EDI 101 A Beginner’s Guide First Edition Published by David B. Mueller ©2009 David B. Mueller All rights reserved

Table of Contents
Introduction………………………………………………..……………………………..…………………….4 Chapter 1: EDI Defined…..……………………………………………….………………………………..5 What is EDI?..................................................................................................6 Translators………………………………………………………………………………….……………….6 Summary………………………………..…………………………………………………..……………….7 Chapter 2: EDI Document Structure.………………………..……………………..………………..8 Transaction References………………………………………..…………………..………………….9 Deciphering the Transaction…….…………………………………………….…………………….9 Identifiers, Separators, and Terminators…………………………………….………………..9 Segments……………………………………………………………………………………………………10 Elements…………………………………………………………………………………..……………....10 Composite Elements…………………………………………………………………………………..10 Control Envelopes………………………………………………………………………………………11 Interchange Control Envelope (ISA – IEA)……………………………………………………12 Group Control Envelope (GS – GE)………………………………………………………………12 Transaction Set Control Envelope (ST – SE)…………………………………………………13 Summary……………………………………………………………………………………………………13 Chapter 3: EDI Guidelines……………...……………………………………………………………….14 EDI Definitions Hierarchy………………………………....................………………………15 Entity Specific EDI Guidelines……….................…………………………………………..15 Transaction Segment Overview……………………………..................………………….15 Loops……………………………………………………………….................……………………….16 Transaction Overview Column Headings………..................………………………….16 Transaction Notes…………………………………………………..................…………………18 Segment Definitions……………………………………………………..................…………..18 Segment Definitions Heading………………………………….................…………….….18 Data Element Summary……………………………………………….................……………20 Segment Definitions Column Headings…………….................……………………….20 Segment Notes…………………………………..................……………………………………..21 Reading the EDI Segment…………………….................……………………………………21
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..........................……………………………………30 Chapter 5: EDI Implementation……...35 Timing Considerations………………...……………………………...……………..……………………………...............…26 Third Party Logistics (3PL) Model…………………........) EDI Mapping……………………….......………………..........27 Functional Acknowledgement (997)……………………………...) Chapter 3: EDI Guidelines (cont........34 Communication Protocols…………........……………………………………..……………............……………32 In-house Systems and VANs……...............22 Summary…………………………………….......................………………35 Summary……………………………………...........22 Chapter 4: EDI Business Models……...…………………..………………………………......…………………………32 Technical Considerations…………………………………………….......Table of Contents (cont.......24 Medical Billing Model…………………………………………………………….……….............……………...........………………........………………………………………………32 EDI Providers…………………………………………....……………29 Summary……………………………………………..…………………35 Hire an EDI Expert………….......................……………….....23 Retail Model…………………………………………………………….....…………………………....................…………………………………………..………………......……………………………............31 Cost Considerations……………………………………….....……………………………………………............………………36 2 .....

24 Figure 4-2 – Professional Health Care Claim EDI Business Model………….....................................10 Figure 2-4 – EDI Segment with Composite Element Separators.......………........…………………………...........34 3 ..........……............….......Table of Figures Figure 2-1 – Sample EDI Document (unwrapped)…………...33 Figure 5-2 – EDI Provider Document Flow Overview……………..9 Figure 2-3 – EDI Segment……………………………….........……....…28 Figure 5-1 – In-house EDI Document Flow Overview......………...……….11 Figure 2-6 – Characters translators use to learn to read the EDI Document…...…………...........................…….27 Figure 4-3 – 3PL Inventory Management EDI Business Model..........................11 Figure 2-5 – Sample EDI Control Envelopes....…12 Figure 3-1 – Sample Segment Usage Guidelines………….....…………………………...………………....17 Figure 3-2 – Sample Segment Detail Guidelines..….………....................…………………………....9 Figure 2-2 – Sample EDI Document (wrapped)….......………...…….......19 Figure 3-3 – PO1 Segment……………………….………..........20 Figure 4-1 – Manufacturer/Retailer EDI Business Model…….…………………...……………....……...........................

First. this eBook is designed as a basic book for beginners and we will only look at simple retail. Your insurance carriers require you to file your claims electronically due to HIPAA requirements. This probably left you asking: • • • “What is EDI?” “How do I implement EDI?” “Where do I begin?” This eBook is designed to help you get started. This eBook is the best place for everyone to start for all industries regardless of how far you intend to take you EDI training. we will discuss how to efficiently implement EDI into your business processes. In the electronic commerce fields (as this falls within) there are two related standards. EDIFACT is very similar to EDI but it is a standard used internationally whereas EDI is used only domestically within the United States (and sometimes in Canada and Mexico). Finally. we will explore what EDI actually is. Then. Someone who pays you will only do so if you invoice them or send claims to them via EDI. 4 . and transportation business examples. That is the goal of this eBook. This eBook will focus only on EDI. If you are required to be EDI enabled by one of your customers. medical provider. When you complete this eBook you will understand what your EDI experts are telling you and what your customers are asking of you. Your customer needs you to satisfy their EDI requirements for them. Although there are thousands of EDI documents designed for a large number of industries. we will go through several examples of how EDI is implemented in different industries. One is known as EDIFACT the other as EDI. it is important for you to be familiar with their program and requirements. Next. we will look at how an EDI document is structured and how to decipher it.Introduction IF you are reading this then you must fall into one of the following categories: • • • • Your retailer has required you to be EDI capable to receive their orders. not necessarily to turn you into an EDI expert.

Chapter 1: EDI Defined What is EDI? Where does it come from? What does it mean? Why does it exist? These questions and more will be answered in this chapter. We will look at the agencies that have defined what EDI is. We will also look at the reason EDI is used and how EDI translators accomplish this. 5 . We will define some of the terminology used to describe EDI.

This is accomplished using a piece of software known as a translator. such as accounting or order processing software. which is a far reaching law that includes a requirement to file health claims electronically using EDI technology. a federal law called the Health Insurance Portability and Accountability Act. simply use the ASC X12 standards and do not define their own.What is EDI? EDI is an acronym meaning Electronic Data Interchange. An EDI translator basically reads an EDI document and converts it into a format that can be used by the platform on which it is run. In the medical industry it is often referred to as ANSI or HIPAA. The industry standard groups further define the ASC X12 standards for usage within their specific industry. That means that someone can securely send a document from a Windows XP platform to someone who has a Linux platform. EDI translators are available from many different sources for many different platforms. 5030 and so on. The use of EDI in the medical industry has been legally required by HIPAA. This is why EDI is sometimes referred to as ANSI or ANSI ASC X12 or ASC X12 or just X12. such as VICS in the retail industry. The document usually contains data that can go into a database and be processed by other applications. All of this sounds complicated but it is not necessary to memorize this. Some Industries. ASC X12 defines all documents used within EDI and all of the data elements usable within each document. 5010. Translators An EDI transaction is basically a text file formatted using predefined standards designed to be readable and usable across any platform. ANSI is split into committees for each industry need. This is an organization that sets national standards for many different industries and is not limited to EDI. This version is used when specifying what type of document is required in a certain process. The committee that specifies EDI standards across all industries is known as ASC X12. such as the medical industry. EDI standards are defined by several voluntary industry specific groups. The highest level of these is called ANSI or the American National Standards Institute. it is just included for background and to explain some terminology used. or a Macintosh platform. Versions of EDI are usually numbered as such: 4010. The ANSI ASC X12 committee will occasionally modify the EDI requirements creating new versions. This is why EDI is sometimes referred to as HIPAA. Within ASC X12 there exist several industry standard groups. or even an IBM mainframe. 4030. Some 6 .

Summary EDI is a set of standards used to format a text file into a document that can be read by anybody. Third party translators tend to be less expensive but are more generic and require more initial setup and maintenance by an EDI expert to meet the specific business needs of the user. The significance of this is the ability to pass paperless transactions between business entities. This lends itself to making them more flexible for possible future needs. They also tend to be less flexible and scalable to future needs. Proprietary or self written translators tend to be more specific to the needs of the party that developed them. 7 . Where once it would take a week or more to post a paper Purchase Order it now takes minutes using EDI technology.companies write their own translator as part of a larger system or as a stand-alone product. greatly increasing the speed of business. regardless of their platform. There is no preferred way to do this and it is up to each individual company based on the resources they have available. using an EDI translator.

We will look at how the document is actually structured and what all of those symbols mean. almost as if it were written in a secret code. In this chapter we will begin to decipher that code.Chapter 2: EDI Document Structure When you view your first EDI document it looks pretty confusing. This is the first step in learning how to read an EDI document. To some extent this is true. 8 .

These are called separators. Figure 2-1 is an example of an unwrapped document and figure 2-2 is a wrapped document. Each row starts with a segment identifier. but if you look at it more closely you start to notice patterns. Each piece of data is called an element.Transaction References There are many types of transactions available to be used for almost any possible business process. Every line contains numbers and letters separated by tildes (~) and the line is ended with an asterisk (*). For example. In the case of the above examples the identifiers tell the translator what kind of 9 . EDI transactions are usually specified by a three digit number. Transactions are often referred to by their three digit document number but are also referred to by name. and so on. It is the separators that tell the translator where the data is delineated. the 850 transaction is a purchase order. An 810 transaction is an invoice. Deciphering the Transaction Figures 2-1 and 2-2 are examples of what an EDI document looks like. and Terminators The document is arranged into rows of data and in each row are many pieces of data. Separators. ISA~00~ ~00~ ~12~5557260541 ~12~5556288340 ~090408~2206~U~00401~600000198~0~P~:* GS~PO~15557844480~5557260541~20090408~2206~600000214~X~004010VICS* ST~850~002140001* BEG~07~RL~5075676~1~20081009* REF~DP~036* CSH~P4* ITD~05~2~0~~0~~30* DTM~037~20090413* DTM~001~20090418* PO1~~80~EA~5~~UP~999999999999~VA~XXXXXXXXX~CB~9999999~BO~001~IZ~33902* CTP~RS~RES~22* PID~F~08~~~TANK WITH LACE:BLK DOTBQT* PID~F~75~~~BLK DOTBQT* PID~F~91~~~SMALL* SAC~N~~VI~TC09~~~~~~~~~KOH3528AT* SDQ~EA~92~00810~8~00855~32~00860~24~00865~8~00885~8* CTT~1* SE~16~002140001* GE~1~600000214* IEA~1~600000198* Figure 2-1 – Sample EDI Document (unwrapped) ISA~00~ ~00~ ~12~5557260541 ~12~5556288340 ~090408~2206~U~00401~600000198~0~P~:*GS~PO~15557844480~5557260541~20090408~2206~600000214~X~004010VI CS*ST~850~002140001*BEG~07~RL~5075676~1~20081009*REF~DP~036*CSH~P4*ITD~05~2~0~~0~~30*DTM~037~200 90413*DTM~001~20090418*PO1~~80~EA~5~~UP~999999999999~VA~XXXXXXXXX~CB~9999999~BO~001~IZ~33902* CTP~RS~RES~22*PID~F~08~~~TANK WITH LACE:BLK DOTBQT*PID~F~75~~~BLK DOTBQT*PID~F~91~~~SMALL*SAC~N~~VI~TC09~~~~~~~~~KOH3528AT*SDQ~EA~92~00810~8~00855~32~00860~2 4~00865~8~00885~8*CTT~1*SE~93~002140001*GE~1~600000214*IEA~1~600000198* Figure 2-2 – Sample EDI Document (wrapped) Identifiers. Each row is called a segment. At first it looks like gibberish.

are the elements. We know it is the PO1 segment because the first element in this segment reads “PO1”. Occasionally you will see two separators together with no data between. so the last element with data will always be the last element in a segment. In an unwrapped document it is easy to see where the segment begins but in a wrapped document it is not. or sub. For example. The translator uses the tilde (~) to know where one piece data ends and the next one begins. but they count. In this case it is not used so it is blank.segment is being read. PO1~~80~EA~5~~UP~999999999999~VA~XXXXXXXXX~CB~9999999~BO~001~IZ~33902* Figure 2-3 – EDI Segment Every element in a segment is identified by its segment identifier and its position in the segment. This is called an element separator. 10 . Composite Elements In some cases a data element has several pieces of data associated with it. The data that would be between those would be the PO101 element. The actual symbols used as separators and terminators can be almost any symbol or punctuation character (also known as extended ASCII characters) and will be defined by the trading partners. This is because there is no data required or available in that spot. The translator knows that the first segment will always be ISA and the last will always be IEA (more on this later). This is because it is the second element in the segment. in this case the asterisk (*) on the prior line (see figure 2-1 or 2-2). Elements The data between each element separator. This is referred to as the PO1 segment. This is known as a composite. in this case the tildes (~). This means it is a single element that contains multiple pieces of data. Segments Let’s take a closer look at an EDI segment. the “80” in the segment example in figure 2-3 is called the PO102 element. Figure 2-4 is an example of an EDI segment that uses composite element separators. The segment identifier (in this case PO1) is not considered an element so you can tell there are 15 elements by counting the data or spaces between element separators. This requires the element to be broken down into composite elements. These are separated by what is known as a composite element separator. It contains 15 elements. You will notice that there are two tildes (~) next to each other right before the “80”. element. The asterisk (*) tells the translator where one segment ends and the next one begins. In either case it is the data immediately following the previous segment terminator. This is necessary because not all EDI documents are sent wrapped. In this case a colon (:) is being used. This is not done when the empty elements fall at the end of a segment. Figure 2-3 is an example of an EDI segment. which determines what type of data is being read. This is called a segment terminator.

The CLM0502 composite element is empty and the CLM0503 composite element contains a “1”. The “11” in the element is the CLM0501 composite element. Figure 2-5 shows an example of how the control envelopes work. otherwise called the Interchange Control Header. The Group Envelope commences with the GS segment. the last composite element is the last one with data. the Group. This starts with the ST segment. otherwise named the Functional Group Header. and the Transaction. called the Transaction Set Header. ISA~00~ ~00~ ~12~5557260541 ~12~5556288340 ~090408~2206~U~00401~600000198~0~P~:* GS~PO~15557844480~5557260541~20090408~2206~600000214~X~004010VICS* ST~850~002140001* | | SE~16~002140001* ST~850~002140002* | | SE~34~002140002* GE~2~600000214* GS~PC~15557844480~5557260541~20090408~2206~600000215~X~004010VICS* ST~860~002140003* | | SE~29~002140003* ST~860~002140004* | | SE~42~002140004* GE~2~600000215* IEA~2~600000198* Figure 2-5 – Sample EDI Control Envelopes 11 . If you look back at figure 2-1 you will see that the first segment is identified as ISA and the last segment is identified as IEA. These are known as control envelopes because they have a beginning and ending segment with other segments in between. appropriately named the Interchange Control Trailer. and terminates with the GE segment. There are 3 control envelopes that occur in an EDI transmission: the Interchange. The rules for identifying composite elements are the same as the rules for indentifying regular elements. The other segments have been replaced with two pipe (|) characters to simplify the example. The Interchange Envelope begins with the ISA segment. Control Envelopes There are certain segments that are always contained in every EDI document. and ends with the SE. These segments are known as a control envelope because every other segment falls within them. The same as with elements. called the Functional Group Trailer. This is terminated with the IEA segment.CLM~XXXX0000~67~~~11::1~Y~A~Y~Y~B* Figure 2-4 – EDI Segment with Composite Element Separators Let’s take a closer look at the CLM05 element (~11::1~) in figure 2-4. The lowest level envelope is the Transaction Envelope. the Transaction Set Trailer.

The GS segment does not have to be any specific length but must contain all of the data.Interchange Control Envelope (ISA – IEA) An EDI transmission can contain many EDI documents. If it does not see these first it doesn’t see the document as an EDI document. versions. if it is the last group. Directly after the ISA it looks at whatever symbol is in the fourth position and reads this as the element separator. The GS segment mainly consists of trading partner addresses. it will be followed by IEA segment. In our example it is a tilde (~) but this is something that is set by the trading partnership and can be almost any extended character. or the GS envelope. Group Control Envelope (GS – GE) Within the ISA envelope is the group envelope. There is only one occurrence of each in any EDI transmission. There can be multiple group envelopes within the ISA envelope. When it gets to the 105th character (:) it sees that as the composite element separator. 12 . Transactions are grouped together by type. It is important to note that the IEA segment will contain the same control number as the ISA segment so the translator can match them up. The very first characters that an EDI translator looks for in an EDI transmission are “ISA”. or PO’s. so the ISA is always the first segment in the transmission and the IEA is always the last segment. document type info and control numbers. The GE segment shows the end of the specific group envelope and is matched by the same control number. will be in the same group with no other types of transactions mixed within (refer to figure 2-5). The Interchange envelope contains the entire transmission. The control envelopes are used to group and arrange these documents. The ISA segment contains control numbers and trading partner addresses and dates and EDI versions etc. dates. After the GE another group may start or. The GS01 element states what type of transactions will exist within the group. The ISA is a special segment in the sense that is always must contain 106 characters. Different translators handle this differently but most advance to the next document (or transmission) and attempt to read it. This is because translators use this segment to figure out how to read the transmission. This is explained further in the advanced EDI eBooks. ISA ~00~ ~00~ ~12~5557260541 ~12~5556288340 ~090408~2206~U~00401~600000198~0~P~ Figure 2-6 – Characters translators use to learn to read the EDI document :* The ISA envelope encompasses the entire transaction between the ISA segment and the IEA segment. These characters are highlighted in figure 2-6. In this way it knows how to read the rest of the transmission. The 106th character (*) is then the segment separator. All purchase orders.

Each segment is composed of elements which use element separators to separate one element from the next and to position them properly within their segment. Summary An EDI document is broken into segments which are indentified by their segment identifiers. if there were a purchase order and a ship notice contained within the same interchange there would be two Group Control Envelopes within that Interchange Control Envelope. etc. The ISA segment is used to tell the translator how to read the transmission and identifies the sender and the receiver. This envelope contains the actual transaction (810. There can be multiple transaction set envelopes within each group envelope (refer to figure 2-5). There can be many groups within the interchange. These start with the GS segment and end with the GE segment. After the SE segment there can be another ST. The IEA segment terminates the transmission. Within each Group Control Envelope are the Transaction Set Control Envelopes. etc). There can be multiple transaction sets within each group. These use composite element separators (also known as sub element separators) to distinguish between each composite element and place it in its proper position within the element. There will be a group for each transaction type contained within the transmission. If there were two purchase orders in the above example there would be two Transaction Control Set Envelopes within that Group Control Envelope. Some elements contain multiple pieces of data and these are called composite elements. 850. In figure 2-5 these are represented by pipe characters (|) as this section only deals with the envelopes themselves. The ST01 will contain the 3 digit EDI transaction code (850 for purchase order. 13 . The segment terminator is used to delineate one segment from another. The entire transmission is wrapped by an Interchange Control Envelope which begins with an ISA segment and ends with and IEA segment. 856. It starts with the ST segment and is ended by the SE segment. ISA. Within the Interchange Control Envelope are the Group Control Envelopes which are used to sort the transactions within the transmission by document type. There is one envelope for every transaction. depending on how many of that type of transaction is sent within the interchange. such as PO1. All of the segments between these two segments constitute the actual transaction itself. etc). beginning a new transaction or if it is the last within the group it will be followed by that group’s GE segment.Transaction Set Control Envelope (ST – SE) Within the group envelope is the transaction set envelope. The control numbers in the ST and SE will match up. In the next chapter we will discuss how to read the actual data using the EDI guidelines to decipher the transactions. For example. These start with the ST segment and end with the SE segment.

but they are all the same thing. They define which segments will be in a document. and which elements will be inside of each segment. We can see that there is a pattern to how they appear but we still need to be able to define what each piece of data means and what its purpose is.Chapter 3: EDI Guidelines Just knowing how EDI documents and transmissions are formatted doesn’t tell us what they are saying. Sometimes they are referred to as implementation guides. 14 . sometimes EDI map guides. This is what EDI guidelines are for. sometimes retailer or trading partner guidelines. how the segments can loop inside of the document.

a detail and a summary section. and elements of data are defined for all industries. VICS has started with the ANSI ASC X12 guidelines and narrowed the definitions down to what is appropriate in the industry they serve. data type. those agreeing to utilize EDI in their business processes are known as trading partners. segments. Definitions at this level tend to be less restrictive as this is the highest level that all other EDI definitions fall within. but they will all normally fall within industry standards. The guideline will also show which segments and elements the retailer wishes used within the transaction. segments and elements that will be used within the industry they represent. This includes. There are several industry specific groups that fall under the ANSI ASC X12 group. The top level is ANSI ASC X12.EDI Definitions Hierarchy First. A major retailer may decide to purchase products from a certain manufacturer and ask that all of their business is conducted via EDI. The agency that deals with the retail industry is known as VICS (The Voluntary Interindustry Commerce Solutions Association). Typical retailer guidelines will explain how the transaction is to be used and give you an overview of their entire EDI program. such as size. all of the possible transactions. Entity Specific EDI Guidelines Different retailers may implement their own EDI rules in seemingly vastly different ways. the EDI business rules must first be agreed upon. Figure 3-1 shows an example of this. In any specific industry. VICS has selected the transactions. Transaction Segment Overview Normally EDI guidelines will start with an overview of the segments used within the transactions. At this level. This is a very simplified example of EDI business flow. but is not limited to. Let’s look at the retail industry. let’s take a look at where the guidelines come from. In this example you see the document is split into a header. 15 . such as retail. The purpose of this is to show how the transaction will be structured. This is also where more detailed definitions are made in each area. It is determined which segments can go in any given transaction and which elements can go into any given segment and which composite elements can go into any given element. all of the EDI rules. etc. In order to accomplish an EDI business relationship. In the retail industry. VICS has created a set of guidelines for each transaction. Earlier we went over all of the agencies that define EDI. normally the retailer (who is the customer) will require the manufacturers and distributers they purchase from to be compliant with the procedures they set up. These guidelines will generally fall within those of their industry (in this case VICS) and will always fall within the ANSI ASC X12 standards. The retailer will want to send EDI purchase orders to the manufacturer and want the manufacturer to send EDI ship notices and invoices back when the product is shipped. The retailer will supply their own version of the EDI guidelines they want followed.

two REF segments. and there is an N9 loop which can occur up to 1. Transaction Overview Column Headings Let’s look at some of the other columns in figure 3-1. If you look under “Loop Repeat” you see it can be repeated 100. At this point it is okay not to know what all of the segments mean since the purpose of this is to demonstrate how the EDI guidelines define the transaction structure. Remember. containing an N9 segment and an MSG segment.000 times.The header section contains an ST segment. a SAC loop containing a SAC segment. each entity will show whatever amount of detail they feel is appropriate. there can be 100.000 PO1 segments they could be followed by several CTP and CUR segments followed by up to 1. 16 .000 times. two DTM segments. This loop starts with a PO1 segment. though. containing a CTP segment and a CUR segment. Loops What are loops? Loops are segments that can be repeated either singularly or in groups. but not always.000 PO1 segments in the EDI transaction. which contains a PO1 segment. The detail section contains a PO1 loop. and finally an N1 loop containing an N1 segment. The summary section contains a CTT loop with a CTT segment and ends with an SE segment. There could be up to 100. Most of the time you will see all of the data included in figure 3-1 in an entity’s guidelines. This segment can only occur once in each loop. which can occur more than once.000 MSG segments each. a CUR segment. There is a CTP loop. This means that for every one of the possible 100. however.000 loops like this. We will explore all of these specific segments in the advanced EDI eBooks. Within the CTP loop is a CTP segment (which begins this loop) and a CUR segment.000 loops of this so you may see up to 100. and an N9 loop. In figure 3-1 we have a PO1 loop. Loops have also been defined at the ANSI ASC X12 level and redefined all the way down through each agency. Sometimes you only get a table of contents showing where each segment is defined. Loops can exist within loops as well.000 N9 and up to 1. In this case there are two other loops within the PO1 loop. a BEG segment. Each one will be followed by the other data in the loop. In fact. Within the N9 loop is an N9 segment (which begins this loop) followed by an MSG segment. Also contained within the PO1 loop is a CTP loop.

or Charge Information Date/Time Reference Date/Time Reference LOOP ID . M M O O O Max.SAC Used Used Used 120 150 155 SAC DTM DTM Service.N1 Used 310 N1 Name O 1 O O O 1 10 10 200 Req. M 010 Seg.Use 1 >1 Loop Repeat 100000 Notes and Comments n1 Summary: Pos. Allowance. 2.Use 1 1 Loop Repeat 1 n2 Notes and Comments Transaction Set Notes 1. If used. O M Max. Des. 010 020 040 050 055 Seg.CTT Transaction Totals Transaction Set Trailer Req. No. No.N9 Used Used 330 340 N9 MSG Reference Identification Message Text O O 1 1000 O O 1 1 1000 Req. PO102 is required. Des. hash total (CTT02) is the sum of the value of quantities ordered (PO102) for each PO1 segment. M Max. ID CTT SE Name LOOP ID . ID ST BEG CUR REF REF Name Transaction Set Header Beginning Segment for Purchase Order Currency Reference Identification Reference Identification LOOP ID . No. ID PO1 Name LOOP ID . The number of line items (CTT01) is the accumulation of the number of PO1 segments.CTP Used Used 040 043 CTP CUR Pricing Information Currency LOOP ID . Used M 010 030 Seg. Promotion. Figure 3-1 – Sample Segment Usage Guidelines 17 .Heading: M M Used Used Used Pos.PO1 Baseline Item Data LOOP ID .Use 1 1 1 >1 >1 25 Loop Repeat Notes and Comments Detail: Pos. Des.

The “Seg ID” heading means segment ID and gives the EDI segment identifier.000” means up to 1. If a segment is designated as mandatory it must be used at least once. These notes are generally repeated on the page that contains the segments detailed definition. in this case by VICS standards. The “Max Use” heading tells us how many times each individual segment can be used. Figure 3-2 shows an example of this with the PO1 segment. Segment Definitions Heading In figure 3-2 let’s first look at the heading information. No. A greater than sign means it can be used that many times or more (“>1” means 1 or more times. We will go between these two figures to explain how the guidelines define the segment. This designates how this particular retailer wishes the segment to be used. In figure 3-1 the designation “n1” and “n2” refer you to note #1 and #2 at the bottom of the page. Figure 3-3 shows the actual PO1 segment that is being referred to. the designation refers to its usage within that loop. This is a programmer’s reference and shows the segment’s relative position within that section of the transaction. Next you see the “Pos. If a segment is within a loop. The “Req. The segment definition portion of the guidelines will be more specific on the usage requirement. or loop name as appropriate. Des. Transaction Notes There are also usually general notes that the entity includes in this section to alert you to any special needs or requirements that exist. The loop information sates that this is the PO1 loop. A number means this can be used “up to” this many times. It tells us that this is for the PO1 segment and this is the “Baseline Item Data” or line item. The “Name” heading shows the segment name.000 occurrences of this loop within the transaction. Segment Definitions Generally there is a section for each included segment that defines all of the elements used within that segment and what the data should contain. 18 .” heading. It also tells us that this is the detail level of the transaction. “M” means the segment’s usage is mandatory and “Used” indicates that the retailer uses the segments.You will notice down the left hand side of the page there is an untitled column containing an “M” or “Used” designation.000 times). “1.” heading tells us the usage requirement for that segment. “M” means mandatory and “O” means optional. its usage is mandatory and there can be up to 100.

Figure 3-2 – Sample Segment Detail Guidelines 19 . If the Product/Service ID field contains CB . Component item details will be sent in the PO1/SLN loop. These codes can occur in any pairing of Product/Service ID and Qualifier from PO106 through PO121. If $29. When PO103=AS then PO106 UP is an Entity’s assigned prepack UPC and CB is Entity’s SKU # (CB*9998877). Price in the PO104 will be sent with a decimal point when there are cents included in the cost. Example: If $15. send as “15.Segment: PO1 – Baseline Item Data Level: Detail Loop: PO1 Usage: Mandatory Entity’s Usage: Mandatory Max Use: 1 Purpose: To specify basic and most frequently used line item data. An AS in PO103 represents an assortment pack. PO104 will contain the Pack cost when PO103 has AS.00. major class and sub class. then the Product/Service ID Qualifier contains Entity’s department. example: CB*9998877. send as ‘29” with no decimal point. ---. SLN09 loop will then contain the vendor style for the items.Data Element Summary ---Ref. When PO103 is AS then PO106 VA is the pack style.95. PO102 330 PO103 355 Max Use: 100000 PO104 PO106 212 235 PO107 PO108 PO109 PO110 PO111 PO112 PO113 PO114 PO115 PO116 PO117 PO118 PO119 PO120 PO121 234 235 234 235 234 235 234 235 234 235 234 235 234 235 234 VICS Attributes Name Quantity Ordered C R 1/15 Unit or Basis for Measurement Code O ID 2/2 EA Each AS Assortment (multi-item pack) Unit Price (Cost) C R 1/17 Product / Service ID Qualifier C ID 2/2 UP UPC Code – Universal Product Code EN EAN – European Article Number VA Vendor’s Style Number CB Buyer’s Catalog Number BO Buyer’s Color (NRF) IZ Buyer’s Size (NRF) IN Box ID (for shoe orders only) TP Product Type Code (Gender Classification Code – for shoe orders only) Product / Service ID C AN 1/48 Product / Service ID Qualifier C ID 2/2 Product / Service ID C AN 1/48 Product / Service ID Qualifier C ID 2/2 Product / Service ID C AN 1/48 Product / Service ID Qualifier C ID 2/2 Product / Service ID C AN 1/48 Product / Service ID Qualifier C ID 2/2 Product / Service ID C AN 1/48 Product / Service ID Qualifier C ID 2/2 Product / Service ID C AN 1/48 Product / Service ID Qualifier C ID 2/2 Product / Service ID C AN 1/48 Product / Service ID Qualifier C ID 2/2 Product / Service ID C AN 1/48 Notes: • • • • • • • Entity can send any number of the codes listed for PO106 depending on the information in the Entity’s system. SLN09 loop will then contain trading partner’s component item UPC’s. Data Element Des.95”. This information should be used in preticketing.

It is normally formatted “minimum size/maximum size”. This section is arranged in columns which describe individual details about each data element. Conditional refers to an element that is only used under certain conditions. PO102. This is placed here for reference purposes only. they each will constitute their own PO1 loop. First is the requirement code. The last heading we see is called “VICS attributes”. Let’s take a look at each column and discuss what they are. “Data Element” is the next heading and this refers to an index number that is assigned to this element within the ASC X12 definitions. The last attribute is the data size. The next attribute is the data type. The terms optional and mandatory are self descriptive. There are many more types of data that can be defined. “R” means the data is some form or number. This defines the element itself in detail but it is usually not necessary to look this up as the definition within the guidelines is sufficient to understand the element. These describe how the data is formatted. “DT” means the data is a date.” which is the reference designation of the segment (i. Des. “ID” means the data is some type of identifier. “O” means optional. Segment Definitions Column Headings Looking at figure 3-2. PO103. “1/15” means it can be 1 to 15 characters long.000 times within this transaction there can be 100. you must use it. This gives us the name of the segment. “2/2” means it must be two characters in length. “AN” means the data is a text type. “C” means conditional and “M” means mandatory. Note that here it says the max.PO1~~80~EA~5~~UP~999999999999~VA~XXXXXXXXX~CB~9999999~BO~001~IZ~33902* Figure 3-3 – PO1 Segment Below the loop information you will see where it says “Entity’s Usage”. It is also used to give the entity’s valid values for this element and what they are (note the writing in bold under this heading). etc. The “Purpose” indentifies what this segment is and why it is used. The next heading we encounter is “Name”. This states that our retailer deems this segment within the PO1 loop to be mandatory. use is 1. we see the first heading is “Ref.e. These are VICS attributes and may differ from the entity’s requirement. This means that this segment may be only used once within the loop. Since the loop can be used 100.000 PO1 segments in the transaction. 20 . In our example the name of the actual retailer is replaced by the term “entity”. Data Element Summary Looking at the section under “Data Element Summary” in figure 3-2 we see the detailed information for each element within the segment.).

The first note states that these elements can be used as much as necessary to describe the product. PO101 is blank. as per the fifth note. 80 items have been ordered that are $5. As you can see in figure 3-2 there is no definition for PO101 so that means this element is not used. has a value of “5”. By VICS and ASC X12 standards it may be optional to use this element but since the entity states that you can either have “EA” or “AS” as a value to this field we know that there MUST be data here.Segment Notes The last part of the segment definition is the notes. a qualifier describes what the data in its following element represents. Figure 3-3 has “EA” as the value so we know that there are 80 eaches. or individual units. PO106 is “UP” so the “999999999999” in PO107 is a UPC code. Looking back at figure 3-3 we see the next element. In figure 3-2 we see that this element is defined as the unit price and it is numeric and can be from 1 to 17 characters long. This field indentifies the value in PO102 as to what kind of quantity it is referring to. which is why you must obtain the guidelines for the entity you are doing business with. Looking at the entities acceptable values for this field describes what the data in PO107 is. We see it is conditional and that it is a number and that it can be between 1 to 15 characters long. Looking at the guidelines in figure 3-2 we see that this element is “Quantity ordered”. Therefore. in figure 3-2. The notes are very important to understanding the data in the segment. PO104. PO110 and PO111 describe a buyer’s catalog number of 21 . we see that PO108 and PO109 describes a vendor’s style number as “XXXXXXXX”. so it is effectively mandatory by the entity’s standard.00 each. In the case of figure 3-3. We also see that this is an ID field that is optional and must be 2 characters long if used. Therefore. Some guidelines may define it and then say “NOT USED” to signify that it is not used. Figure 3-2 shows PO103 as the “unit of measure” and it goes on to state that valid values are either “EA” for each or “AS” for assortment. For example. Some entities may use this element. Normally. the fifth note about how the price will be formatted helps you understand when to use a decimal point and when not to. In figure 3-3. The notes are used to more clearly define any aspect of the segment data that the entity feels may require further explanation. Looking at figure 3-2 we see that PO108 to PO121 are further instances of the same pairing as PO106 and PO107. if PO106 has a value of “UP” then the value in PO107 is the UPC code. PO102 has a value of “80”. so let’s look at the next two elements together. Figure 3-2 reveals that PO106 is a 2 digit Product/Service ID qualifier. the quantity of this line item is 80. Figure 3-2 shows that PO105 is not used and figure 3-3 has it blank. In the case of figure 3-3. As an example. In figure 3-3 the first element. Reading the EDI Segment Now let’s look at figure 3-3 and compare it with figure 3-2 to understand what the data means.

the PO would be mapped to some application and when the PO is filled and shipped the data can be used to create a ship notice. This is called EDI mapping. Summary The guidelines define the entire EDI transaction. EDI mapping is the process of taking the data from your EDI documents and putting them into a format that your production accounting and shipping programs can read. 22 . They also describe how to implement the transaction within the business process. PO114 and PO115 describe a buyer’s size (NRF) of “33902”. Finally. If you were to use the example data from this chapter. you can then map them into your production systems. All of these pairs are conditional because one is only required to be there if the other exists. In the next chapter we will review several models of how EDI is used in different industries and show simple examples of their transaction flows and what they represent. An EDI programmer or analyst uses the guidelines to create a map that will take the data from the EDI transaction and puts it into some usable format that can be processed. This is mainly a higher level function that your EDI expert or programmer will perform.00 each”. and maybe even shipping labels. EDI Mapping Once you know how to read the EDI documents. The EDI programmer or analyst will also use the guidelines to map data from an application to create an EDI document that goes out to the trading partner. Therefore the segment reads: “80 items that are UPC 999999999999 which is also vendors style XXXXXXXX and is also buyer’s catalog number 9999999 and is NRF color 001 and NRF size 33902 and cost $5.“9999999”. It is also the process of taking data from your applications and creating EDI documents with them. This is how your translator “talks” to your systems. an invoice. PO112 and PO113 describe a buyer’s color (NRF) of “001”.

23 . The more advanced eBooks look in detail at EDI usage in each specific industry. This will give us a better understanding of how EDI is used in a real business environment and will help us understand how to best implement the process. We will look at a simple manufacturer to retailer trading partnership. All of these examples are very simplified. The scope of this beginner’s eBook is just to give examples of EDI usage in a real world environment.Chapter 4: EDI Business Models In this section we will look at three different business models in which EDI is used. Finally we will look at a third party logistics company doing inventory maintenance and shipping for a manufacturer. We will also look at a small medical office billing insurance companies.

TUV Inc. physical descriptions and other product information for each UPC. who is an online UPC catalog provider. XYZCO has mandated the use of EDI.Retail Model First let’s look at a manufacturer retailer trading partnership. Online UPC Catalog provider 832 UPC Proprietary ABC Mfg. must be able to accept various documents and must also maintain a UPC catalog online with TUV Inc. size. sending an 832 EDI document to TUV Inc. Manufacturer 850 PO 856 ASN 810 INV XYZCO Retailer Figure 4-1 – Manufacturer/Retailer EDI Business Model In figure 4-1 we see that the first part of this simplified model is ABC Mfg. but not through the 832 document. The 832 is known as a “Price Sales Catalog”. as the retailer. This means ABC Mfg. Pictures can also be uploaded to most catalogs. It is also used to maintain color. doing business as the manufacturer with XYZCO. This is the document used in EDI to maintain one’s UPC catalog. There are many providers who maintain online UPC catalogs and generally the retailer will specify which catalog a manufacturer’s UPC catalog must be kept on. price. Figure 4-1 shows us ABC Mfg. This document specifies UPC codes for each product. 24 .

At this point. For this reason. the carton label is scanned and the carton number is used to identify which store the container should be routed to and exactly what has been received. Under each container is listed exactly what is packed within that container. the manufacturer sends the 856 ASN to the retailer. Under each store there are the containers listed which are packed for that store. ASN data is fed into the retailer’s systems. Most retailers have their own requirements on how this label must be formatted and they provide the manufacturers with this information along with the EDI guidelines. it is normally required that the ASN reach the retailer’s system prior to the goods arriving at the DC. When the containers reach the DC. Different retailers and catalog providers use different programs and this connectivity is not usually done via EDI documents. The ASN is routed to the DC and contain information for all the stores within the shipment. Usually there is one ASN per distribution center required. This label will contain a serialized. unique carton number. This automates the routing and inventory systems at the retailer’s DC. The only reason we are mentioning it here is because the next document. The manufacturer will pack everything by store and ship everything by DC. the 856 advanced ship notice (ASN). Once ABC Mfg. A retailer’s buyers normally use a program that allows them to view their manufacturer’s UPC catalog and to create orders based on their selections. is normally integrated with this label through the carton number. between TUV Inc (the online UPC catalog provider) and XYZCO (the retailer) labeled as proprietary. but it is used to create the EDI Purchase Order. This document normally tells the manufacturer what the retailer wishes to purchase. In figure 4-1 we see XYZCO next sends an 850 Purchase Order (PO) to ABC Mfg. which stores to pack each item/quantity for.You will notice that there is a connection. In most cases manufacturers will be required to place a carton packing label on each carton or pallet or bag they are shipping. the quantity of each item. We will go into more detail about these labels in the advanced EDI eBooks for the retail industry. the invoice and the ASN are usually created and sent together. Invoices can be split into one invoice per store or one consolidated invoice per shipment (or DC). 25 . the manufacturer also sends the 810 Invoice (INV). The retailer will pay the manufacturer based on the agreed upon terms once they have received the 810 into their system. based on their selections from the UPC catalog. In fact. Immediately upon shipping.. they use this data to manufacture and pack their goods for shipment. receives the 850 PO. and when they must be shipped. The invoice is the bill to the retailer. which distribution centers (DC) to ship goods for each store to. indexed by the carton numbers on the carton labels. in our model.

Figure 4-2 shows this model from the perspective of a provider billing multiple payers on a weekly billing cycle. and payers. Normally. The payer will normally send each provider an 835 outlining what they will be paying and how much they will pay for each procedure. providers. 26 . there is the provider loop which contains the provider information. Figure 4-2 shows a basic EDI flow for this business model. The 837 is a very complex document and can contain billing for multiple patients and multiple providers for a single payer.The manufacturer/retailer EDI model displayed in figure 4-1 is a greatly simplified version and only includes the basic elements. The institutional version is used by hospitals and other institutions. The 837 is arranged in loops. The main EDI documents used in this process are the 837 Health Care Claim and the 835 Health Care Claim Payment/Advice. 837’s are normally sent one to each payer from each office for each billing period. creating bills for each payer containing all the procedures performed by all the providers on all the patients for that payer in that time period. Each provider normally deals with multiple payers. This will be covered more completely in the advanced editions of the EDI eBooks. Each payer has their own payment cycle and sends the 835 based on this cycle. Medical Billing Model Another good example of an EDI business model is within the medical industry. The patient is the party receiving the medical treatment. The patient and the payer can be the same party. There are also 837 versions for dental providers and for medical equipment and devices (such as prosthetics or oxygen machines). There is the header loop which contains the billing provider information and the payer information. There is a professional version of the 837 and an institutional version. the provider is the party providing the medical treatment. They will usually do their billing on a daily or weekly basis. Generally the medical industry is split into three main categories: patients. The loops are hierarchal in nature. These loops are referred to by number when referencing the EDI document. but generally the payer is one or more insurance companies who pay for the patient’s medical expenses. and finally there is the subscriber/patient loop which contains the insurance subscriber and patient information. Typically. The professional version is typically used by private providers and groups. a provider’s office includes several medical providers that see multiple patients in any given period. there is the detail loop which contains the procedure and diagnosis information. This is an ongoing process based on the provider’s and payer’s billing and payment cycles. The provider typically bills the payer for services rendered to the patient. the payer is the party who pays for the medical treatment. other supplementary documents are used in conjunction with these main documents.

there is a shipping phase where the 3PL will ship goods for their customer. In this model ABC Mfg. This includes shipping to their retailers. Next. packing. First. such as claim status and insurance verification documents. On the other side. and reporting requirements. The 3PL model can be said to be a 3 phase process. there is an inventory management phase where the 3PL manages the inventory for their customer. This also requires the 3PL to manage the inventory levels for ABC Mfg. Figure 4-3 shows an example of how this business model works with its EDI flow. Finally. Third Party Logistics (3PL) Model Finally let’s look at a typical Third Party Logistics Company (3PL) inventory management model. ABC Mfg. ABC Mfg needs to ensure that DEF Logistics has the necessary goods in stock to fulfill their orders. this is a simplified version of the health care claim business model and there are other supplementary documents that can be used as well as these main documents. which includes all of the labeling. so 27 . however. they have DEF Logistics holding and shipping their inventory. there is the receiving phase in which the 3PL receives goods from their customer.Weekly Billing ABC Medical Group 837 CLAIM 835 ADVICE Payer 1 837 CLAIM 835 ADVICE Payer 2 837 CLAIM 835 ADVICE Payer 3 837 CLAIM 835 ADVICE Payer 4 Figure 4-2 – Professional Health Care Claim EDI Business Model As in the previous example. hires DEF Logistics to hold and manage their inventory. works the same way as in figure 4-1 when dealing with their retailer.

This is a very straightforward document but the 3PL uses it to update their inventory and ABC Mfg. When DEF Logistics receives the goods itemized in the ASN they send a 944 Warehouse Stock Transfer Receipt Advice (or just “receipt” for short). The only difference is that the 943 is more of a shipment summary. This is very similar to an ASN in that it lists all carton numbers and itemizes the packing. Either document can be used. ABC Mfg. 3PL Receiving 940 Order 850 PO 856 ASN 945 Ship Advice 810 INV XYZCO Retailer 3PL Shipping 944 Shipping Receipt 947 Inventory Adjustment 846 Inventory Advice 3PL Inventory Figure 4-3 – 3PL Inventory Management EDI Business Model Once the shipment is packed and ready to ship. uses it to update their inventory as well. The 3PL then prepares the shipment based on the 940. they need to make sure that this is shipped to DEF Logistics in enough time to fulfill the order. When ABC is expecting an order from XYZCO or one of their other retailers and they determine that DEF Logistics isn’t holding enough inventory. This is necessary because the 28 . the 3PL ships the goods to the retailer and sends a 945 Warehouse Shipping Advice (or just ship advice for short) to ABC Mfg. DEF Logistics 3PL 856 ASN or 943 Ship Advice ABC Mfg. The 940 tells the 3PL what and when they should ship and to which retailer store and DC. on exactly what was sent to the retailer. receives an 850 Purchase Order (PO) from their retailer they send a 940 Warehouse Shipping Order (or just “order” for short) to the 3PL. Typically. showing only how many of each item was shipped and an 856 gives packing level detail. much like a PO. This document advises ABC Mfg.they always need to be aware of the inventory. will send a 943 Warehouse Stock Transfer Shipment Advice or an 856 Advanced Shipment Notice (ASN) to DEF Logistics itemizing what is being sent to them. When ABC Mfg.

When you receive a 997 it means that your document was received. This document is used when it is determined that the inventory held by the 3PL does not match what the manufacturer thinks they should have. The 3PL could make a mistake on a 944 or ship something incorrectly. The 846 Inventory Advice is used either in a predetermined cycle (i. as long as the EDI is correct the 997 will accept it. the 947 is designed to send corrections with reasons from the 3PL to the manufacturer. The manufacturer could ship the wrong thing to the 3PL or items could be damaged and therefore unsellable. which also updates inventory in both places. There are many ways this could happen.e. or when the manufacturer requests one. as with all of the models we have discussed here. Although the 3PL sends the 944 whenever they are in receipt of goods.manufacturer will use this document to create its own 856 ASN and 810 INV to send to the retailer. When you receive a document your translator should send a 997. Usually this is a feature that is automated within a translator. this is a simplified view of the 3PL inventory management model and there are many additional transactions that could be used here. The accounting department of your trading partner will probably reject the invoice. monthly or weekly). Functional Acknowledgement (997) The 997 Functional Acknowledgement (FA or ACK for short) is one subject we haven’t mentioned that you will see in every EDI scenario from the beginning. Translators normally check for proper EDI syntax of a document so a 997 could say that a document was received but it was either rejected. This is a general document used in almost 29 . It is very important for the manufacturer to always be aware of the inventory levels at the 3PL. This document is simply an inventory report that reflects the entire inventory held by the 3PL for the manufacturer. The 997 will reference the envelope control numbers of the document it is acknowledging. there is always the possibility of error. At this level only the EDI syntax has been checked so you could have a 997 say a document was accepted but the document could still be rejected as being in error by your trading partner. and the 3PL sends a 945 when they ship goods. Of course. For example. Anytime any EDI document is sent a 997 is generated and sent back. if you have the wrong prices on an invoice. Sometimes the 864 Message Transaction Set is used. In this case you could receive another type of EDI document or even a call from your trading partner. For this reason two more documents are used. In any event. or accepted. in error. The other document is a 947 Inventory Adjustment. and this should update the inventory in both places.

30 . and third party logistics. service interruptions. the marine industry. EDI is also used heavily in the automotive industry. medical billing. just to name a few. business closed dates. The 864 could be used to announce store openings or closings. errors in EDI documents. and the like. The purpose of this eBook is just to give you a basic understanding of how to apply EDI in a business environment. and the construction industry.every industry to send general messages out. Summary We just reviewed only three types of EDI business models: retail. There are more EDI business models than what we have described here. address changes.

The cost and capabilities vary greatly as well. and how it is used we need to understand how to implement our own EDI system.Chapter 5: EDI Implementation Now that we have a good understanding of what EDI is. how it is defined. The range of possible implementations goes from simple third party providers to completely customized in-house systems. 31 . There are many ways to implement EDI into your business.

or anyone who is requiring you to do EDI with them has a VAN they subscribe to. you also need to consider the technical requirements you will need to fulfill. if you do not have many customers that require you to use EDI you may be able to get by with using an online service. Trading Partner 1 has its own VAN that is not one of ABC Company’s VANs. In-house Systems and VANs Figure 5-1 displays ABC Company’s trading partnerships. or Value Added Networks. Technical Considerations In deciding how to proceed with implementing your EDI system. or in time to do it yourself. You will want to set up your system as an “in-house” system and create programs. then you will want to invest in a system that has a high level of automation. In figure 5-1 let’s look at the connection between ABC Company and Trading Partner 1. ABC Company has four trading partners. A VAN is sort of like an EDI mailbox provider. ABC also has two VANs. You can get data files but it usually requires human intervention to download them and enter them into your accounting systems. Also you will usually have to pay some sort of subscription charge for the online service. The first thing you should look at is how documents are actually delivered between trading partners. the most important thing to consider is the bottom line . Of course. If you do a large amount of EDI transactions on a daily basis with many of your customers. insurance companies. All 32 . Online services are more generic. For this reason ABC Company has setup an interconnect between their VAN 1 and Trading Partner 1’s VAN. In Chapter 4 we looked at how various documents flow between trading partners from a business perspective. Figure 5-1 gives you examples of the various ways trading partners actually connect to deliver documents back and forth. scripts and procedures that will automatically pull data into your account and shipping systems and eliminate data entry. If you need to pick up documents from your trading partner’s VAN you will probably need to subscribe to that VAN. Each trading partner communicates with ABC using different methods.Cost Considerations There are many things to consider when determining how to implement a system.how much your system will cost to implement and maintain versus how much increase in revenue you will generate with your system. Most retailers. This adds an extra possibility of creating errors and your operating costs are higher to pay the employee to do this for you. Of course. The more data entry you have in your system the more chance there is of human error and the higher your operating costs will be. If you already have a VAN chances are you will be able to interconnect with the other VAN through yours. transportation carriers.

Looking at the connection between ABC Company and Trading Partner 2 we see that both sides use the same VAN. This type of setup is becoming more common as the cost of doing 33 . we’ll look at Trading Partner 3 last). There is no VAN in between the two companies. This is a direct connection between the two companies also known as a B2B. Documents from ABC Company follow the same path back. connection.ABC Company EDI Implementation ABC Company VAN 1 Trading Partner 1 VAN Trading Partner 1 ABC Company VAN 2 Trading Partner 2 Trading Partner 3 Trading Partner 4 Figure 5-1 – In-house EDI Document Flow Overview documents sent from Trading Partner 1 go through their VAN (Trading Partner 1 Van) to ABC Company’s VAN 1 to ABC Company. Most trading partners connect through VANs so the interconnect and the straight VAN connections are the most common. This is a normal VAN connection and no interconnect is necessary. The connection between the two VANs is known as an “interconnect”. Let’s take a look at the relationship between ABC Company and Trading Partner 4 now (don’t worry. or business to business.

Also. This is a mixed connection. When Trading Partner 3 sends to ABC Company they use a B2B connection. ABC Company EDI Provider EDI Provider VAN 1 EDI Provider VAN 2 Trading Partner 3 Trading Partner 1 VAN Trading Partner 2 Trading Partner 1 Trading Partner 4 Figure 5-2 – EDI Provider Document Flow Overview 34 . Of course the disadvantage of not using a VAN is the necessity to provide your own security and accountability. This is just an example of a mixed connection and it could be configured with an interconnect or the send and receive could be reversed. This is pretty rare and there is usually some specific reason for doing this.business increases and profit margins decrease. Looking at the relationship with Trading Partner 3 we see that when ABC Company sends a document to Trading Partner 3 they send it through their VAN and Trading Partner 3 picks it up from the ABC Company’s VAN 2. it requires you to store all of the transactions on your systems as there is no backup from a VAN mailbox.

Once you have your system ready to go your trading partner will typically require a testing phase that could also take a significant amount of time to complete. Usually when you are requested by one of your customers to implement an EDI process they need it to be done as soon as possible. The provider’s connections already exist and you connect directly to the provider. This usually only recommended if you have a minimal amount of trading partnerships and a small volume of EDI transactions. The upside of an online provider or a service bureau is the cost of maintaining the system is usually limited to the subscription fee. Generally. Since the data files are so generic you usually must manipulate your system to be able to load them and sometimes this isn’t possible at all so data must be manually data entered. You will want to give yourself as much lead time as possible to get your EDI system into production. You will need ample time to properly implement and thoroughly test any programming or mapping you may require.EDI Providers Another way to go is to contract with an online provider or EDI service bureau. which can cause many headaches and a lot of lost time in production. 35 . Also it becomes very difficult to integrate your labeling with your EDI document using this method. You just need to know that this is a consideration that affects the type of hardware and communications software that you will require. The provider maintains all of that for you. You don’t need to know what these are if you hire an EDI expert. The downside to an EDI provider is that the “human readable” reports (printouts of the EDI documents) and the data files provided are usually very generic. the buyers will require you to be EDI enabled before they can order from you. the process is related to payment. The difference between the provider and the VAN is the provider eliminates the need for you to have your own EDI translator and in-house setup. Timing Considerations Timing is a major consideration when planning your EDI implementation. They could use FTP or bisynchronous modem (yes there still are a few out there) or AS2 or AS3 or any other type. The whole process could take several months so do not delay beginning the process or it could have financial repercussions to your company. Figure 5-2 shows the connectivity using an EDI provider. Medical payers require you to be able to bill them via EDI. In retail. The reports tend to be hard to read and the data files require human intervention to enter them into your system. Communication Protocols Each one of the connections in figure 5-1 could use any type of communication protocol. It takes a significant amount of time to acquire and set up your translator. The longer you have to wait to be EDI enabled the longer you may have to wait to be paid.

Please look for our more advanced eBooks to extend your EDI knowledge. you may have to scrap that system and start over when you begin doing business with more customers requiring the use of EDI. If you implement a system that does not grow with your company. Remember though. this is a beginner’s guide for all industries. Hiring an EDI expert is something you should consider at this stage of the game. production. Though we only show examples of EDI in three industries. It is important to give your company enough time to implement the system that is right for you. Your expert will analyze your trading partner requirements and your production and accounting processes and recommend the system that is right for you. Summary Implementing a successful EDI system requires a high level of needs analysis and forecasting in order to make your system productive and cost effective. EDI and other electronic commerce technologies will just continue to grow in all industries due to their ability to significantly shorten supply chain. such as DBM Consulting Services. This eBook was designed to introduce you to the world of EDI and to explain what it is and how it is used. The goal of this eBook is to familiarize you with the world of EDI so that you can effectively implement your own system. and billing cycles and allow companies to respond even more flexibly to their customer’s needs. and your profits. ten-fold or more. this system will carry you into the future and can have the ability to increase your business volume. Initial investments in EDI are usually a little costly and it is not unusual to experience “sticker shock” when looking at the costs. For this reason it is recommended that you hire EDI experts.Hire an EDI Expert It is very important to make the right decisions for your company from the beginning. 36 . You need to have an expert analyze your needs and your budgetary restrictions and to recommend a system that will meet your needs within your budget.

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