For many companies around the world, electronic data interchange (EDI) documents are the backbone of B2B transactions. These standardized forms define the specific formats and protocols businesses use to exchange data electronically, allowing them to process information efficiently and reliably. At first, deciphering EDI documents might seem like cracking a complex code, but this guide breaks down everything you need to know to get started.
What Is an EDI Document? EDI Documents vs. EDI Transactions
An EDI document is a digital version of a business file exchanged between two parties in a standardized format, replacing traditional paper-based communication to ensure consistency and accuracy.
Conversely, EDI transactions refer to the actual exchange of these documents between systems. For example, instead of mailing or faxing a printed invoice, businesses now send electronic EDI messages that streamline workflows and reduce manual effort.
How EDI Formats Work
EDI formats follow strict structure guidelines that allow different receiving systems to interpret the same document. Every data element has a predefined location, making the information the document contains easy to process.
Let’s take a look at the four core principles that shape EDI formats:
Syntax Rules
Syntax rules specify the characters and symbols used in an EDI file and their correct sequence. These rules maintain the file structure's consistency and readability. For example, an invoice file might use an asterisk to separate data elements (e.g., `REF*IA*987654`), ensuring each field is correctly parsed.
Codes
Codes represent standardized information like dates, currencies, and country abbreviations. Dates written as “20231120” (YYYYMMDD) maintain uniform formatting, and currency codes like “USD” identify U.S. dollars in financial transactions. These ensure consistency in how data is interpreted across systems.
Message Designs
Each EDI document uses a specific message design that defines its structure and applicable syntax rules. A shipping schedule (EDI 862) might include segments like delivery dates and product quantities arranged in a specific order to align with just-in-time inventory management. This alignment allows the sender and receiver to work with the same format for smooth communication.
Identification Values
Identification values in an EDI file are defined by the standard being used and are determined by their position in the file or by separators. For instance, in an EDI 850 purchase order, values such as the item's description, quantity, and price are located in predefined positions, ensuring the recipient system can interpret the details accurately.
Key Components of an EDI Document
In EDI formats, business documents are referred to as “transaction sets.” Each transaction set consists of three main components:
Data Elements
Data elements are the individual pieces of information within a document. For example, an item number, country code, or unit price would be considered data elements in an invoice.
Every data element corresponds to a specific EDI standard data type, which determines its format. This includes the minimum and maximum length, accepted code values, and whether the data type is numeric, time-based, or a date.
Segments
EDI segments are groups of related data elements that provide detailed information. For instance, a segment might include the quantity of a product (e.g., "20 lbs") or its unit price.
For each EDI document, the standard specifies:
Which segments are mandatory, optional, or conditional
The sequence in which elements and segments appear
The maximum number of times a segment can repeat
When segments are arranged in the correct order, they form a complete electronic document.
Envelopes
Envelopes act like containers for EDI data, defining where a document or group of documents begins and ends. They make it easier to transmit files electronically, much like an envelope for a physical letter.
Three levels of envelopes exist:
Transaction set envelopes: These contain a single transaction set.
Group envelopes: These collect multiple transaction sets of the same type, commonly required in North America under ANSI X12.
Interchange envelopes:These hold one or more group envelopes and enable communication between sender and receiver.
Common Examples of EDI Document Types
In EDI, transaction codes correspond to specific document types, each tailored to a different process. Here’s a closer look at seven of the most common:
EDI 180 (Return Merchandise Authorization and Notification)
This document is used during the returns process to notify or authorize the return of goods. For example, a retailer might send an EDI 180 to request approval for returning defective or damaged products.
EDI 211 (Motor Carrier Bill of Lading)
Often used in the motor transport industry, this legally binding document provides a detailed description of the shipment. Shippers send EDI 211 to carriers, including details such as shipping terms, dates, origin, and destination.
EDI 301 (Booking Confirmation (Ocean))
This document confirms a shipment booking with an ocean carrier. Sent in response to EDI 300 (Reservation Booking), EDI 301 outlines shipment details to ensure alignment with the original request and provides additional booking information to shippers and carriers.
EDI 404 (Rail Carrier Shipment Information)
Rail carriers use EDI 404 to notify railroads about a shipment and provide key details for the bill of lading. This document can also serve as an equipment release notification or a legal bill of lading for rail transport.
EDI 503 (Pricing History)
Vendors use this document to request a supplier’s pricing history for a specific item. It can also be used to respond to a similar request, helping businesses maintain correct pricing data and expedite price-related inquiries.
EDI 602 (Transportation Services Tender)
This document communicates tender details, including rates, involved parties, and product information. Carriers use EDI 602 to submit new tenders or amend existing ones, while governments may distribute transportation rates to interested organizations utilizing this format.
EDI 754 (Routing Instructions)
Retailers send EDI 754 to suppliers to provide shipment routing instructions. It outlines the preferred carrier, transportation mode, and other shipping details.
Benefits of EDI Documents in Business Operations
Using EDI documents offers businesses a range of benefits that go beyond simple automation. Here are three main advantages:
Enhanced Data Accuracy
EDI documents improve the accuracy of your data by identifying and flagging errors early in the process, reducing the risk of disruptions. Automation ensures reliable data for smoother operations, better forecasting, and greater customer trust.
Cost Savings
Switching to EDI reduces reliance on paper-based processes, cutting costs associated with printing, storage, and mailing. Automating workflows also minimizes the need for manual labor, saving both time and money on routine tasks.
Increased Scalability
Growing businesses often face increased supply chain complexity. EDI systems are designed to scale with demand, helping organizations adapt seamlessly to new challenges. Agile EDI platforms optimize processes, supporting long-term growth without compromising efficiency.
Best Practices for EDI Document Management
Managing EDI documents involves more than just basic organization. Here are three best practices to keep your data secure and processes efficient:
Back Up Data Regularly
Backing up EDI data ensures business continuity in case of cyberattacks, hardware malfunctions, or unexpected system failures. Establishing a consistent backup schedule safeguards critical information and maintains the integrity of your EDI processes.
Secure Data With Encryption and Protocols
Protecting sensitive data during transmission is vital. Implement encryption methods and secure communication protocols, such as AS2 or SFTP, to shield data from cyber threats. This not only prevents tampering but also ensures data remains accurate and secure throughout the exchange.
Conduct Routine Compliance Audits
Routine audits help identify vulnerabilities and ensure your system adheres to industry regulations and standards. Regular reviews improve data security, enhance transparency, and build trust with trading partners. Audits also provide an opportunity to address weaknesses before they impact operations.
How to Read EDI Files
To effectively work with EDI files, it’s important to understand their primary components and how they come together in a standardized format.
Key Components of EDI Documents
Using the X12 standard, one of the most widely adopted EDI frameworks in North America, EDI documents are divided into three main parts: interchange envelopes, functional groups, and transaction sets.
Interchanger Envelopes
The interchange envelope includes a header (ISA) and a footer (IEA) to identify the organizations involved in the exchange. It acts as a wrapper for the entire file, ensuring it reaches the correct recipient.
Functional Group
The functional group organizes related transactions and directs them to specific departments or functions within an organization, such as purchase orders for a sales team. It uses a header (GS) and footer (GE) to mark the beginning and end of a group of transactions.
Transaction Set
This section contains the core content of the document, like order details. Each transaction set begins with a transaction type identifier (ST) and ends with a closing tag (SE) to complete the data exchange.
EDI File Structure
EDI files are made up of segments, each beginning with a segment ID that defines the type of data elements that follow. Segments are separated by terminators or separators, which help systems interpret the file.
For example, a purchase order (EDI 850) might look like this:
ST*850*0001~
BEG*00*NE*123456789**20231117~
REF*IA*987654~
N1*BT*Company Name*92*12345~
In this example, the "~" acts as the terminator, marking the end of each segment. “ST” signals the start of a transaction set. “BEG” identifies the beginning of the purchase order with details like the order type and date. “REF” includes reference numbers like internal identifiers. “N1” specifies details about the buyer, seller, or other parties involved.
Using an EDI Reader
EDI readers help interpret and process EDI files, translating raw data into a format that's easier to understand and work with. These tools operate in three main modes, each designed for specific tasks:
Read-to-End
This mode scans the entire file, including all control transactions and segments, in one uninterrupted pass. For instance, a wholesaler reviewing an entire purchase order (EDI 850) can use this mode to examine all details, such as order numbers, product quantities, and delivery dates.
Streaming
Streaming processes one transaction at a time, allowing users to focus on specific data. For example, a retailer might use this mode to isolate and review a single invoice (EDI 810) for payment, simplifying data analysis for that transaction.
Splitting
Splitting divides the EDI file into smaller, manageable segments or loops. A logistics company, for example, could use this mode to extract individual shipment updates (EDI 214) from a larger transportation document, streamlining the review of delivery statuses.
EDI Documents Demystified and Simplified
Orderful makes EDI management easy by improving visibility, streamlining file transfers, and automating workflows from start to finish. Our platform supports all major EDI standards, messages, and transaction types, allowing you to manage exchanges across a wide network of partners.
Ready to modernize your EDI processes? Request a demo from the experts and see how Orderful can transform the way your business works.