EDI 101 Guide - 1 EDI Source

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a division of EpicorEDI 101 Guide

TABLE OF CONTENTSChapter 1: What is Electric Data Interchange (EDI)?Chapter 2: Six Good Reasons to Use EDIChapter 3: The Process of Exchanging EDI Data2-345-7Chapter 4: Four Ways to Implement & Manage EDI8Chapter 5: Five Steps to Empowering EDI9Glossary of Terms10-11Common Transaction Sets12Getting Started12a division of Epicor 1

Chapter 1What is Electronic Data Interchange?EDI is a set of standards developed in the 1960s that defines common formats forinformation to be exchanged electronically between two organizations that do businesstogether—or “trading partners.” In practice, it allows companies to speak the same languageelectronically and communicate more efficiently.Before EDI was widely adopted, companies conducted business by sending paper documentsusing mail and couriers. Even with access to modern technology, some still operate usingthese paper-based processes. EDI eliminates much of that manual processing – and theinefficiencies that come with it – by automating the electronic flow of the same informationin packets of formatted data. Documents exchanged through EDI may include invoices,purchase orders, advance shipping notifications, student transcripts, healthcare claims andmany more.EDI STANDARDSTrading partners communicating with EDI must first follow the same standards for formatting thedata. This way they (or their computers) know where to find “elements” — individual data unitsthat include dates, item numbers, prices, order quantities and other information withinthe message.EDI standards define both what pieces of information are required and optional for a particulardocument, as well as the rules for the structure of the document. In the U.S., organizationstraditionally follow standards set by the American National Standards Institute (ANSI), a private,nonprofit organization that oversees the development of voluntary consensus standards forproducts, services, processes and systems. An ANSI committee developed the most commonstandard for EDI, often referred to as “ASC X12” or just “X12.”Outside the U.S., the international EDI standard is Electronic Data Interchange for Administration,Commerce and Transport (EDIFACT), which was developed under the United Nations.EDI GUIDELINES OF SPECIFICATIONSIndividual trading partners have their own sets of rules and preferences for EDI, typically laidout in a manual called an “implementation guide.” Guidelines often are based on a given EDIstandard, with some additions, exceptions and changes based on a company’s preferences. Thesedifferences are akin to local variations in language – both businesses speak EDI, but with differentdialects. When creating EDI to send to a trading partner, companies should consider how data willbe organized according to the EDI standard and the specific requirements of each, referencingtheir implementation guides.a division of Epicor 2

Chapter 1What is Electronic Data Interchange?EDI FORMATSEDI transactions represent one or more individual documents. In the ASC X12 standards, eachdocument type is referenced by a three-digit number. (See page 11 for more on transaction sets.)EDI can include documents in many formats, such as XML, CSV, fixed length and evenspreadsheets; however, EDI traditionally represents one formatting structure for data followingindustry standards.EDI DATA STRUCTUREAn EDI file contains data organized into groups and smaller units. This data represents particulartransactions that replace traditional documents. EDI standards were developed at a time whenthe transmission of electronic data was very expensive, so the most widely adopted standardsrepresent data in a very compressed format, limiting the size of the transmitted files.Following the ASC X12 standard, each document represented in an EDI transaction contains astring of data elements divided into rows called “segments.” The elements are separated by asymbol—known as a delimiter —used to distinguish data elements (element separators)or to indicate the end of a segment (segment terminators). Each segment begins with a segmentidentifier indicating what type of data is being presented. A block of segments containing relateddata that can repeat is called a “loop.” The combination of data that forms a single message ordocument is called a “transaction set,” according to the X12 standard. Multiple transaction setscan be grouped and transmitted together in a package called an “envelope.” When the transactionsets are related in function, the grouping is called a “functional group envelope.” Functionalgroups from the same trading partner are grouped into an “interchange envelope,” and a series ofinterchanges from different trading partners form a “transmission.”a division of Epicor 3

Chapter 2Six Good Reasons to Use EDICompanies often view EDI as a burden placed on them by trading partners, butimplementing EDI can provide a number of tangible benefits. Your company may have littlechoice but to use EDI, as it’s often required by many larger organizations, especially bigretailers, manufacturers and government agencies. Integrating EDI allows companies togrow their business and provides:SECURITYCOST SAVINGSAs EDI automates the flow of information, reducing humaninteraction, companies can save money in a variety of ways,including reduced: Overhead costs related to manual document management Printing and paper costs Data entry errors, leading to heightenedcustomer satisfaction Inventories and inventory carrying costs Risk of penalties or chargebacks for errors orfor not following guidelines correctly.ACCURACYData sent via EDI is never physically “touched,” reducingthe likelihood of costly errors and promoting strongerrelationships between trading partners. Manual andduplicate data entry is eliminated, and, with internalintegration, orders received via EDI can flow throughyour entire process exactly the way they were prepared.VISIBILITYEDI allows users to share valuable information with tradingpartners, including product sales data, inventory statusof products and component parts, demand forecasts andmore. They can then share similar information with theirtrading partners, and so on, all the way down the supplychain. Improving visibility across the supply chain allowssuppliers to plan and respond to changes in demand, bettermoderate inventory levels and prepare for larger ordersbefore they ever arrive.ACTIONABLE MANAGEMENT INFORMATIONEFFICIENCYSending information via EDI takes minutes – sometimesonly seconds. Trading partners can act on received dataimmediately with less manual work, meaning moreefficiency for you and for them. Furthermore, integratingEDI with your internal business or accounting system makesfor a more streamlined workflow. Incoming transactionscan automatically convert to actionable items (i.e. ordersor claims) with minimal human intervention, saving asignificant amount of time.a division of EpicorEDI makes the exchange of critical business or personalinformation more secure since many communicationsprotocols for transferring data include encryption and othersecurity measures, like digital signatures. This is one reasonwhy HIPAA, the U.S. Federal health insurance law of 1996,encourages the widespread use of EDI in the healthcaresystem. EDI also provides a data trail. Orders, shipments, claims,loan applications, inventory status and other businessfunctions can more easily be tracked and compiled forfurther manipulation and analysis. Data can be mined andspecific functions, while transactions and information ontrading partners can then be assessed for trends, errorsor redundancies providing actionable information to helpguide business management decisions.4

Chapter 3The Process of Exchanging EDI DataMost EDI-based transactions are the same as those you would traditionally handlewith paper documents, the lone difference being that all EDI information is sent andreceived electronically. This Chapter explains the steps in the process.FIVE STEPS IN THE EDI PROCESSThree major processes involvedin the mapping of EDI data:Sender extracts data from a back end businessor accounting system;Sender maps that data into the proper EDI formatto be transmitted;EDI file is translated in preparation for transmission;Sender transmits the message – the outbound data –to the recipient;Recipient translates the inbound data and providesthe sender with a digital receipt called a “functionalacknowledgment.”MAPPINGInvolves transforming an EDI document into anotherformat (such as XML, a flat file, a delimited file, etc.)or vice versaTRANSLATIONThe process of accepting in bound EDI data, orpreparing an outbound file for transmissionCOMMUNICATIONSRefers to the transmission of the EDI transactionSEND EDI DATA TO YOUR TRADING PARTNERExtract datafrom BackOffice SystemMap data toEDI FormatTranslateEDI Data inPreparation forTransmissionSend EDI Datato TradingPartnerProcess andReconcile FATranslate andValidate EDIDataReceive EDIData fromTrading PartnerRECEIVE EDI DATA FROM YOUR TRADING PARTNERIntegrate Datato Back OfficeSystemMap EDI Data toInternal DataFormatUNDERSTANDING FUNCTIONALACKNOWLEDGMENTSGenerate andsend FA toTrading PartnerFunctional Acknowledgments (FA) 997 and 999 are digital receiptsmeant to confirm the successful transmission of EDI data and notifysenders that it is structurally acceptable, with three possible outcomes: Accepted. The EDI message conforms to all agreed upon EDI standards Accepted with Errors. The EDI message does not meet the EDIstandards, but is sufficient to be processed by the trading partner Rejected. The EDI message does not meet the EDI standards andis not being processed by the trading partnera division of Epicor 5

Three Major Processes Involvedin the Exchange of EDIMAPPINGElectronic information typically resides within a software application on a computer ormainframe. As long as it is possible to import and export files from that application, (such as XML,a flat file, a delimited file, etc.), pertinent information can be extracted and mapped to an EDItransaction.The function of mapping outbound data involves establishing what information from the businessor accounting software, (the data source), goes where in an EDI file (the data destination). EDIsoftware allows you to map EDI data and then save that map like a template to use repeatedly,allowing for quick conversion of information in the future. Multiple data maps can be created toaccommodate each trading partner’s unique specifications or data requirements.When inbound data is received, it also must be converted to a format your business or accountingsystem can understand. Through system integration, the EDI data can be mapped to automaticallyand seamlessly load into your internal system.TRANSLATIONWhen an inbound transmission is received by the EDI software, the file must be brokendown, or “parsed”, to identify everything it contains and what actions should be taken. EDItranslation software will determine what trading partners and individual transactions areincluded in a transmission, and whether there are any duplicates.The senders of each transaction are validated as legitimate trading partners and thefile structure and individual data fields of each are analyzed for compliance with EDIstandards. If required, an FA is sent to the trading partner. Only then is the data mapped andapplied to your internal business system.A similar process occurs when preparing an outbound file for transmission. The translator willprepare the transaction(s) and await receipt of the appropriate acknowledgment(s).a division of Epicor 6

COMMUNICATIONSThe actual transmission of EDI data requires a communications connection which come in bothdirect and indirect varieties.Indirect connections with trading partners are done through a value added network (VAN).Often referred to as the “electronic post office,” a VAN is a third-party service that transmits andstores data in an “electronic mailbox” until it is picked up by the appropriate party. Since the EDImessage contains addressing information, the VAN routes the message to the mailbox ofthe recipient.Direct connections allow trading partners to transmit data directlyto each other over the Internet via: EDIINT, commonly known as applicability standard 2 (AS2); A virtual private network (VPN); or FTP, sFTP or FTPs.Core Functionality of an EDI TranslatorCommunications Protocols DefinedSuccessful EDI translators provide features such as: FTP—transferring files over a TCP-based network suchas the Internet Validation of the document’s adherence to EDIstandards as agreed upon with your trading partner; Document checking to flag redundant EDI messagesand ensure that duplicate documents don’t createunnecessary work or confusion; & Functional acknowledgment reconciliation that alertsEDI teams when inbound and outbound documentsdon’t match up with corresponding FAs. FTPs—FTP secure is FTP with support for encryptionprotocols TLS or SSL sFTP—SSH-FTP is using FTP with the SSH (secure shell)security protocol AS1—EDIINT standard for sending EDI dataencapsulated within MIME email messages (SMTP) AS2—EDIINT standard for EDI transmissions over theInternet (HTTP) with SIMIME encryption AS3—EDINT standard for using FTP with SIMIMEencryptiona division of Epicor 7

Chapter 4Four Ways to Implement & Manage EDIThere are a number of ways to implement EDI in your organization. You can choose tomanage it yourself in-house or outsource the entire function. Here are your options:WEB-BASED EDI SOLUTIONINSTALLED SOFTWAREGreat for small companies that are new toEDI and need to make a quick, inexpensiveinitial connection. The platform mimicsemail where EDI messages are importedinto an inbox and responded to withpre-populated data forms.Best option for companies with many tradingpartners and high monthly transaction volumesthat want full control over their EDI operation.Requires an investment in hardware and software;full integration with back-end business andaccounting systems; and EDI and IT personnelto manage and support the function.MANAGED SERVICESCLOUD-BASED EDI SOLUTIONA fully outsourced option designed to servelarger organizations that do not want toinvest in additional personnel to managethe day-to-day EDI operation. Managedservices handles all routine activities andtrading partner onboarding, while providingongoing support for every party involved.Best option for companies that want to maintainall the flexibility and control that an installedsoftware option provides, but don’t want tomanage the IT infrastructure.7 Questions to Help Determine The Best Solution for You!Take a moment to answer these questions:How many trading partners will you need toexchange EDI with?Do you intend to integrate the EDI data with yourback office systems?What types of transactions do these tradingpartners require?Are you able to provide data from your back officesystem for all of your trading partner needs, or willyou need a system that allows you to manuallycreate EDI data?How often do you expect to receive a transactionfrom these trading partners?For each trading partner, will you need to sendtransactions to a single specified location, ormultiple facilities?a division of Epicor Do you have the resources to manage an ongoingEDI operation inclusive of new trading partneronboarding and operational data managementresponsibilities?8

Chapter 5Five Steps to Empowering EDIThe value of EDI does not stop at the initial connection. In fact, EDI can help you totransform your business and achieve operational excellence. Following these steps canget you there.LEVEL 1: CONNECTLEVEL 4: EMPOWER COLLABORATIONWhen the goal is to make an initial connection andthe transaction volume is low, it’s best to employ aWeb-based EDI solution. This satisfies trading partnerrequirements and allows you to do business with them,but EDI remains a manual process for you.Prior to EDI, sales teams handled orders manually,shipments were loaded onto trucks by the fulfillmentteam with bills of lading, and invoices were sentby accounting personnel. Everyone involved wasintimately familiar with transactions.LEVEL 2: AUTOMATE VOLUMEAs the number of documents increases to more than100 per month or your trading partners expand beyondthree, you should explore automation opportunities.This involves mapping the EDI data to a format thatcan be integrated into your back-office system, givingyou the ability to automatically send data to tradingpartners with little or no human interaction.Automation can save your company money andtime through reduced manual processing whileimproving data accuracy.LEVEL 3: AUTOMATE INTEGRATION RULESEven after integrating data with your back-officesystems, you may still find yourself reviewing the EDIdata manually. Perhaps ship-to locations are not yetset up in your ERP, causing errors when loading theorder. Or maybe the price a customer included on theirorder doesn’t match the internal price that you have inyour ERP, forcing you to override the trading partner’sexpectations or undermine your internal price controls.You can solve this problem by building business rulesright into your data integration process, enhancingorder accuracy and limiting unnecessary frictionwith trading partners. Best of all, it increasesefficiencies, since you won’t need to manuallycheck orders anymore.a division of Epicor With automation, cross functional teams can easilylose visibility into the process. To keep customers andtrading partners happy and improve supply chainvisibility, empower everyone in the organization tore-engage with the most critical business processesby exposing them to EDI data.LEVEL 5: APPLY INTELLIGENT LEVERSEDI documents sent to your trading partners representmilestones within your own internal business processes,so information about these documents can alsodescribe the effectiveness of your different internalteams. In addition to the contextual business rulevalidation, companies are now able to track trendsover time to assess issues in their internal businessprocesses that can be improved in an effort totransform business operations.Integrating EDI data with back office systems andproviding the needed visibility into the process foryour stakeholders can position your company toleverage the full potential of EDI data. As EDI is astandard with common data structures, reusablebusiness rules may be leveraged to ensure that data isintegrated successfully and that the actual content andcontext of the data is correct. Checking the EDI data forcontent issues may illuminate a variety of opportunitiesto improve trading partner relationships, such asmaking sure prices on invoices and customer ordersmatch and that Advanced Ship Notices are beingsent on time.9

Glossary of TermsANSI (American National Standards Institute): A voluntarycommittee that coordinates standards. Its subcommittee,the ANSI Accredited Standards Committee (ANSI ASC)recommends a standard referred to as ANSI ASC X12 orsimply X12.AI (Artificial Intelligence): Ability for computer systems tobe able to perform certain human tasks such as being ableto translate between languages, make new decisions basedupon prior training, and interrupt visual imagery. AI usesa large data set to train the software algorithm and thenintroduce it to new situations to make interferences basedupon its prior training.ASN (Advance Ship Notice or Advance ShippingNotification) (EDI 856): A notification of forthcomingdelivery details of product.AS2 (Internet Applicability Statement 2): Specifies how totransport data and the means to connect, deliver, validateand reply to data in a secure and reliable manner. AS2Software specifically supports transmissions using the AS2protocol, such as AS2 Complete from 1 EDI Source.Blockchain: List of records or blocks that are linkedtogether using cryptographic technology with each blockcontaining transaction record data, a unique timestamp,and a cryptographic hash of the previous block. Blockchaintechnology is used to design a distributed ledger whereall nodes (devices) in the network have an identical,decentralized copy of the ledger that are written toindependently instead of a centralized data repository.Cloud: Cloud software is the means of storing and accessingdata and applications from a vendor’s servers instead ofbeing installed on the client’s own servers and computers onpremise.Communications Session: The uninterrupted flow of datafrom one computer system to the other.Compliance Checking: A process for ensuring that the EDItransmissions comply with the established rules.CSV File (Comma Separated Values File): A File format inwhich the data elements are separated with commas, alsoknown as a Comma Delimited File.a division of Epicor Data Element: The smallest unit of EDI information. A dataelement could be a code, a name, a quantity or any otherindividual piece of information.Data Mapping: The method by which information in oneformat is restructured into a different format.Data Warehouse: Type of data repository that containsstructured data from different sources that can be used forreporting and analytics to gain new data insights.EDIFACT (Electronic Data Interchange For Administration,Commerce and Transport): International EDI standarddeveloped under the United Nations with strong adoption inEuropean countries and the automotive industry. EDIFACTserves as an alternative standard to the ASC X12 EDI standardwidely adopted in the United States. EDIFACT can also becalled the United Nations Rules for Electronic Interchange forAdministration, Commerce and Transport (UN/EDIFACT)EDIINT (EDI over the INTernet): The ability to send EDI datadirectly over the Internet without the use of a VAN provider.Electronic Mailbox: Term referring to the place (locatedwithin a third party’s provider system) where an EDItransmission is stored for pickup or delivery.Fixed Length: Term that describes a data field with anestablished number of characters.Flat File: Alphanumeric and/or numeric files with no controlcharacters, used for transferring data.Functional Acknowledgment (FA) (EDI 997): An EDItransaction set sent from the receiver of the EDI transmissionto the sender. The EDI 997 indicates receipt and acceptabilityof data and allows the receiver to notify the sender ifproblems have been encountered within the data.FTP (File Transfer Protocol): Standard Internet protocol fortransferring files. FTPs (File Transfer Protocol secure) usesFTP with support for encryption protocols TLS (transportlayer security) or SSL (secure socket layer) to provide greatersecurity in transferring files.10

Glossary of TermsGS1-128 (formerly UCC-128): Application standard usingthe Code 128 barcode specification to generate a scannable,barcoded label located on the outside of a shipping cartonenabling the exchange of data between companies onphysical goods. GS1 is the organizational body that managesthe standard.IoT (Internet of Things): Interconnection of computingdevices to send/receive information via the Internet. Thecomputing devices are everyday objects from sensors towearables to anything that has a processing chip that cancommunicate over the Internet. This is extended to industrialIoT or IIoT that focuses on the application of IoT technologyto industrial and manufacturing processes.ODBC (Open Data Base Connectivity): A standard softwareinterface for injecting and extracting data to and fromcomputer systems, such as business or accounting softwareapplications.Protocol: Rules that determine the format and transmissionof data between the sender and the receiver.REST (Representational State Transfer): Softwarearchitectural principles that defines a set of constraints whencreating web services over a standardized interface such asthe HTTP protocol. REST doesn’t contain a messaging layerand instead focuses on best practice rules when creatingstateless services.SaaS (Software as a Service): SaaS software is a modelwhere customers access a cloud hosted application overthe Internet. In this model, the customer is typically alwaysrunning the most current version of software and doesn’thave to manage the software infrastructure / hostingrequirements.Segment: A grouping of one or more data elements thatappears as a line of information within an individual EDImessage.sFTP (SSH File Transfer Protocol): Using FTP with the SSH(Secure Shell) security protocol provides a secure connectionfor file transfer encryption both the authenticationinformation and data files being transferred.Trading Partner: The business with which you areexchanging data.Transaction Set: The electronic version of a writtendocument.Translator: A software tool that accepts or converts datafrom irregular, enterprise-specific formats into an orderedand standardized structure that is compliant with EDIstandards.VAN (Value Added Network): A third-party EDI serviceprovider that supplies a communication link betweencompanies so they may exchange electronic transmissions.X12: A standard of EDI that has been widely adopted inNorth America and is governed by the ANSI standardscommittee.XML (Extensible Markup Language): A simple and flexibletext format designed to meet the needs of electronicpublishing.Web Service: A service that enables electronic data transferbetween applications or electronic devices using a webconnection with HTTP being the most widely used protocol.Common web services use SOAP, REST, and XML-RPC.Web API (Application Programming Interface):Programmatic interface of clearly defined, exposedendpoints enabling external systems to communicate withthe software to request data from or post new data to thesoftware.SOAP (Simple Object Access Protocol): XML-basedmessage protocol using HTTP or SMTP as the transportcommunication protocol. SOAP uses a WSDL (web servicedescription language) file to describe the functions that canbe implemented or exposed.a division of Epicor 11

Common Transaction SetsManufacturing/Retail810 - Invoice850 - Purchase Order855 - Purchase Order Acknowledgment856 - Advance Ship Notice864 - Text MessageReady to GetStarted?ProcurementThe EDI experts at 1 EDI Source are here to helpyou not only learn EDI, but also provide theexpertise, experience and solutions that will helpyour business grow. We have a full suite of EDIsoftware and solutions perfect for your uniquebusiness needs.940 - Warehouse Shipping Order943 - Warehouse Stock Transfer Shipment Advice944 - Warehouse Stock Transfer Receipt Advice945 - Warehouse Shipping Advice947 - Warehouse Inventory Adjustment AdviceHealthcare270 - Eligibility, Coverage or Benefit Inquiry271 - Eligibility, Coverage or Benefit Information276 - Health Care Claim Status Request277 - Health Care Claim Status Notification834 - Benefit Enrollment and Maintenance835 - Healthcare Claim Payment Advice837 - Healthcare ClaimFreight, Trucking and Logistics204 - Motor Carrier Shipment Information210 - Motor Carrier Freight Invoice211 - Motor Carrier Bill of Lading212 - Motor Carrier Delivery Trailer Manifest214 - Transportation Carrier Shipment Status MessageWhether you choose a web-based, managed,installed or cloud-based EDI solution, we havea product that will exceed expectations. Wealso provide communication, integration andmigration services to help complete your solution.If you have questions about EDI, or you’re ready toget started, contact us and we’ll walk you throughwhat EDI option is best for you and be your guidethrough the entire implementation and beyond.In no time at all, EDI will become a natural part ofyour business. And through our ongoing training,you can learn as much or as little as you’d likeabout the solution, process and ways tomaximize success.OtherContact Us Today!753 - Request for Routing754 - Routing Instructions811 - Consolidated Service Invoice/Statement812 - Credit/Debit Adjustment820 - Payment Order/Remittance Advice997 - Functional AcknowledgmentCall: 877.334.1334Email: sales@1edisource.comVisit: www.1edisource.coma division of Epicor Call 877.334.1334 today!sales@1edisource.com www.1edisource.com 2019 1 EDI Source, a division of Epicor. All rights reserved.12

MAPPING Involves transforming an EDI document into another format (such as XML, a flat file, a delimited file, etc.) TRANSLATION The process of accepting in bound EDI data, or preparing an outbound file for transmission COMMUNICATIONS Refers to the transmission of the EDI transaction Accepted. The EDI message conforms to all agreed upon EDI .

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