EDI

ELECTRONIC DATA
INTERCHANGE
 DEFINITION
• Is the electronic transfer of information
between two trading partner’s systems using a
set of transactions that have been adopted as
a national or international standard for the
particular business function.
• A set of managed standards that allow Buyers
and Sellers to exchange business critical
documents electronically.
 • Originally targeted to Large Vendors
• EDI initially between large retailers and large
vendors
• Too Cost Prohibitive for Small and Medium
• the computer-to-computer interchange of strictly
formatted messages that represent documents other
than monetary instruments. EDI implies a sequence
of messages between two parties, either of whom
may serve as originator or recipient.
 HISTORY
• EDI got started when the first telegraph
messages were send in the 1840's
• Message-based digital communication systems
were aggressively being developed for military
use, while in business data was still conveyed
via teletype, fax or courier and then manually
entered into incompatible data bases; a slow
and tedious process with significant
opportunities for error.
• Large US retailers such as Macy's and Sears (and who
could afford the expense of owning and operating the
enormous computer systems of the time) started to
develop proprietary message-based EDI systems for
supply chain management that initially copied their
existing paper-based forms and processes.
• This further accentuated the problem of incompatible
databases, and created significant barriers to adoption
for smaller and overseas suppliers. 
• The situation continued practically unchanged
until the late 1980's when the personal
computer, together with the advent of
"Software as a Service", back-office integration
and the adoption of international standards
made EDI the most effective way to exchange
data between trading partners. 
 EDI STANDARDS
• Electronic Data Interchange is intended to handle all
aspects of business transactions such as ordering,
acknowledgements, pricing, status, scheduling,
shipping, receiving, invoices, payments, and financial
reporting. One of the principal aims of EDI has been to
develop electronic surrogates for the myriad of paper
forms used in commercial transactions such as
purchase orders, bills of lading, and invoices. Since the
early 1970's, efforts have been underway to develop
standardized data formats for business transactions.
• There are two main EDI standards that are
currently used in North America and Europe;
the ASC X12 group of standards supported by
the American National Standards Institute
(ANSI) and the EDIFACT standards supported
by the United Nations Economic Commission
for Europe (UN/ECE).
 Components of EDI standards
The following outlines the three basic structural
components of EDI standards. Both the ANSI X12
and EDIFACT standards are based on these
components.
1. A syntax and encoding scheme for messages
which specifies the structure of data. 
2. A data dictionary.
3. Combinations of data elements to be used for
standard messages. 
  ANSI X12

• Accredited Standards Committee (ASC X12)

ASC X12 is the ANSI Accredited Standards
Committee charged with developing EDI
standards for use in the United States. The Data
Interchange Standards Association (DISA) serves
as the secretariat for ASC X12. DISA's activities
include communicating with ANSI and the public
on behalf of the ASC X12 committee, organizing
X12 meetings and publishing the X12 standards.
 The X12 Series of Standards
• The X12 series of standards consist of a number of interdependent standards. The transaction
set standards define the grouping of data into segments and the sequence of these segments
to be used in a specified business transaction such as a purchase order. There are also the
'foundation' standards which define the syntax to be used in defining X12 transaction sets as
well as the data elements, data segments, and control structures to be used. The full set of
foundation standards required to interpret, understand and use the X12 series of transaction
set standards, consists of:
• Data element dictionary (X12.3)

• Interchange control structure (X12.5)

• Application control structure (X12.6)

• Data Segment Directory (X12.22)

• Functional Acknowledgment (X.20)

 X12 Syntax and Message Structure

• The EDI message unit in X12 is known as a "transaction set", presumably because
it is a set of data "segments" used for a single business transaction. The ASC X12
standards specify:
• the segments used in a transaction set,

• the sequence in which the segments must appear

• whether segments are mandatory or optional, 

• when segments can be repeated

• how loops are structured and used

• X12 message formats consist of the following
components
Interchange Control Structures
Functional Groups
Transaction Sets
Segments
Data elements
 Interchange Control Segments

These segments constitute the electronic

structure which surrounds the transaction sets
to be transmitted. They signal the beginning
and end of organizational units of information
within the message but do not contain data
relevant to the EDI transaction. They indicate
the sender of the message, the intended
recipient, the date and time of transmission
and the version of X12 in use. 
• The other type of control segment is associated with
loops of segments that may be repeated within a
message. A loop would be used to indicate the names
and addresses of various parties in a purchase order
transaction, if the billing address is different from the
shipping address for a particular order. The loop
header and loop trailer segments indicate the start of
the loop and the end of the loop (Bass, 1991).
 Functional Groups
• A functional group is a group of similar
transaction sets (eg. three purchase orders).
For example, an X12 interchange could consist
of a functional group of purchase orders and a
functional group of payment advices.
 Transaction Set
A transaction set is analogous to a business
document such as a purchase order, while a
segment is analogous to a line of information
in that purchase order and a data element is
analogous to unit of information in the item
line.
 Segments
• A segment is an intermediate unit of
information in a transaction set. It consists of
logically related data elements in a defined
sequence: a predetermined segment identifier
(which is not a data element), one or more
data elements, each preceded by a data
element separator and followed by a segment
terminator.
 Data elements
•  Data elements have no explicit identifier, and
are identified only by their sequence in the
segment. A data element may be one of 6 types:
numeric, decimal, identifier, string, date or time.
All types are represented as character strings
such as "AN" (alphanumeric) or "DT" (date). Data
elements are also characterized by minimum and
maximum lengths, and an indication of whether
their presence is mandatory or optional.
 EDIFACT

• UN/EDIFACT stands for the United Nations rules

for the Electronic Data Interchange for
Administration, Commerce and Transport. They
are a set of international standards, directories
and guidelines for the electronic interchange of
structured data, and, in particular, relate to
trade in goods and services between
independent computerized information systems
(UN/EDIFACT Rapporteur's Team, 1990).