EDI Documents: The Backbone of Automated Business Communication

 

EDI documents form the core of automated business communication, enabling smooth and efficient data exchange between partners, reducing errors, and speeding up processes.

As businesses increasingly move toward digital transformation, EDI remains a critical tool for streamlining operations, improving efficiency, and enhancing collaboration across supply chains and industries. So, what role do the EDI documents play in modern data exchanges?

Let us look at a comprehensive analysis of EDI documents, their types, benefits, structure, transmission methods, security protocol, and more. 

 

EDI Documents Meaning: What Are EDI Documents?

 

EDI is an electronic exchange of business documents. The documents exchanged via EDI are called EDI Documents. EDI Documents mostly include Purchase Orders, Shipping Notices, Invoices, etc. which are mostly used in business-to-business (B2B) communication. 

A structured, automated process is used for creating and processing EDI documents. As these documents are transferred from computer to computer, they need to be translated into formats that can be read by computers.

Each document adheres to set rules, ensuring that the recipient's system accurately interprets and processes data, such as order numbers and prices.

The main purpose of EDI documents is to automate the exchange of critical business data between trading partners, such as suppliers, manufacturers, retailers, logistics providers, and more. This automation helps reduce errors, speed up transactions, and improve overall business efficiency and supply chain connectivity. 

 

Common Types of EDI Documents

 

 

EDI Documents are mostly used for business information exchanges in a supply chain network. Businesses use them to communicate with their suppliers, wholesalers, distributors, retailers, customers, and other trading partners inside a supply chain. 

Here are some of the most commonly used EDI Documents. 

 

Purchase Orders (850) 

• Initiates a request to purchase goods or services.
• Modifies details of an existing purchase order with EDI 860: Order Changes.  

 

Invoices (810) 

• Requests payment for delivered goods or services.
• Generates billing for products or services provided and specifies conditions and deadlines for invoice payment. 

 

Advanced Shipping Notice (ASN, 856)

• Details shipment contents and delivery schedule.
• Lists items included in the current shipment and defines the delivery method and expected arrival time. 

 

Functional Acknowledgments (997) 

• Verifies successful document transmission and receipt.
• Identifies issues with received EDI documents.

 

Purchase Order Acknowledgement (855) 

• Confirms acceptance of a purchase order.
• Specifies the expected shipment or delivery date.

 

Request for Quotation (840)

• Requests pricing and terms for goods or services. 
• Discusses pricing and terms before final agreement.

 

Inventory Inquiry/Advice (846) 

• Updates on current stock levels and availability. 
• Manages storage and movement of inventory.

 

Shipping Schedule (862)

• Coordinates the timing of shipments for delivery.
• Reports sales and inventory activity data.

 

The Structure of an EDI Document

 

A document exchanged during an EDI transaction comprises several layers and components. Each component has a specific role to ensure efficient communication. Major components of an EDI Component include segments, data elements, and codes. 

Here’s a breakdown of an EDI Document structure:

 

1. Interchange Control Header (ISA) and Trailer (IEA) / Interchange Envelope

ISA (Interchange Control Header) and IEA (Interchange Control Trailer) mark the beginning and end of an EDI interchange. 

• ISA contains information like sender and receiver IDs, date/time, and control numbers.
• IEA marks the end of the interchange.

This is the highest level of an EDI Document structure, containing one or more functional groups.

 

2. Functional Group Header (GS) and Trailer (GE) / Functional Group Envelop

• Functional Group Header (GS) and Functional Group Trailer (GE) define the type/group of the EDI transaction like a Purchase Order (PO), or Invoices.  
  • GS contains identifiers for the sender and receiver and control numbers.
  • GE marks the end of a functional group.

 

3. Transaction Set Header (ST) and Trailer (SE) / Transaction Set Envelop

• ST (Transaction Set Header) and SE (Transaction Set Trailer) define an individual transaction, such as a purchase order (850), invoice (810), or payment order (820).
  • ST begins the document and identifies the type of transaction (e.g., "850" for a purchase order).
  • SE closes the transaction and includes the number of segments in the transaction.

 

4. Segments

• Segments are the building blocks of an EDI document. Each segment is identified by a segment ID (e.g., BEG, PO1, DTM).
  • BEG: Beginning segment, typically used in purchase orders to specify the order type.
  • PO1: Purchase order line item, used to describe the individual products or services ordered.
  • DTM: Date/Time reference, used to specify dates (e.g., shipment and delivery dates).

Each segment serves a specific purpose and contains various data elements.

 

5. Data Elements

• Data elements are the individual pieces of information within a segment. They can be simple text, numbers, dates, or codes, and their format is determined by the segment type.
  • Example: In a PO1 (Purchase Order Item) segment, the data elements might include:
    • Item number (e.g., "12345")
    • Quantity ordered (e.g., "10")
    • Unit of measure (e.g., "EA" for each)

 

6. Codes

• Codes are standardized values used in data elements to ensure consistency and understanding between trading partners.
  • Product codes: Specific product identifiers, like a UPC or barcode.
  • Unit codes: Codes for units of measure, like "EA" (Each), "LB" (Pound), 
  • Date codes: Standard codes to represent date formats, like YYYYMMDD.

 

EDI Document Example

 

Here is an example of an EDI Document (Purchase Order) sent from a buyer to a supplier on January 1, 2023. 

The paper purchase order generated by the buyer’s system and human-readable appears so:  

 

 

 

Now, when this purchase order is translated with EDI translation, the structure appears as such: 

 

 

 

Detailed Breakdown of the EDI Message:

1. ISA:
   • This is the Interchange Control Header which includes general information for the transmission.
   • Sender ID: SenderID
   • Receiver ID: ReceiverID
   • Date/Time: January 1, 2023, at 12:53 (formatted as 230101*1253)
   • Control Number: 000000001
   • Standard: 00401 (EDI Standard version used)
2. GS: The Functional Group Header defines the type of transaction being sent (in this case, a purchase order group).
   • Functional Identifier: PO (Purchase Order)
   • Sender and Receiver IDs: SenderID and ReceiverID
   • Date/Time: January 1, 2023, at 12:53
   • Control Number: 1
3. ST: Transaction Set Header defines that this is a Purchase Order (850), with the control number 0001.
4. BEG: The Beginning Segment for Purchase Order indicates this is a new order (NE) with the order number 123456 and the order date as January 1, 2023.
5. REF: Reference Identification (DP) shows a reference number of 123.
6. N1: Name: This specifies the Buyer's Name and their ID (987654321).
7. PO1: Purchase Order Line Item:
   • Item Number: 1
   • Quantity: 10
   • Unit of Measure: Each (EA)
   • Price: $15.00
   • UPC Code: 123456789012
   • Description: Product Description
   • Vendor Part Number: 0000
8. CTT: Transaction Totals: The total number of line items is 1 (in this case, one item).
9. SE: Transaction Set Trailer: Indicates that the transaction is complete, containing 8 segments in total.
10. GE: Functional Group Trailer: This marks the end of the functional group.
11. IEA: Interchange Control Trailer: Indicates the end of the entire transmission, with control number 000000001

 

EDI Standards and Formats

 

EDI standards are a set of structured sets of rules and guidelines that dictate how electronic business documents are formatted and transmitted between different organizations using Electronic Data Interchange (EDI).

They are acceptable formats regulated by international authorities to maintain a standard document exchange protocol so that whoever transmits an EDI Document, follows a set structure. 

 

Here are some major EDI standards. 

 

• ANSI X12 (American National Standards Institute)

  • A widely used EDI standard in North America, specifically the U.S. and Canada, covering various industries, including retail, healthcare, and logistics.

  • Defines the structure and format for various business documents, such as purchase orders (850), invoices (810), and advance shipment notices (856).
  • Used in supply chain transactions, healthcare (HIPAA compliance), and financial services.

 

• EDIFACT (Electronic Data Interchange for Administration, Commerce, and Transport)

  • An international EDI standard developed by the United Nations, used primarily outside of North America, especially in Europe and Asia.

  • Standardizes electronic messages across multiple industries for global trade, simplifying cross-border transactions.
  • Used in global trade, transportation, and government sectors.

 

• TRADACOMS (Trading Data Communications Standard)

  • An older EDI standard that is primarily used in the United Kingdom, especially in the retail and grocery industries.

  • Used on retail and supply chain transactions, with specific message sets for orders, invoices, and deliveries in the UK.

 

• HIPAA EDI (Healthcare Insurance Portability and Accountability Act)

  • A US-specific standard that is mandated for the secure exchange of healthcare-related documents under the HIPAA regulations. 

  • Primarily uses the X12 standard but with specific document sets for healthcare.
  • Facilitates the exchange of claims, payments, and enrollment information while ensuring patient data privacy and security.
  • Used in healthcare insurance, claims processing, and patient data management.
     

 

EDI Document Transmission Methods

 

 

EDI documents are transmitted between two systems via different methods. These methods are there to ensure secure and efficient data transmission. Depending on the EDI mapping structure, infrastructure, business systems of trading partners, and other factors, different EDI documents can be exchanged using different transmission methods. 

Here are some common methods to transmit EDI documents:  

 

AS2 (Applicability Statement 2)

AS2 is a secure internet-based protocol for transmitting EDI documents. It ensures end-to-end encryption, message integrity, and non-repudiation, making it a popular choice for direct, secure EDI data exchange between trading partners.

 

FTP/SFTP (File Transfer Protocol / Secure File Transfer Protocol)

FTP/SFTP facilitates the transmission of EDI documents by enabling the transfer of files between servers. SFTP adds encryption and security to ensure that sensitive EDI data, such as orders and invoices, is protected during transmission.

 

VAN (Value Added Networks)

VANs are private networks that facilitate EDI document exchange by providing intermediary services, ensuring data security, reliable delivery, and compliance. VANs manage the routing of EDI messages between multiple trading partners in a secure environment.

 

API-based EDI Integration

API-based EDI uses modern APIs to exchange EDI documents in real-time. It enables direct, fast integration between trading partners’ systems and e-commerce platforms, offering more flexibility and quicker communication than traditional EDI methods.

 

EDI Document Flow in Supply Chain Management

Here is an overview of how an EDI Document flows through the supply chain network from order to fulfillment between a buyer and a supplier. This is also the EDI document lifecycle. 

 

1. Purchase Order (EDI 850)

The process begins with a buyer sending a Purchase Order (850) to the supplier, detailing the items, quantities, and agreed-upon terms for the order.

2. Purchase Order Acknowledgment (EDI 855)

The supplier responds with a Purchase Order Acknowledgment (855), confirming receipt and acceptance of the order, or requesting changes (if necessary).

3. Advance Ship Notice (EDI 856)

Once the order is ready for shipment, the supplier sends an Advance Ship Notice (856) to the buyer, detailing the shipment contents, packaging information, and expected delivery date.

4. Invoice (EDI 810)

After shipping, the supplier sends an Invoice (810) to the buyer, requesting payment. The invoice includes details such as pricing, quantities shipped, and payment terms.

5. Functional Acknowledgment (EDI 997)

Throughout the process, a Functional Acknowledgment (997) is sent to confirm the receipt of each EDI document, ensuring that no data is lost during transmission.

6. Inventory Updates (EDI 846)

As items are shipped or sold, inventory levels are updated via an Inventory Inquiry/Advice (EDI 846), helping the buyer and supplier maintain accurate stock levels and avoid shortages or overstocks.

7. Payment Remittance Advice (EDI 820)

Once the buyer processes the invoice, they send a Payment Remittance Advice (EDI 820) to the supplier, confirming the payment details and the amount transferred for the order.

 

 

Learn more about how EDI helps in Supply Chain Management. 

 

Benefits of Using EDI Documents

 

EDI carries many benefits for businesses involved in a supply chain. Through automated and electronic document exchanges, EDI saves time and costs, improves accuracy, and reduces manual data entry. 

EDI documents make the exchange process extremely fast and efficient. This helps many businesses streamline their supply chain communication as the businesses do not have to exchange documents one by one manually. 

Moreover, with integrations between the business’ internal systems and EDI platforms, the major B2B documents are automatically generated, exchanged, and updated, without any manual intervention. 

Also, with secure and advanced error-handling features, EDI documents provide business owners the comfort of security and resolution of any issues that may crop up during business exchanges. 

 

Compliance and Regulatory Requirements for EDI Documents

 

Compliance and regulations are critical to ensuring secure and standardized business transactions. The regulatory requirements are even more stringent in sensitive areas like health and military transactions. 

For example, HIPAA (Health Insurance Portability and Accountability Act) mandates that healthcare organizations use specific EDI standards (like ANSI X12) for transmitting sensitive information such as claims (EDI 837) and payment remittances (EDI 835). 

Defense Logistics Agency (DLA) mandates EDI Document exchanges for procurement and government contracting. For businesses trying to get into military contracting, strict EDI guidelines must be followed. 

Ensuring data security and meeting data regulatory standards, including those for data transmission protocols like AS2 or FTP helps reduce fraud, ensure transparency, and maintain consistency in public sector transactions.

In the retail sector, many large-scale retailers like Walmart also mandate EDI for huge-volume transactions. The compliance requirements suggest specific EDI document formats (e.g., EDI 850 for purchase orders, and EDI 856 for shipping notices) as well as trading partner agreements that businesses must adhere to. 

 

EDI Document Acknowledgments and Responses

 

EDI Documents like Functional Acknowledgment (EDI 997) confirm successful transmission and receipts of EDI transactions between two trading parties. 

Here is how the Functional Acknowledgement (EDI 997) functions: 

 

1. Receipt Confirmation

After a trading partner receives an EDI document (e.g., purchase order, invoice), they send an EDI 997 back to the sender. This document acknowledges that the transaction was received by the intended recipient's EDI system.

 

2. Syntax Verification

The EDI 997 verifies whether the incoming document adheres to the correct EDI syntax and standards. It checks if the segments, elements, and data codes conform to the agreed-upon format.

 

3. Error Identification

If any errors are detected (e.g., missing data or incorrect formatting), the EDI 997 will flag these issues in its response. This allows the sender to quickly identify and resolve transmission problems, ensuring data integrity.

 

4. Transaction Status

The EDI 997 includes status codes that indicate whether the document was accepted, rejected, or partially accepted. This confirmation helps both parties know if the transaction can proceed or if corrective action is needed.

 

5. Audit Trail

By sending and receiving EDI 997 acknowledgments, both parties can maintain a complete audit trail of all EDI transactions. This documentation is useful for compliance, dispute resolution, and tracking the flow of transactions.

 

EDI Document Automation and Integration

 

Today’s business landscape requires all major enterprises to use an Enterprise Resource Planning (ERP) system to consolidate and streamline business processes and information exchange operations. 

In such a context, the integration of EDI for transmitting data electronically in a standardized format becomes a bonus for businesses to reduce manual data entry, cut costs, improve business exchanges, and streamline data flow. 

Here is how EDI document automation and integration works and how it helps businesses in a supply chain network. 

 

EDI Document Automation With Business ERP Systems

 

1. Integration: First, the internal ERP systems of both the sender and receiver of EDI documents are integrated with the EDI platform (businesses’ internal EDI platform or EDI from a service provider). 
2. Translation: A dedicated translation system acts as a translator to translate the EDI documents into formats readable by the ERP system of the businesses. 
3. Mapping: Data fields from the EDI documents needed in the business exchange are mapped in the appropriate locations in the ERP database of the ERP system through system configuration.
4. Transmission and Reception: EDI documents are then automatically sent and received by the sender and receiver in the network respectively for information exchange. 

 

EDI document integration with ERP systems facilitates automated data transfer, reducing manual data entry, gives real-time visibility for information like purchase order status, shipment status, and invoices, and provides a secure method of communication, 

By increasing efficiency, and enabling accuracy in order fulfillment, inventory management, and accounting processes, EDI integration helps businesses boost profits. 

 

EDI Document Tools

 

EDI tools are the tools businesses use to exchange documents electronically, simplify the transmission of information, and automate business processes. 

EDI tools fall under different categories depending on the needs of the exchange and business processes. Some tools are used for integrations, some for translation, some for mapping, some for real-time visibility, and some for other EDI processes. 

EDI Translation tools: Used to translate EDI documents in a standardized format readable by all internal business systems. 

EDI Integration tools: These are used to integrate the EDI platform into the internal systems of businesses (ERP, CRM, WMS, etc.). 

EDI Mapping tools: These are used to map data elements of EDI documents between different EDI formats.  

 

Commerce Network — Comprehensive Solution for all EDI needs!

 

Integrating different EDI tools for different business needs can become a hassle. Moreover, specifying your business needs, maintaining compliance with your partner’s EDI system, and onboarding other business systems with different EDI functionalities are other big problems. 

Commerce Network’s cloud-based EDI solution encompasses all the features of a modern EDI tool. The platform acts as a mapping tool, translation tool, and transmission tool with features of integration with major suppliers, retailers, online storefronts as well and government procurement platforms. 

 

Why Commerce Network is the best EDI tool? 

 

 

Several reasons make Commerce Network’s EDI platform your perfect choice for managing all EDI-related activities, whether you are a small retailer or a large business enterprise. 

• User-friendly and customizable online dashboard.
• Compliance with all standard formats (ANSI X12, EDIFACT, TRADACOMS, and more)
• Efficient data translation
• Data mapping capabilities (EDI to XML, EDI to JSON, and more)
• Wide range of supplier networks (S.P Richards, 10G, Essendant, Airgas, and more)
• Integrations (NetSuite ERP, QuickBooks Accounting, eCommerce Integration with Amazon, Walmart, Shopify, and more)
• DoD-certified Value Added Network (VAN)
• Easy federal contracting and selling options with integrations to GSA Advantage!, FedMall, DLA, and more. 
• Storefront customization, catalog management, inventory updates, and order fulfillment with EDI. 

 

EDI vs. Traditional Document Exchange (Email, Fax)

Comparing EDI with traditional document exchanges makes it clear that for large-volume B2B transactions involving multiple partners across diverse verticals, EDI comes out on top. 

Here is a table comparing EDI with manual document exchange methods such as email, fax, and paper exchanges. 

 

 

Security and Encryption in EDI Document Exchange

 

EDI document exchanges are encrypted and proper security protocols are set up to ensure confidentiality, integrity, and authenticity of transmitted data between trading partners.

Some key methods in handling security for the exchange of EDI documents include: 

1. Encrypting EDI documents to protect sensitive information during transmission, using protocols like AS2, FTPS, or HTTPS.
2. Implementing secure authentication methods for identity verification of both sender and receiver.
3. Adding digital signatures to ensure data integrity.
4. Adhering to industry standards and regulations, such as HIPAA, GDPR, or PCI-DSSfor data security.
5. Maintaining detailed logs and audit trails for transparency and accountability throughout data exchanges.

 

Handling Errors in EDI Documents

Errors often occur while handling EDI documents. These errors are represented by error codes depending on the error type. Here are some error codes for EDI document errors. 

• Code 997 (Functional Acknowledgment Errors): Indicates a problem with data integrity, such as missing or incorrect segments in the document.
• Code 856 (Shipment Notice Errors): Issues might include missing data elements or mismatches between the purchase order and the shipment.
• Code 810 (Invoice Errors): This occurs when incorrect pricing, missing line items, or invalid product codes are detected.
• Code TA1 (Interchange Acknowledgment): Reports basic envelope structure issues, such as problems with ISA or GS segments.

 

How To Handle EDI Document Errors

Several steps need to be taken immediately for error handling and resolution while exchanging EDI documents. 

• Identification: Figure out the issue through the error codes. 
• Correction: Adjust the EDI document by fixing the issues and correcting missing segments, data formats, etc. 
• Reconciliation: Cross-check EDI transactions by comparing the incoming and outgoing transactions like acknowledgments, and invoices and make sure that all values are matched. 
• Validation: Validate the EDI document and its setup and formats, with constant testing. 
• Resubmission: Resubmit the EDI document after correction and validation. 

 

 

EDI Document Mapping

EDI mapping refers to transferring the EDI data to formats specific to a company’s internal system (ERP, CRM, WMS). An EDI document must be mapped so that specific fields of the EDI documents can be correlated to the same fields on a business system. 

Take an example of Company A (Buyer) producing a Purchase Order. The PO is mapped into an EDI-specific format and sent to the supplier. The PO is then mapped using pre-specified mapping instructions to Company B's (i.e. supplier) internal ERP system, streamlining automatic data transmission. 

EDI Document mapping needs to follow several steps. 

1. Understanding the needs of EDI and internal requirements of business systems.
2. Analysis of EDI and internal data structures.
3. Creation of a mapping template through a mapping tool. 
4. Specify rules for field mapping, transformations, and validations that are followed between the trading partners during each EDI transaction.
5. Testing the mapping process with sample data.
6. Document exchange automation setup and integration. 
7. Maintenance of the mapping structure and error resolution.

Industry-Specific EDI Documents

Some EDI documents are common for all sorts of industries while there are some EDI documents specific to particular industries. Let us take a look at them.

 

Common EDI Documents used across all major industries

 

Purchase Order (EDI 850): Used in retail, logistics, manufacturing, healthcare, automotive, government, etc. 

Functional Acknowledgement (EDI 997): Used for each EDI document exchange for acknowledgment. 

Advance Shipping Notice (EDI 856 ): Used in eCommerce, logistics, automotive, government procurement, food and beverage, and more. 

Invoice (EDI 810): Used to request payment for goods or services in nearly every industry.

Shipping Schedule (EDI 862): Used by many industries to convey shipping requirements and updates for supply chain management.

 

EDI Documents across specific verticals

 

Healthcare: EDI 837 – Healthcare Claim, EDI 270/271 – Eligibility Inquiry/Response, EDI 276/277 – Claim Status Inquiry/Response

Finance And Banking: EDI 820 – Payment Order/Remittance, EDI 823 – Lockbox, EDI 812 – Credit/Debit Adjustment

Government Procurement: EDI 840 – Request for Quotation (RFQ)

Logistics and transport: EDI 214 – Shipment Status, EDI 204 – Motor Carrier Load Tender, EDI 210 – Freight Invoice

 

The Future of EDI Documents and Digital Transformation

 

AI, machine learning, and blockchain are driving the future of EDI. AI enhances EDI by automating data mapping, validation, and error correction, reducing manual intervention. Machine learning predicts and prevents errors, ensuring smoother transactions while adapting to changing business rules and formats.

Blockchain adds security and transparency to EDI by providing an immutable ledger for tracking transactions and reducing fraud. It streamlines contract management and ensures data integrity with real-time, automated validation. AI, automation, and blockchain will improve interoperability, security, and efficiency in EDI systems across industries.