Electronic Data Interchange (EDI) is the computer-to-computer exchange of business data in a publicly published and globally standardised format. EDI is the transfer of structured business data, by agreed message standards, from one computer application to another by electronic means and with a minimum of human intervention.
Despite being relatively unheralded, in this over hyped world of the Internet and World Wide Web, EDI is still the engine behind 95% of all electronic commerce transactions in the world.
The EDI standards were designed from the beginning to be technology independent and can be transmitted using Internet protocols as well as private networks. It is important to differentiate between the EDI documents and the methods for transmitting them. While comparing the bisynchronous 2400 bit/s modems, cleo devices and value added networks to the Internet some people predicted erroneously that EDI would be replaced. These older transmission methods are being replaced by Internet protocols such as ftp, telnet and email, but the EDI documents themselves remain.
EDI documents contain the same data that would normally be found in a paper document used for the same business function. For example an EDI 940 ship-from-warehouse order is used by a manufacturer to tell a warehouse to ship product to a retailer. It typically has a ship to address, bill to address, a list of product numbers (ussually a UPC code) and quantities. It may have other information if the parties agree to include it.
There are three major sets of EDI standards. The UN/EDIFACT is popular in Europe and Asia. ANSI ASC X12 and Uniform Communication Standard (UCS) are popular in North America and are very similar to each other.
These standards prescribe the formats, character sets, and data elements used in the exchange of documents/forms, such as purchase orders (called ORDERS in UN/EDIFACT and TS850 in X12) and invoices.
The standard says which pieces are mandatory, which pieces are optional and give the rules for the structure of the document. The standards are like building codes. Just as two kitchens can be built "to code" but look completely different, two EDI documents can follow the same standard and contain different sets of information. For example a food company may indicate a particular product expiration date while a clothing manufacturer would choose to send color and size information.
Organizations that send or receive documents from each other are referred to as "trading partners" in EDI terminology. The trading partners agree on the specific information to be transmitted and how it should be used. This is done in human readable specifications (also called specs or spec sheets). While the standards are analogous to building codes the specifications are analogous to blue prints. (The specification may also be called a mapping but the term mapping is typically reserved for specific machine readable instuctions given to the translation software.) Larger companies have existing specification sheets and are usually unwilling to negotiate. Often in a large company these sheets will be written to be used by different branches or divisions and therefore will contain information not needed for a particular exchange. (Deviations from and clarification to the specification sheets should alway be obtained in writing.)
Often missing from the specifications are real world descriptions of how the data should be interpreted. This is particularly important when specifying quantity. For example, suppose candy is packaged in a large box that contains 5 display boxes and each display box contains 24 boxes of candy packaged for the consumer. If an EDI 940 document says to ship 10 boxes of candy it may not be clear whether to ship 10 consumer packaged boxes, 240 consumer packaged boxes or 1200 consumer packaged boxes. The use of qualifiers indicating case, pack, box or each often need further clarification.
EDI Translation Software interfaces between the internal system and the global standards. For an "inbound" document it typically it takes the variable length fields of the EDI document, translates the individual pieces of data and then creates a file of fixed lenth fields. For an "outbound" document the translation software queries the internal system, as in the case of an SQL database, or it translates a fixed width file exported by the internal software.
Note: In EDI terminology "inbound" and "outbound" refer to the direction of transmission of an EDI document in relation to a particular system not the direction of merchandise, money or other things represented by the document. For example an EDI 940 document that tells a warehouse to perform an outbound shipment is an inbound document in relation to the warehouse computer system. It is an outbound document in relation to the manufacturer or dealer that transmitted the document.