EDI Overview-Introduction..

What is EDI?

EDI which stands for Electronic Data Interchange is the computer-to-computer communication of business documents between companies in a standard format.  It is a paperless way to send and receive Purchase Orders, Invoices, etc.  EDI replaces human-readable documents with electronically coded documents. The sending computer creates the document and the receiving computer interprets the document.  Implementation of EDI streamlines the process of exchanging standard business transactions.   Companies save by eliminating people cost as well as the cost due to errors and double entry of data.   The transmissions are accomplished by connecting to a mailbox via a modem or the internet.   The most common mailbox is a Value Added Network's (VAN) electronic mailbox.  Each user, identified by a unique EDI ID, accesses his mailbox to send and receive all EDI transactions. EDI standards are formats and protocols that trading partners agree to use when sending and receiving business documents.

Electronic       è Media (Internet)

Data                è Business Information

Interchange    è Sending and Receiving of Data

How EDI Works

Typically, an EDI document begins in a trading partner's business application computer system.  A document is produced and sent to a specialized computer program that translates the document into a standard EDI format.   The EDI file is then transmitted, usually via the trading partner's VAN.   When the VAN receives the transmission, it is sent to the intended recipient's mailbox, identified by its EDI ID.  The trading partner receives the document from its VAN when it connects and empties its mailbox.  Through the use of an EDI translation program, the document is translated into a file that will be processed by the trading partner's business application system.  During the inbound translation process, a new EDI document is transmitted back to the sender to acknowledge receipt of the document.   This new document, the functional acknowledgment (FA), assures the sender that its transmission has been received.

Standard EDI PO / SO Cycle..

Here we will discuss the standard PO / SO EDI Cycle. To elaborate this example we need three parties i.e.

1è Customer

2è Supplier

3è EDI translator, may be third party

Customer                                          EDI Translator                         Supplier

è EDI 850/875 X12 Doc                    translates the same è            Receives the file and populates in OM

  Received EDI 997                             ç translates the same                                           ç EDI 997

  Received EDI 855                             ç translates the same                                           ç EDI 855

è EDI 860 X12 Doc                           translates the same è           Receives the file and populates in OM

Received EDI 997                               ç translates the same                                           ç EDI 997

 Received EDI 865                              ç translates the same                                           ç EDI 865

Received EDI 856                               ç translates the same                                           ç EDI 856

Shipping Done

Received EDI 810/880                                                ç translates the same                                           ç EDI 810/880

EDI Standards..

EDI standards help facilitate EDI by providing a common format or rules of data structure and transmission protocols.   The objective is to use an agreed upon structure for communicating the data in business documents.   Each organization that maintains a set of standards provides a full set of documentation and definitions of each version of their standards. The standards say which pieces of information are mandatory for a particular document and which pieces are optional. These standards are necessary because so many trading partners conduct transactions with several other trading partners.  It would be difficult to conduct business if every trading partner had completely different rules.  As the standards have grown, they have become more general and able to be interpreted in many different ways. If you trade with 5 EDI partners, you will probably have 5 different documents for each PO, Invoice, etc.  Because of the standards, they will at least have the same basic structure.  Each partner with whom you trade will have a detailed set of EDI specifications.  The documents you trade must adhere to these specifications.  Some trading partners will assess a charge against your invoice for mistakes or missing documents.   Therefore your understanding and compliance with your partner's specifications are very important.

EDI Document Structure..

A single EDI transmission constitutes an ISA/IEA envelope, which isolates one group of transmitted data from another. Each envelope contains EDI documents to (outbound) or from (inbound) a single EDI trading partner.   These envelopes contain one or more GS/GE envelopes, which contain one or more documents of the same type.  The use of separate GS/GE envelopes allows for several different document types to be communicated within the same ISA/IEA envelope. Within the GS/GE envelope is the ST/SE envelope that isolates one document from another.  A Transaction Set is wrapped in the Transaction Set Header/Trailer (ST/SE) envelope.  Data Segments (similar to a record in a data file) are used to make up Transaction Sets.   Data Segments are roughly equivalent to a single line on a document.  Data Elements (similar to a field in a record) contain the basic units of information and are used in various combinations to make up Data Segments.

The Interchange Header (ISA), commonly known as the Communications envelope, starts an interchange of one or more functional groups.  It contains: the syntax identifier, Sender and Receiver EDI ID's, unique control number, acknowledgment requested, test indicator, date and time sent, recipient reference or password, and version of Standard being used.  The Functional Group Header (GS) indicates the beginning of a group of transaction sets and provides a second level of Sender and Receiver IDs.  It usually includes an identifier for the type of transaction set, application sender identifier, application recipient identifier, date and time sent, unique functional group reference, agency responsible for specification of structure (i.e. X12, VICS), message type version, and password.

The Detail area contains the details of the business transaction.   In a PO document, the ST includes elements such as: Purchase Order Number, Date and PO Type, Item Numbers for Products Ordered and Product Descriptions, Prices, Method of Shipment and Delivery Dates, Terms of the Order, and, for some orders, a Distribution List by Item by Location.

The Trailer Envelope Segments contain control information such as total ST Segments and total GS Segments and unique control numbers that must be identical to the values in the ISA and the GS.

Benefits of EDI..

. Closer relationships with your trading partners.
· Reduction of data entry errors.
· Shorter ordering cycle.
· Personnel reductions.
· Competitive advantage when selling to large, EDI capable customers.
· Potential for faster payment process.
· Decrease of on-hand inventories.