EDI HC 252

Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI) is the structured transmission of data between

organizations by electronic means. It is used to transfer electronic documents from one
computer system to another, that is, from one trading partner to another trading partner. It
is more than a mere e-mail; for instance, organizations might replace bills of lading and
even cheques with appropriate EDI messages. It also refers specifically to a family of
standards, including the X12 series.

However, EDI also exhibits its pre-Internet roots, and the standards tend to focus on
ASCII (American Standard Code for Information Interchange)-formatted single messages
rather than the whole sequence of conditions and exchanges that make up an inter-
organization business process.

EDI implies a sequence of messages between two parties, either of whom may serve as
an originator or a recipient. The formatted data representing the documents may be
transmitted from originator to recipient using telecommunications or may be physically
transported on electronic storage media.

Why Standardize?

There are almost as many business computer programs as there are businesses. In the early days,
each business had its own programs for tracking merchandise, ordering, invoicing, accounts
payable, receivable, and other business needs.

We soon realized that:

The computer programs of one business could not talk to those of another, which meant that all
data that was received would need to be re-entered.

The programs in one department of a business could not talk to those of another in the same
business— for instance, order entry could not talk to invoicing, which could not talk to accounts
receivable. Hence, the required data needed to be re-entered two, three, or more times.

The answer was to standardize the data that was read by a computer program so that the data
could be read by all programs with that standard.

What is a Standard?

A standard is a method of coding data to facilitate Electronic Data Interchange or EDI.

It provides:
 Rules of syntax
 Definition of the data organization
 Editing rules and conventions
 Published public documentation (that is., a Standards Manual)

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 EDI HC 252

The Standard contains specifications for:

 The segments that may be used in the transaction set
 The sequence in which the segments must appear
 The segments that are mandatory or optional
 Maximum use of repeating segments
 Loop structure and usage

Standards
EDI is considered to be a technical representation of a business conversation between two
entities, either internal or external. The EDI standards were designed to be independent of
communication and software technologies. EDI can be transmitted using any
methodology agreed to by the sender and recipient. This includes a variety of
technologies, including modem (both asynchronous and bisynchronous), FTP, e-mail,
HTTP, and value-added networks used to transmit EDI documents to transmitting using
the Internet.

EDI documents generally contain the same information 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,
which is 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 (for example, patient records and laboratory
results), transport (for example, container and modal information), engineering and
construction, and so on.

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