What Are the EDI Standards? Here’s a Comprehensive Guide!

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Business transactions involve the exchange of documents such as purchase orders and invoices. Manual preparation and sending of such papers can be cumbersome. Humans can introduce errors and cause complications to the business process.

Automation of these procedures contributes to speedy processing, fewer errors, reduced costs, and improved relationships amongst business partners. Parties in a transaction can enjoy these benefits by using Electronic Data Interchange (EDI). EDI is the transfer of business documents between computers in a standardized electronic format.

EDI standards provide a uniform format for conversion and transmission of data in your trucking business. They determine the sequence and position of units of data in an EDI document.

There are many EDI standard formats designed for different types of transactions. Keep on reading to learn more!

Components of EDI Standards

Every EDI standard format comprises of elements, segments, and transaction sets. An element is the smallest constituent of an EDI standard. You can compare it to a word in a natural language.

A segment matches a sentence while a transaction set mimics a paragraph or a document. EDI standards are like reading and writing rules. Elements make segments, and segments create a transaction set.

How EDI Works

EDI is a substitute for email, fax, and postal mail. Documents flow through an application on the recipient’s end, and processing commences. This is different from sending emails since there’s no human effort at any point.

EDI documents have to be in a standard format since they need computer processing. The computers exchanging data must understand the information. It’s like how human beings have to use a common language to communicate.

The most popular method of transmitting messages through EDI is utilizing a value-added network (VAN). The VAN reviews the signal to and routes it to the intended recipient.

A more recent EDI mode of communication is called the Applicability Statement 2 (AS2). It offers Secure Multi-Purpose Internet Mail Extensions and uses Hypertext Transfer Protocol (HTTP/HTTPS) to send data.

AS2 is an advanced version of AS1, a slower method which uses Simple Mail Transfer Protocol. HTTP and HTTPS enable real-time communication between computers over the internet. These EDI standards enhance data security and integrity using digital signatures and encryption.

Examples of EDI Standards

There are many EDI document standards used in different industries. Some are regional while others have international acceptance. Here are four of the most common EDI Standards.

1. ANSI ASC X12

The American National Standards Institute and the Accredited Standards Committee developed the ANSI ASC X12 standards to ease business transactions. ANSI X12 used to support firms in different sectors within North America in the start.

The standards have gained immense popularity across the world. More than 300,000 international companies use ANSI ASC X12. The standards provide a uniform platform for the electronic data transfer.

2. UN/EDIFACT

The UN/EDIFACT is a United Nations EDI standard for Administration, Commerce, and Transport. This is an international standard.

Its further development occurs through the UN/CEFACT (United Nations Centre for Trade Facilitation and Electronic Business). The UN Economic Commission for Europe oversees the maintenance of this standard.

UN/EDIFACT provides the syntax necessary for an interactive data exchange protocol. It offers standard messages which enable countries and industries to exchange transaction documents.

Europe was the first to adopt the standard, and this makes it popular with companies in the region. There has also been a significant acceptance of UN/EDIFACT in some Asian countries.

3. ODETTE

The ODETTE standards are a creation of the Organization for Data Exchange by Tele Transmission in Europe. The association represents stakeholders in the motor vehicle industry in Europe.

It develops infrastructure and advises on how to enhance the flow of goods, services, and information across the automobile manufacturers. ODETTE has developed useful communications standards like OFTP and OFTP2.0.

4. TRADACOMS

TRADACOMS is one of the earliest EDI standards developed for the United Kingdom’s retailers. It came into being in 1982 as part of the UN/GTDI syntax, a predecessor of EDIFACT. The UK Article Numbering Association used to maintain and improve this standard.

The standard may seem outdated since its development stopped in 1995, but it persists. Majority of the retail traders in the UK today still use TRADACOMS for EDI purposes.

Benefits of Electronic Data Interchange

The cost of paper, printing, storage, reproduction, filing, and postage is enormous. EDI eliminates most of these expenses. The budget for processing and sending hard copies is much more than sending an EDI document.

Manual processing of documents often results in mistakes. They may come as a result of typographical errors, illegible handwriting, and loss of emails or faxes, among other reasons. Using an EDI system improves accuracy and reduces disputes among trading partners.

Error-free processing also saves employee time in reworking orders. It also reduces cases of order cancellation. Automation allows workers to focus on critical tasks which need their attention.

A transaction which requires days in a manual system can take a few hours with EDI. Computers can process and exchange orders and invoices in minutes without human intervention. Typing the documents and sending them by mail or fax requires considerable effort and time.

Shortcomings of EDI Systems

EDI technology comes at a price. All partners intending to communicate using EDI must install the appropriate infrastructure and have a budget for its maintenance. The cost can be high for small traders of firms with minimal technical resources.

Companies with older systems may not be able to generate or accept EDI orders. Some receive orders electronically, print them out, and enter them into their systems.

EDI Standards – Final Thoughts

EDI is a phenomenon which has helped business partners to have quick communication in a secure environment. Electronic transmission of documents saves traders money by eliminating paperwork. The system is doesn’t need human supervision.

Various EDI standards come in different versions. Trading partners must agree on the standard and version to use to exchange documents. Businesses may have to use an EDI translator to interpret EDI documents for processing by internal applications.

Traders who are always sending documents should integrate their business processes with EDI. The long-term benefits of using an EDI system surpass the cost of installation.

We’d love to hear from you, so just reach out to us if you have any question.

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