EDI

1.1 What is EDI?..........................................................................................................

1.2 Advantages of EDI.................................................................................................
1.3 What is EDI for?.....................................................................................................
1.4 What does an EDI document contain?...................................................................
1.4.1 The Order..........................................................................................................
1.4.2 The Despatch Advice........................................................................................
1.4.3 The Invoice........................................................................................................
1.5 EDI Standards........................................................................................................
1.5.1 Why do we need standards?.............................................................................
1.5.2 Who writes the standards?................................................................................
1.5.3 Why are there so many standards?...................................................................
1.5.4 What is an EDI message?.................................................................................
1.5.5 How do I read an EDI message?.......................................................................
1.5.6 EDI message example......................................................................................
1.5.7 VDA Standard…………………………………………………………………………
1.5.8 EDI Implementation…………………………………………………………………..

EDI Core Standards iii

1 A beginner's guide to EDI
1.1 What is EDI?
EDI stands for Electronic Data Interchange. EDI is the exchange of structured data in
electronic form direct from one computer system to another. The data is transferred
electronically between two parties, usually a supplier and a customer.

The two parties are known as trading partners. The most common trading partner
relationship is that of supplier and customer. Sometimes there may be a different
relationship, such as that of seller and buyer, payee and invoicee, or supplier and
carrier. Each trading partner may play different roles during the business process, as
illustrated in the diagram below, or each role may be played by a different partner.

The data transferred between the trading partners is business data, such as orders,
despatch advices and invoices, in the form of standardised documents. They have to
be standardised so that they can be deciphered by the computer system that receives
them.

1.2 Advantages of EDI

One of the aims of EDI is to reduce the time taken for documents to be transferred
between trading partners, and, where possible, to remove the need for the keying in of
data to their computer systems.

In order to conduct business, the customer and the supplier are involved in a two-way
communication that includes some or all of the following actions:

 The customer requests a price list from the supplier.

 The supplier sends the customer a price list.
 The customer and supplier agree a contract for the supply and purchase of
products/services.
 The customer sends an estimated order (forecast) to the supplier.
 The customer sends a definite order to the supplier.
 The supplier sends an order acknowledgement to the customer.
 The supplier sends an advance shipping notification to the customer.
 The supplier ships the order together with an advice note.
2 A beginner's guide to EDI
 The customer receives the goods.
 The customer sends the supplier confirmation of delivery.
 The supplier invoices the customer for the order.
 The customer, upon receipt of the supplier’s invoice, checks that the goods delivered
match the goods being invoiced, and then pays the supplier.
 The customer sends the supplier a remittance advice note.

Before EDI, these business activities would have been formalised by the use of paper
documents, such as a Purchase Order or an Invoice. These documents were used to state
requirements, make agreements and provide other kinds of business information. Since they
were paper-based they had to be posted or faxed. Posting involved extra delay, which meant
that the data could be out of date by the time it was received. Both posting and faxing meant
that data contained in the documents had to be typed into the computer system when it was
received.

With EDI, the time taken to transfer information electronically between trading partners is
minimal. In many cases, partners can communicate with each other directly, so that data
transfer is practically instantaneous. Even when communication is via a third party the
information is usually available within minutes.

Another advantage of EDI is that data received electronically can be integrated into existing
computer systems without the need for time-consuming and error- prone manual data entry.

1.3 What is EDI for?

EDI makes it quick and easy for trading partners to send each other information relating to
their everyday business transactions such as ordering, shipping and invoicing.

It not only speeds up these transactions but increasingly, as more companies integrate their
internal business systems, results in fewer errors because less data has to be processed
manually.

1.4 What does an EDI document contain?

For both paper documents and EDI documents, there is always a minimum amount of data
required. Without this minimum, the document does not fulfil its purpose. For example, an
order should state which products are required, what quantity of each product is needed,
when they should be delivered and to which address they should be sent. If the delivery
address is not given, we would end up with the situation where the goods have been
produced and packaged up, but left lying around because we don't know where to send
them!
The data contained in the electronic documents is essentially the same as that which used to
appear on the paper documents. Let's take a look at the information that might appear in
each type of document….

1.4.1 The Order

We would expect an order to provide the following details:

 the name and address of the customer who is ordering the goods
 the products/services that are required
 the required quantity of each product
A beginner's guide to EDI 3
  the date(s) on which or by which the products/services must be supplied
 the place(s) to which the products/services must be delivered

1.4.2 The Despatch Advice

We would expect a despatch advice to provide the following details:

 the name and address of the supplier

 the products/services that are being supplied
 the quantity of each product that is being supplied

1.4.3 The Invoice

We would expect an invoice to provide the following details:

 the name and address of the supplier and the customer

 the products/services for which payment is requested
 the cost of each product/service and/or the total cost of all products/services included
on the invoice
 the date on which or by which payment is requested
 VAT details
 the name and address of the party to whom payment should be made

The details shown above for each type of document are only a minimum, required to make
the document meaningful. Other details can easily be included in EDI documents, where
space on a sheet of paper is not a factor to be taken into account.

1.5 EDI Standards

1.5.1 Why do we need standards?

EDI documents are intended to be sent, received and interpreted by computers. For the
interpretation to be successful, the data must be in a format that both computers can
understand. Use of standards minimises the difficulties and expenses that would result if each
trading partner were to impose its own formats on every partner with which it does business.
1.5.2 Who writes the standards?

A number of EDI standards bodies exist, whose purpose is to develop and maintain sets of
EDI messages (in EDI terminology, an EDI document is usually referred to as a message).
The standards bodies we shall refer to in this document are EDIFACT, ODETTE, EAN (and
its members), VDA and ANSI. Each of these bodies has developed its own set of EDI
messages.

1.5.2.1 EDIFACT

EDIFACT (Electronic Data Interchange for Administration, Commerce and Transport) is the
body which develops the United Nations rules for EDI. EDIFACT usually publishes a new set
of EDI messages each year, incorporating any new messages and amendments to existing
messages, and calls each of its yearly publications a Dictionary. Each dictionary is named
according to the year of its publication, whether it is a draft version (D) or the definitive
standard (S), and whether it is published in the first (A) or second (B) half of the year. So, for
example, the dictionary named D96A is a draft standard published in the first half of 1996.
4 A beginner's guide to EDI
Quite often, only the draft version of a dictionary is issued, but EDIFACT standards are so
robust that they are as good as a standard version and, indeed, are used as such by many
companies.

1.5.2.2 ODETTE

ODETTE (Organisation for Data Exchange by Tele-Transmission in Europe) is an

organisation formed by and for the automotive industry. Originally it developed its own distinct
set of messages but now only develops subsets of those EDIFACT messages used by the
automotive industry.

A subset is a smaller version of a full EDI standard, usually developed for a specific business
sector.

1.5.2.3 EAN

EAN stands for European Article Numbering. The EAN association is an international
standards body with members in individual countries. The members may develop their own
EDI standards for use within their own country. The Tradacoms standard for the UK retail
trade was developed in this way.

1.5.2.4 VDA

VDA stands for Verband der Automobilindustrie (i.e. association of the automobile industry).
The VDA is a standards body set up by the German automotive industry that has developed
its own set of EDI messages for use in that industry. The VDA messages are not strictly EDI,
because they do not have all the usual characteristics of EDI messages, but they are
accepted as EDI messages by the UK automotive supply industry.
1.5.2.5 ANSI X12

ANSI stands for American National Standards Institute. ANSI X12 is an American standard,
whose EDI messages are called Transaction Sets. This standard is rarely used in the UK.

1.5.2.6 Company standards

Although the standards bodies above provide comprehensive standards that can be used by
any company of the sector they were written for, it is often the case that individual companies
adopt these standards but issue their own "Message Implementation Guidelines". These
Guidelines usually state explicitly what information is to be contained within messages
exchanged between the individual company and its trading partners. The result of this may
be, for example, that a supplier who trades with two different automotive manufacturers may
be required to send the same message type to both manufacturers, but that the contents of
those messages will differ according to which manufacturer they are intended for.

1.5.3 Why are there so many standards?

In the very early days of EDI, groups of partners would simply agree among themselves what
data to send and how to position it in the file, but this soon became impractical as EDI grew in
popularity.

At this point, groups of users with a common interest got together to develop the first
standards. Such groups tended to be those from a common business background, such as
the automotive or retail industry, and the standards they developed were intended for use
A beginner's guide to EDI 5
specifically by their own industry. This stage saw the emergence of such standards bodies as
ODETTE and ANA, which developed standards for the UK automotive and retail sectors
respectively. At the same time, similar bodies were being established in other countries, such
as VDA for the automotive industry in Germany.

Other standards bodies, such as EDIFACT, have developed standards that can be used by
any industry.

1.5.4 What is an EDI message?

An EDI message provides a means of transferring data electronically from one partner to
another. Each EDI standard defines many different types of message. Each message is used
for a different purpose e.g. the EDIFACT DELFOR message is used to place an order with a
supplier, the EDIFACT DESADV message is used to inform a customer of a despatch that is
on its way to him. Similar messages will exist under other standards.

Although each message has a descriptive name, such as Delivery Forecast or Despatch
Advice, they each also have a shorter name such as DELFOR for Delivery Forecast and
DESADV for Despatch Advice. Usually this is an abbreviation of their descriptive name, as in
the examples given, but some standards, such as VDA and ANSI X12, use numbers for their
naming convention.

1.5.5 How do I read an EDI message?

An EDI message is, essentially, a computer file containing structured data. Usually it will
contain characters which separate one piece of data from the next, but never any
explanations of what the data represents. The standards explain fully what data may be
transmitted in each document, and how the data is to be laid out in the file. If the standards
are adhered to, then all partners using the same standards can decipher the data.

1.5.6 EDI message example

Each message is made up of a number of "segments", and each "segment" is made up of a

number of "elements" and, sometimes, "composite elements". Let's take a look at these
different components of a message.

Below is a sample EDIFACT EDI message.

Example EDIFACT EDI Purchase Order

UNB+UNOA:1+US::US+50138::THEM+140531:0305+001934++ORDERS'
UNH+1+ORDERS:91:2:UN'
BGM+220+A761902+4:20140530:102+9'
RFF+CT:EUA01349'
RFF+AAV::C'
TXT+THIS IS WHAT AN EDI MESSAGE WOULD LOOK LIKE... '
NAD+BY++OUR NAME PLC::::+++++EW4 34J'
CTA+PD'
COM+01752 253939:TE+01752 253939:FX+0:TL'
CTA+OC+:A.SURNAME'
COM+2407:EX'
CTA+TI+:B.BROWN'
COM+0:EX'
CTA+SU'

6 A beginner's guide to EDI

 COM+0161 4297476:TE+01752 670633:FX'
UNT+15+1'
UNZ+1+001934'

Example Message - Segment tags are shown in bold e.g. UNB

Note: Data elements that could identify the participants have been changed, although the text is based on
a live transmission.

Service Segments in above message

Service Segments are used to keep track of the transmission. The most common set is shown below.

 UNB - Start of Interchange

 UNG - Start of Group
 UNH - Start of Message

 UNT - End of Message

 UNE - End of Group
 UNZ - End of Interchange

Normally, any EDI message would consist of a long unbroken stream of data, but for
illustration purposes the message above is shown with each "segment" on a new line.

As you can see, the data in this message looks pretty meaningless, so let's break it down to
show how it can be deciphered.

1.5.6.1 Separators
The + signs and : characters are used throughout this message to separate one piece of
data from the next within a segment.
1.5.6.2 Segments

Segments are used as a way to break up the information within an EDI message and to give
the information some structure. Each segment in this message is separated from the next by
a ' character (single quote)

1.5.7 VDA Standard

The VDA standard differs from all the other EDI standards we have talked about. Instead of
using special characters to divide each segment from the next and each data element from
the next, a VDA message consists of fixed length records within which each item of data is
allowed to take up a specific number of characters. If any item of data is omitted, its absence
must be shown by a space the same length as the omitted item of data.

Another difference is the naming convention of the messages and their records. Each VDA
message has a number instead of a short name, so it has messages such as the 4913 and
4905. Since each VDA record contains a variety of data it cannot easily be given a
meaningful name such as QTY. Instead, another naming system using numbers is used. For
example, within the 4913 message the records are called 711, 712, 713 etc.

Although these differences exist between the VDA standard and other standards, their

A beginner's guide to EDI 7

messages are still treated as proper EDI messages.

1.5.9 EDI Implementation

EDI has become firmly established throughout the business world in recent years. There are EDI
specialists and a variety of EDI-related organisations that can support a company in implementing its
own EDI solution.
Since EDI implementation can be complex in both technical and organisational terms, a systematic
approach and the structured application of typical implementation processes as described in the
following examples are helpful:

Step 1: Requirements analysis

Right at the start, you should clarify the following points on your own or together with your EDI
service provider:

 What business processes (orders, invoices) should be supported?

 What business processes have the greatest strategic potential in EDI implementation?

 What data or information should be exchanged?

 Should data only be sent, only be received, or both sent and received?

Step 2: Build up the organisation structure

For EDI implementation, it is important to decide on a strategic basis and to equip the project team
with the necessary resources and expertise. EDI coordinators and teams must be capable of driving
the implementation within the company’s organisation.

Step 3: Selection of the ideal EDI solution (in-house or EDI service provider)
In order to ensure automated data processing, companies need special EDI software that supports the
message standards and your interface requirements. Inform yourself about the solutions available on
the market or weigh the pros and cons of an EDI outsourcing solution. Today, building up an in-house
EDI infrastructure only makes economic sense for a very small number of companies.

Step 4: Compile your information

 A variety of information is required for implementation and roll-out:

 Your GLN: Ensure that your company is in possession of the necessary identification numbers
such as the Global Location Number (GLN) or apply for the number.
 Description of the exchange format
 Customer key contact
 Necessary written agreements (e.g. EDI agreement)

8 A beginner's guide to EDI

 Step 5: System and data integration
The necessary infrastructure must be set up (in-house model) or the communication connection to
your EDI provider (outsourcing model) needs to be established according to your company’s
operational model. Then, the interfaces to your internal ERP system must be supplied or adapted.
Mappings have must be developed in order to depict the individual business processes. EDI providers
very often have a wide range of EDI mappings available. 

Step 6: Tests and start

Once the EDI system has been implemented or all of the requirements have been fulfilled by the EDI
provider, pilot project testing is conducted with a customer. Once these tests have been concluded
successfully, there are no further obstacles to electronic communication with your business partners in
actual business operation.

A beginner's guide to EDI 9