Guide on EDI file formats
What is an EDI File Format?
For starters, EDI stands for Electronic Data Interchange.
Further, EDI is a computer-to-computer exchange of documents between trading partners. More specifically, EDI enables businesses to send and receive documents electronically in a format acceptable by the trading parties.
An EDI file format is a file structured using one of the several EDI standards (we’ll talk about this in detail later on).
The primary reason for having these EDI format standards is to ensure that businesses can communicate in a “universal language.”
That way, companies in different states, cities, or countries can do business together while ensuring that their trade is as quick, efficient, and profitable as possible.
The Evolution of EDI Document Standards
The EDI history goes as far back as the 1960s when the United States transportation industry developed a standard to ensure thorough and accurate information exchange between different companies’ computer systems.
The idea was to regulate electronic transactions between sellers and buyers.
The American National Standards Institute took up EDI in 1981 when it published a standard known as X12. The standard was used in multiple industries across the nation.
In 1985, the United Nations (UN) created EDIFACT as a global standard.
At this point, you must be thinking … wouldn’t it make perfect sense to have one, universally acceptable EDI standard?
It sure does, but technology and specific industry requirements keep changing. The ripple effect is a rise of new EDI file formats to keep up with the shifting demand.
In essence, this means that a business can choose its preferred EDI document standard based on the most widely used industry format.
Why is EDI Important?
Think about this for a second. What if your business could speak? What language would it speak?
As stated, EDI makes it possible for businesses to speak the same language, irrespective of their locations.
With a standard way of communicating, governments, retailers, manufacturers, and many businesses don’t have to rely on obsolete channels for B2B communication such as faxing or manual data re-entry.
Of course, the manual exchange of business documents comes with a host of disadvantages. Take paper invoices, for instance. Sending or receiving paper invoices is susceptible to fraud and errors and is the number one reason for late payments.
On the flipside, e-invoicing, a form of EDI, makes it possible for trading partners to exchange invoices in real-time, thereby helping streamline business transactions.
The long and short of it is that EDI is essential because it creates a standardized communication format across every industry globally.
Today, the use of EDI is widespread, with large corporations such as Walmart, Costco, Sears, and Home Depot demanding that their suppliers are EDI compliant.
Why You Need to Understand EDI Formats as a Business Owner
Should you bother to know as much as you can about the EDI format?
Yes. You should.
Why? ….because the journey to choosing the right EDI standard starts by understanding which EDI file format your business will need to support and, most importantly, the EDI solution provider to work with.
Moreover, knowing the format that works best for your business model will enable you to understand how your EDI provider will support the standard in question.
At the very least, you should know which EDI standard most of your trading partners use and how it works. Besides, you want to be sure that your current computer system can support the EDI file format or if you need to make some adjustments.
The point we’re trying to make here is that adopting and implementing EDI is a significantly multifaceted procedure, so you want to ensure you get everything right from the get-go.
Examples of EDI File Formats
There are five most commonly used EDI file formats. Here’s a closer look at each one of them.
ANSI ASC X12
ANSI (American National Standards) ASC (Accredited Standards Committee) X12 was one of the earliest developed EDI document standardizations.
Also referred to as ANSI X12 or X12, it is predominantly used in B2B data exchange.
There are over three hundred X12 EDI standards, identifiable by a three-digit number. For instance, 810 is the number allocated to invoices.
- X12 EDI file formats fall under industry-specific categories as follows;
- AIAG – Automotive Industry Action Group
- VICS – Voluntary Interindustry Commerce Standards
- CIDX – Chemical Industry Data Exchange
- PIDX – American Petroleum Institute
- EIDX – Electronics Industry Data Exchange Group (CompTIA)
- UCS – Uniform Communication Standard
- HIPAA – Health Insurance Portability and Accountability Act
Note – The ANSI ASC X12 also creates standards for CICA (Context Inspired Component Architecture) and XML schemas.
TRADACOMS stands for TRAding DAta COMmunicationS.
It is the primary EDI standard for the retail industry in the United Kingdom. TRADACOMS comprises twenty-six hierarchy messages with a six-letter reference. That way, a utility bill is UTLHDR, an invoice is INVFIL, etc.
A TRADACOMS EDI file doesn’t use a single message format. A business-to-business transmission consists of several messages.
TRADACOMS uses segments for quick and easy translations. Here are the four commonly used segments;
- MHD – Message start
- STX – Start of Interchange
- END – End of Interchange
- MTR – Message end
UN/EDIFACT stands for United Nations rules for Electronic Data Interchange for Administration, Commerce, and Transport.
EDIFACT consists of a set of B2B message structures used across several industries. Due to this standard’s popularity, some industries have created subsets of the leading standard to transmit industry-specific information. EANCOM is one such EDIFACT subset used in the retail industry.
A six-letter reference identifies EDIFACT document file types. ORDERS, for instance, is a reference for purchase orders, while DESADV refers to dispatch advice.
Apart from transmitting information between trading partners, EDIFACT also outlines delivery requirements. For example, the format defines guidelines regarding the structure of specific messages.
UBL is an acronym for Universal Business Language.
It is a collection of standard XML-based business documents formats. It is available to all businesses for free thanks to its owners’ generosity, the Organization for the Advancement of Structured Information Standards (OASIS).
Unlike the EDI file formats above, UBL uses a significantly different XML structure. On top of that, UBL XML-based transmissions are easier to read than other EDI file formats.
Even so, UBL XML files are relatively larger than other EDI file formats.
The earlier version of UBL, which was released in 2003, comprised seven EDI file standards. That number increased to sixty-five for the 2.1 version and eighty for UBL 2.2.
The European Committee for Standardization endorsed UBL as one of the two syntaxes that conform to the EU invoice directive. The use of UBL continues to grow as the businesses edge toward e-invoicing via networks such as PEPPOL.
You can read more about UBL here.
ODETTE is short for the Organization of Data Exchange by Tele Transmission in Europe. This EDI file enables data exchange and communications for the European automotive industry.
ODETTE also creates EDI protocols such as OFTP and OFTP2. The two offer improved security through encryption and digital signatures for EDI data exchange. OFTP and OFTP2 B2B solutions allow businesses to exchange information and data securely and efficiently.
Benefits of Adopting EDI for SMBs
Implementing EDI in your business helps add value and streamline processes. It allows you to process information automatically, reduce clerical tasks, and eliminates data entry errors.
More than that, using EDI for business-to-business electronic transactions helps save time and resources. Further, your trading partners benefit from the real-time exchange of information, leading to a better buyer-seller relationship.
Other benefits of EDI include;
- Reduced Paper Usage – EDI eliminates the use of paper and related expenses such as storage, mailing, printing, postage, and recycling.
- Improved Quality of Data – EDI eliminates manual data entry. The ripple effect a well-run finance department can predict things such as expected revenue, profits, losses, etc.
- Improved Turnaround Times – EDI allows you to stay on top of your stock levels, improving the overall business cycle since everything is always up to date and visible.
- Improved Timelines – As stated, EDI allows real-time processing. That way, you can reduce that time it would have taken to send, receive, and enter orders manually.
- Improves Operational Efficiency – EDI helps reduce the time it takes for employees in the finance department to create invoices and purchase orders.
- Supports a Greener World – The use of EDI, by extension, implies that there are no paper trails, helping keep the environment green and cleaner.
The Future of EDI
Indeed, there’s no doubt that EDI is beneficial to businesses and organizations in more than one way. The obvious that may come up in your mind as you start to adopt EDI is about the standard’s longevity.
Will the various EDI file formats be relevant in, say, ten years to come? Are you likely going to incur expenses in the future for a different mode of document exchange?
To predict the future of EDI, we need to look at history. The first EDI file format was created in the 60s. Since then, EDI has evolved, getting better with every new version of standards released.
Sure, over the last couple of years, industry players have suggested moving from EDI file formats to XML-based ones due to “simplicity.”
Even though XML will continue to gain popularity, EDI will always have a place in the B2B document exchange circles.
Look at it this way; most major retailers/manufacturers in the United States and across the world prefer EDI and don’t intend to switch any time soon. Besides, the benefits of XML based standards would have to be immensely significant to make some of these businesses abandon EDI.
So yes, the future of EDI is intact, now and in the years to come.
Unimaze – Helping you Get Started with EDI
Electronic Data Interchange will give you entrepreneurial competitiveness, whether you’re a small business or a large corporation.
While EDI adoption is growing, you will need to adopt several document standards because there’s no one universal EDI standard acceptable by all businesses.
In other words, to enjoy a completely automatic B2B data exchange with your trading partners, you’ll need a system that can translate data in several EDI file formats – and that’s where UNIMAZE comes in.
As your EDI solutions provider, we’ll ensure that your business can transfer documents in any format over any EDI protocol through a single connection.
Our cloud-based integration enables connectivity across any application and systems, whether located on-premises or in the cloud.
On top of that;
- Our data governance tools guarantee high-quality data.
- We’ll validate all messages against your trading partners’ business’ to eliminate errors.
- Our EDI solution is scalable. When your integration needs increase, UNIMAZE will swiftly accommodate new partners.
- Our solution is managed by a team of dedicated professionals who’re committed to your success.
Get access to our EDI solution. Contact UNIMAZE support today and let us simplify how you deal with your trading partners with customized integration.
UNIMAZE – The EDI solution provider you can count on!
Frequently Asked Questions FAQs
What are types of EDI?
There are many types of EDI. The choice of one EDI type over another depends on your business needs, budget, and technical abilities. Most businesses adopt hybrid EDI solutions to enable them to translate various EDI file formats.
Common EDI types include;
- Direct EDI/Point-to-point
- EDI via VAN
- EDI via AS2
- Web EDI
- Mobile EDI
- EDI outsourcing
What is EDI file format?
An EDI file is a data file structured using one of the various Electronic Data Interchange (EDI) standards. It contains information stored in plain text format. The primary use of the file is to transfer business data between trading partners.
What is the X12 format in EDI?
X12 EDI is a data file structured on ASC X12 standards created by the American National Standards Institute (ANSI) Accredited Standards Committee (ASC).
What are EDI requirements?
EDI requirements differ depending on the specific needs of the trading partners. Even so, a document that outlines the specifications on an EDI standard will contain the following information;
- The EDI format you use to exchange B2B documents
- The documents you receive
- Whether your business requires customized mapping
- The process of testing your systems to ensure a smooth exchange of goods
- Your EDI provider
- Challenges you might encounter when connecting with your trading partners
What is EDI example?
There are thousands of EDI documents that you can send automatically. The most common EDI examples include;
- Shipping statuses (EDI 214)
- Purchase Orders (EDI 850)
- Payment confirmations (EDI 820)
- Invoice (EDI 810)
What is the difference between API and EDI?
The primary difference between the two is that with API, information gets transmitted in real-time and in individual increments. More specifically, API is a software link that enables two applications to communicate with each other.
While the exchange of data happens in real-time with EDI, it is transmitted in batches. Also, EDI runs on various protocols meaning transacting partners need to agree on the EDI format to use.
How do you set up EDI?
This is what you require to set up EDI;
- Prepare the documents to be exchanged.
- Translate them to EDI format.
- Send them to your trading partners.
The crucial thing to note here is that setting up EDI can be challenging, especially if you don’t have the technical knowledge. You’re better off contacting a reliable EDI provider to help you connect to your trading partner’s system.
Who uses EDI?
During the early days, EDI was predominantly used in the retail and automotive businesses. However, in the last couple of years, various industries ranging from pharmaceutical to manufacturing, healthcare, construction, and utility, have adopted EDI.
The use of EDI is fast becoming global thanks to networks such as PEPPOL.
What is EDI software?
EDI software is the “driving force” behind the computer-to-computer exchange of data in documents such as purchase orders, invoices, etc., between businesses.
There is a host of EDI software in the market. The choice of one over the other depends on your business’s specific needs.