groups present in the transaction set.
• GS/GE - GROUP CONTROL/ FUNCTION GROUP: It shows the total number of transaction sets.
• ST/SE - TRANSACTION: It shows the total number of lines present in the transaction set.

ISA Segment Structure

ISA*00* _00_ *12*6194537845 *12*8997372426 *051101*0306*U*00401*100000799*0*P*>

• ISA-06 - In the above example, the ISA-06 field is the sender ID.
• ISA-08:- This field holds the receiver's ID.
• ISA-12:- This field holds the Interchange version number.
• ISA-13:- This field contains the control number used for tracking purposes.
• ISA-15:- This field indicates whether data is for “T”(Testing) purpose or for “P”(Production) purpose or “I” (information).

Delimiters:

★ (Star) Element/ Field Separator – It separates elements.

~ (Tilde) Segment Separator – It is used to separate segments.

> Composite Element Separator - It is used to make a group. It is not a field or element separator. Example:-

EDI Transactions Flow

Let's delve into the flow of EDI transactions with an illustrative example. Refer to the image below for a visual representation:

In this scenario, the Front End converts the given document into IDOC, and the ERP system, situated at the backend, only accepts the IDOC format. For X12 File Format, the 997 is a Functional Acknowledgement. In EDIFACT, the 997 serves as a Control Message, confirming the receipt of the document.

For instance, if Company A sends a document to Company B, Company B will respond with a 997, an acknowledgment confirming the successful reception of the document.

Transaction Errors

EDI transactions may encounter errors, which can be categorized as:

• Syntax Error – This occurs when a segment is valid only when both fields are present.
• Code Error – This happens when the code is not in line with the specified version or the provided version.

Acknowledgement Segments and Elements:

**AK1*PO*1421** Segment

The AK1 segment, paired with the AK9 segment, functions at the Group level. It includes:

GS01 along with Functional group control number.

• AK1 – Functional Group Response Header
• 01 – Functional Identifier (GS01)
• 02 – Group Control Number (GS06). It is unique.

**AK2*850*000000010** Segment

The AK2 segment, coupled with the AK5 segment, operates at the Transaction level. It includes:

Transaction set identifier: ST01, denoting the type of transaction set (e.g., 850 for Purchase Order). Transaction Set Control Number: A unique identifier for the transaction set.

AK9: Functional Group Response

**AK9*A*000003*000003*000002** Segment

The AK9 segment provides an overview of the Functional Group Response. It includes:

• 01 – Functional group acknowledgement. It shows the status of the transaction set, whether it is accepted or rejected. In the above segment, the transaction set is accepted.
• 02 – Number of Transactions. In the above segment, there are 3 transaction sets.
• 03 – Number of Received Transaction Set. In the above segment, all the 3 Transaction Sets are received.
• 04 – Number of Accepted Transaction Set. In the above segment, only 2 Transaction Sets are accepted among 3.
• 05 – Functional Group Syntax Error Code.
• 06 – Functional Group Syntax Error Code.
• 07 – Functional Group Syntax Error Code.
• 08 – Functional Group Syntax Error Code.
• 09 – Functional Group Syntax Error Code.
• The AK1 and AK9 are paired and refer to the Group level.
• The AK2 and AK5 are paired and refer to the Transaction level.
• The AK3 and AK4 are not paired and refer to any errors received in the Transaction being acknowledged.

Order Types

There are several Types of Orders in EDI, StandAlone orders, Bulk orders, and Release orders are B2B orders as they may contain resellers.

• StandAlone Order (SA):- When anyone places an order, and it ships the given order. For Example:- Veena is placing an order at Amazon, then it is a StandAlone order.
• Bulk Order (BK):- When an order is placed in advance or bulk quantity. For Example:- On the occasion of Diwali reseller places an order to the manufacturer in advance telling the manufacturer the quantity of goods required of them.
• Release Order (RL):- This releases some quantity of order in reserved order. For Example:- If Aptronix (Reseller for Apple) placed a bulk order to Apple (Manufacturer or sender) and if Aptronix ordered some quantity of iPhones now, then this type of order is used to order some quantity of phones in bulk order.
• Drop-ship Order (DP/ D):- It is a Direct Customer Order. For Example:- Ordering a Realme phone from the Realme website directly. It doesn’t contain any 3rd person or reseller.
• SDQ Order:- It is used to place orders at once for multiple locations. For Example:- SQD order segment P01 contains Item Details such as, example: SDQ*001*10*002*8*003*13*004*2~

Consider the corelation between the following table, it states that for store 001, the No. of Quantities required are 10

• In CTT – This tells that while shipping, use the carrier mentioned in CTT. For example:- UPS.

PO (850) Segment

Following is the Structure breakdown of 850 i.e. Purhcase Order Segment

Hierarchical Level

1. HL ~ 1 ~ 0 ~ S
2. HL ~ 2 ~ 1 ~ O
3. HL ~ 3 ~ 2 ~ P
4. HL ~ 4 ~ 3 ~ I

• HL 01 - Sequence no of HL segment
• HL 02 - Parent HL sequence ID
• HL 03 - HL type (Packing type)

HL Structures

S - Shipment level

O - Order level

P - Pack/Carton level

I - Item Level

SOI Structure

• S - Shipment level
• O - Order level
• I - Item Level

SOTPI Structure

• S - Shipment level
• O - Order level
• T - Tare/Pallet level
• P - Pack/Carton level
• I - Item Level

Where ACK is Item acknowledgement

855:- In this only acknowledgement there rest is the same as 850.
ACK01 - Code

EDIFact

• UNH-UNT - Transaction Set
• UNH 01 - Type of Information (Eg: DESADV - Shipping Information)
• UNH 02 OR 03 - Version
• NAD Segment - Address Information
• UNG-UNE (optional) - Functional Group
• UNA&UNB-UNZ - Interchange: UNB holds the Sender and Receiver ID.
• In EDIFACT the BGM is unique all the time.

Customer Specifications

In customers’ specifications, we have some codes by looking at those we can consider. E.g. -  Cancel after, ship not before.

• 00 - Original
• 07 - Duplicate - To resend the order if we made any mistake in the original order.

• INVOICE Its beginning segment is BIG
• IT1 - Item Information includes prices, quantity, and discounts (same information in 850, 856) shipping numbers, payment terms

Bonus: Free EDI Basics PDF download

Conclusion

In conclusion, Electronic Data Interchange (EDI) is a process of exchanging information electronically between companies without using paper documents. It offers numerous benefits such as automation, efficiency, cost-effectiveness, and increased sales. EDI is widely used in supply chain management and e-commerce to handle transactions effectively.

EDI standards, such as ANSI X12 and EDIFACT, define the structure and format of electronic documents exchanged between trading partners, ensuring consistent and interpretable data. Communication modes like AS2, FTP, SFTP, HTTP, and HTTPS facilitate secure transmission of EDI documents.

EDI works by exchanging files between trading partners, where one party adds a file in FTP and the other party updates it with the required information. This communication occurs through ANSI-specified modes like FTP, ensuring real-time data exchange.

Different types of orders, such as Standalone, Bulk, Release, and Drop-ship orders, are commonly used in EDI. These orders enable efficient business-to-business (B2B) communication and data exchange.

EDI tools like Sterling Integrator, Seeburger, and Web methods are utilized for communication purposes. Enterprise Resource Planning (ERP) systems, such as SAP SD and SAP WMS, are also employed for backend operations and order management.

Overall, EDI streamlines business processes reduces manual intervention and enhances the efficiency of data exchange between trading partners. By leveraging EDI technology, businesses can achieve faster, more accurate, and secure transactions in the ever-evolving digital landscape.

Remember, EDI is a powerful tool that revolutionizes the way companies exchange information. Embrace this technology to unlock its full potential and stay ahead in the world of electronic data interchange.