EDI Resource Center
EDI FAQs: Answers to Common EDI Questions
What is EDI?
EDI, which stands for electronic data interchange, is the automated, computer-to-computer exchange of standard electronic business documents between business partners over a secure, standardized connection.
Why Use EDI: How Does EDI Benefit Businesses?
Typically, companies begin using EDI for doing business. Other reasons to use EDI include automating manual processes, saving money, and reducing manual data entry errors that lead to incorrect product shipments, invoices, and inventory data. Businesses can save on order data entry costs by using and integrating automated EDI into order processing systems.
What are EDI Trading Partners?
EDI trading partners are the parties securely exchanging EDI business documents. EDI partners establish a B2B EDI connection, enabling them to securely exchange key business documents with each other and connect with each other's core business systems, including their ERP, CRM, accounting software, and other enterprise tools.
Which Companies Require EDI?
There are several types of companies that require that their trading partners are capable of doing business via EDI. These include retailers, large manufacturers, automotive companies, health insurers, healthcare providers, and many governments.
What are EDI Standards?
EDI standards are the basis for B2B EDI transactions, providing rules that govern the formatting of standardized EDI documents (e.g. a Purchase Order). Each standard contains a set of specific EDI documents, ranging from thousands of documents in standards like X12 and EDIFACT to just more than a handful in specialty standards such as GISB/NAESB. Different standards have evolved to govern the EDI documents exchanged in different regions (U.S., UK, Europe) and various business industries, such as retail, technology, healthcare, etc.
What are EDI Documents (Messages or Transactions)?
An EDI document (EDI message or an EDI transaction) is a business document, such as a PO, invoice or shipment acknowledgment, that EDI partners exchange via an EDI system. Each EDI document has a rigid structure and carries specific information. However, most of EDI partner exchanges involve only several of the most common EDI files.
If There Are Standards, Why are EDI Documents Different?
There are various ways to interpret EDI standards, so many of the segments and elements defined in the standard are optional. If, for example, 10 companies designed the same purchase order, there would most likely be 10 different POs. For this reason EDI mapping and B2B partner setup can be difficult and take weeks or months.
What are EDI Trading Partner Specifications?
Each of your EDI trading partners has a set of specifications. Consider these a subset of the standards for a given EDI document. Each partner will provide a list of required EDI documents you'll need to provide them to do business together - these are also all the documents you'll need to map to and from your internal systems.
What is EDI Mapping?
EDI mapping and translation is the process of converting business documents for use in both EDI processes and other business systems. Specific mappings are required for each EDI partner you add.
EDI mapping often involves converting EDI files, such as an X12 EDI 850 Purchase Order, into XML and then from XML into other commonly used flat-file formats, such as CSV, Excel and JSON.
What is X12?
X12 is an EDI standard governing the structure and format of all X12 EDI documents (e.g. an X12 EDI 810 Invoice) and is the most commonly used EDI standard in the U.S. X12 also provides the basis for EDI sub-standards, such as HIPAA, the de facto EDI standard for healthcare EDI documents in the U.S.
What is EDIFACT?
EDIFACT is an EDI standard governing the structure and format of all EDIFACT EDI documents, (e.g EDIFACT EDI ORDER) and is the most commonly used EDI standard internationally, especially in Europe. EDIFACT also provides the basis for EDI sub-standards, such as EANCOM, used by many retailers in Europe and internationally.
What is EDI File Transfer?
EDI file transfer, often referred to as B2B managed file transfer, is the secure exchange of encrypted EDI documents over secure Internet protocols between partners. MFT software is used to encrypt, send and decrypt the EDI files.
What are EDI Protocols?
EDI Protocols, or EDI messaging protocols, are the specific Internet messaging protocols used to securely send and receive files. Some examples include AS2, AS4, OFTP2, GISB, and RosettaNet.
What is AS2?
AS2, or Applicability Statement 2, is the most commonly used EDI protocol in the world and is the de facto EDI protocol used in the U.S. AS2 took its place as the foremost EDI protocol when Walmart required the use of AS2 among its supplier network.
What Are EDI Security Requirements?
There is no doubt that EDI requires the utmost attention to security. EDI security requirements include: data encryption at all times (in motion and at rest), secure file transfer protocols, partner authentication for all messages, confirmation and legal proof of secure message receipt, and more.
What is Non-Repudiation?
Non-repudiation is legal proof that the intended recipient of a B2B/EDI document exchange has received a message. This is a critical component of any B2B/EDI transaction, as it ensures companies cannot ever deny receiving a purchase order, invoice, payment or other key business exchange.
How Do You Know an EDI Transmission Has Been Received?
The receiver of an EDI transmission is responsible for sending back an administrative EDI document, such as the X12 997 Functional Acknowledgment. The FA identifies the received transmission by its sender, including assigned control number, document type (e.g., invoice, PO, etc.), and number of documents sent. Senders should keep up with intended receivers if acknowledgments have not been received within the expected time frame.
What is EDI Integration?
EDI integration is the process of connecting an organization's EDI systems to its other systems, such as: internal databases, ERP solutions, CRMs, accounting tools, and other software, as well as connecting one company's EDI process to another company's EDI process and IT systems. EDI integrations broadly fall two categories, internal process integrations and EDI/B2B partner integrations.
What is EDI Software?
EDI software is an EDI solution designed to map and translate business documents between EDI and business formats. Additionally, modern EDI software handles B2B partner file transfers as well as direct EDI integrations into other business systems, such as CRMs (e.g. Salesforce), ERPs (e.g. Oracle Netsuite, Microsoft Dynamics), accounting tools (e.g. QuickBooks), and popular databases (e.g. MySQL). EDI software automates the process of EDI, in contrast with other forms of EDI (e.g EDI VAN EDI web forms).
What are The Types of EDI Software?
Broadly speaking, EDI software falls into one of four categories:
- EDI Mapping Tools - limited (often older and more expensive) solutions that are only focused on EDI mapping & translation.
- Application-Specific Integration Tools - tools specializing in integrating specific applications like Microsoft Dynamics ERP to EDI processes, with limited EDI features
- iPaaS Platforms - General integration platforms that offer some EDI capabilities
- EDI-First Integration Solutions - Full-powered EDI-first solutions, such as CData Arc, also designed to connect EDI processes with broader applications and handle other business integrations
There are also tools that provide managed file transfer (or EDI file transfer) via AS2, SFTP and other secure messaging protocols. These tools (such as in the case of CData Arc), provide full-scale EDI capabilities and are used as individual components in a broader, multi-tooled EDI process.
What is Web EDI?
Web EDI is a web interface that allows you to manually enter data (e.g. purchase order, invoice, shipment data) into a simple form on a website that is typically associated with an EDI VAN. The site will then pass the data to another solution which maps & translates it into EDI documents and sends it to a trading partner. The web EDI is quite simple, but it requires ongoing manual data entry and does not provide a scalable process.
What is an EDI VAN?
A VAN (Value Added Network) is a service provider used to exchange EDI documents between trading partners. The VAN is kept in the EDI trading partner's electronic mailbox with a unique EDI ID, serving as the EDI address of the trading partners. Interconnects among VANs enable the exchange of EDI documents between EDI trading partners whose mailboxes have different VANs. These VANs are used by organizations that lack in-house IT personnel and EDI knowledge to manage low-volume EDI transactions.
Should I use EDI Software or a VAN?
Organizations with low EDI volume use a VAN, as the VAN already has a network of EDI partners in place and often gets companies new to EDI up and running.
However, VANs not only charge for initial setup, but also a variety of fees:
- Fees per transaction
- Fees to set up each trading partner (e.g. Amazon, Walmart, Overstock, Target, etc.)
- Fees per line item (e.g. if there are 7 items on a purchase order, there are 7 fees)
- Fees per kilocharacter (e.g. fees by data)
- And fees for exceeding transaction limits, among others
Organizations that lack EDI expertise use VANs IF they plan to only add a couple EDI partners and only exchange a small transaction volume (usually fewer than 50 EDI documents/day).
Organizations that lack EDI expertise but do plan to exchange 50+ documents per day or add EDI partners in the future often turn to EDI consultants. They'll get a dollop of help to get started with EDI and implement scalable software that ultimately saves them significant money in the long run.
Learn more in our comparison article: Direct EDI Software vs. VANs
What Does an EDI Consultant Do?
An EDI consultant, or EDI systems integrator (SI), helps organizations implement specific EDI partner mappings as well as configure EDI software. Do you need EDI expert assistance?