EDI or Electronic Data Interchange is the computer to computer exchange of standard business documents, such as purchase orders and invoices, in electronic format that does not require manual intervention. A structured and standard file format is established for each kind of document in order to facilitate the exchange of data across a variety of platforms and programs. Business transactions are coded in a defined format and transmitted directly by electronic media between computer systems.
While the EDI requirements for each individual organization will vary, most organizations use the ANSI standard file formats for each document type. ANSI or American National Standards Institute is the organization which coordinates and acts as an clearing house for information in USA, including EDI. Outside of the USA, EDIFACT is the international EDI standard which is followed and developed under the United Nations. EDI makes the process of placing orders and entering receipts automatic and seamless, allowing for gains in efficiency at both the customer and the supplier side as in the figure
EDI was initiated in the late 1960s within the transportation industry for seamless transmission of data between the carrier and the shippers. By the late 1970’s it had expanded to the point that the American National Standards Institute adopted it as a national standard. The 1980’s saw exponential growth in commercial EDI implementations. EDI has been less successful in penetrating to small and medium enterprises for a variety of reasons including a complex set-up process and high initial investment on the infrastructure.
Value Added Networks (VAN) provides a secure electronic link between two or more trading partners using EDI. They usually offer a wide range of services to facilitate establishing and maintaining an EDI arrangement. A VAN can deal with any incompatibilities between partners such as media, code, or timing. The use of VANs permits each trading party to adapt to individual requirements and restrictions.
FEDI is the use of computers and telecommunications to exchange business data between a bank and its customers in a structured format that does not require manual intervention.
EDI standards are structured document formats for EDI documents that specify what information goes where within an EDI document. Organizations determine which EDI standard to use. When information is missing or in the wrong place, the EDI document might not be processed correctly. Over time, EDI standards are updated to reflect business needs and practices. The governing committee for each standard periodically reviews and revises the standard. There are two types of EDI standards
- Proprietary standard – EDI standard developed for a specific company or industry. This is also called a non-public or private standard.
- Public standard – EDI standard developed for use across one or more industries.
Common EDI Standards
Common North American EDI standards are
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International EDI Standards being followed are
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There are two main standards that are used extensively for EDI, ANSI ASC X12 and EDIFACT.
ANSI ASC X12
It defines the data structure and content for business transactions transmitted between computer applications. The data is grouped to represent all the information required for a particular business function, such as a purchase order. ASC X12 specifies business forms by defining standard data elements with dictionaries that specify name, length of data field, description, data type, and meaning. Full X12 standard consists of
- 3 Data element dictionary
- 5 Interchange structure-the envelope
- 6 Application control structure-the formal description of the EDI architecture
- 22 Directory of lists of related data elements like multiple lines of address
United Nations Rules for Electronic Data Interchange For Administration, Commerce and Transport (UN/EDIFACT) is a set of internationally agreed upon standards, directories and guidelines for the electronic interchange of structured data that relate, in particular, to trade in goods and services.
EDIFACT consists of data elements (a value), segments (a logical group of data elements), and messages (a collection of segments relating to a business function), and rules for combining them.
Each data element has attributes like
- coded tag or identifier(code dictionary)
- plain text description
- format (length and data type or class)
- year of insertion in Directory (previous issue in parenthesis)
The full standard consists of
- Data element directory (ISO 7372)
- Segment dictionary
- Message dictionary
- Syntax which defines a hierarchical structure with implicit data element identification, flexible length data structures and mandatory or conditional status of data elements and segments.
ANSI ASC X12 versus UN/EDIFACT
The two standards are similar. X12 has more, but smaller messages, with more single data elements. EDIFACT has fewer, but more comprehensive messages, with composite data elements. EDIFACT always uses the same begin message header.
X12 was developed in response to industry needs and put to practical use. EDIFACT emphasizes design and has been slow to achieve practical use. Recently, ASC X12 has agreed to develop standards based on EDIFACT principles. The US government has adopted the use of EDIFACT.
The X12 standard and its use are ahead of EDIFACT. As of 1994, EDIFACT had only 43 standard messages defined, and 14 messages in development. In 1992, there were 37,000 users of X12 in the United States, while only 1% of businesses in the United Kingdom used EDIFACT.