EDI Gateway & EDI Transactions – Explained

Learn about the most common EDI transactions, what they are and how they work. Find out why you need a good EDI gateway and how it does its job.

Electronic data interchange is used to translate and transmit business information between two parties electronically, for example, when a buyer sends a purchase order to a vendor. In order to perform this communication successfully, there are some standards and protocols you and your partner need to conform to. The standards will vary depending on where you are located and what industry you operate in. Luckily, you don’t need to know a lot about the standards and protocols because there are special service providers who do all the hard work for you. In this article, we are going to explain what EDIEDI stands for Electronic Data Interchange. It is a standardized method for exchanging business documents electronically between different computer systems in a structured format. EDI enables the automated exchange of documents such as purchase orders, invoices, and shipping notices between trading partners, helping to streamline and automate business processes. transactions are, what all those codes mean and why it is important to use an EDI gatewayGateway – The interconnection between public or private networks, enabling the transmission of documents in EDI format across multiple networks.. To start using this technology to your advantage, no special knowledge is required. All you need to do is to export the document in the specified format and send the documents to your EDI gateway then the software does the job of translating this to a format that is readable by the recipient ERP system. So first step , let’s take a closer look at exactly what an EDI gateway is.

What is EDI Gateway?

An EDI gateway is essentially software that enables successful electronic communication – or document exchange – between business partners, using the appropriate EDI standard. Your EDI gateway can translate document formats from one ERPERP means Enterprise Resource Planning. It refers to a suite of integrated software applications that organizations use to manage and automate their core business processes. ERP systems typically include modules for finance, human resources, supply chain management, inventory control, and other functions, providing a centralized database and facilitating the flow of information across different departments. system to another, which means it acts as an intermediary between two systems that speak a different language – much like a human translator enables communication between people who speak different languages. It is also important to note here that even though you may sometimes be able to communicate directly with another ERP system, communicating through an EDI gateway is a much better option, as gateways provide more communication channels than individual ERP systems. This is important because your ERP’s communication options may be limited and will depend upon your country or industry, while an EDI gateway can bridge those differences and enable easy cross-country and cross-industry communication.

What are EDI Transactions?

EDI transactions are standardised electronic business documents that your EDI gateway can use. The most common types of EDI transactions – or documents – that all industries use are purchase ordersORDERS (Purchase Order): The ORDERS message is used to convey a request for goods or services from a buyer to a seller. It includes information about the items requested, quantities, pricing, delivery details, and any other relevant terms and conditions. The ORDERS message serves as an official document for initiating the purchase process. (POs) and invoices. Any EDI transaction document must contain some key data, in compliance with the appropriate EDI requirements. Without this, the EDI document would become useless. To put it in simple terms, for a purchase order to be a valid (and useful) EDI transaction, it must include data such as the types, amounts and codes of ordered items, and the unique identifiers of the sender and receiverReceiver – The party to whom the EDI message or transaction set is transmitted.. And, of course, all this data must be placed in the right location in the document so that the systems can access the information. To facilitate and speed up the process even more, each document (transaction) is assigned a specific transaction code so that the system that receives it can instantly recognize it.

What is EDI standard and its importance?

To effectively conduct EDI transactions using a standardised format, an EDI standard is needed. As we have already mentioned, EDI standards are usually related to your location and industry. But remember – your EDI gateway can easily translate between different standards and industries, so don’t worry if your partners are located around the world and use different standards. The importance of an EDI standard is that it defines the rules of how EDI documents – EDI transactions – should be formatted and interpreted. It determines the exact location and correct order of units of data in any EDI document. It is like a rulebook for EDI transactions. Meeting an EDI standard ensures complete and accurate EDI transmission. If you have ever sent money abroad, even as a private person, you may already be familiar with a very common banking standard called SWIFT. Here are some more common standards.

ANSI X12

ANSIANSI – American National Standards Institute – The national standards body for the United States. ANSI, through its accredited standards committees, keeps the standards for all applications of technology and mechanics for U.S. Industry. X12 stands for American National Standards Institute and it was initially created as a standard for use by North American businesses across many industries. This EDI language is currently utilised globally, despite North America still being its main usage region.

EDIFACT

EDIFACTEDIFACT: Electronic Data Interchange For Administration, Commerce, and Transport is an international standard for structuring electronic data interchange messages. It provides a set of standardized message formats that facilitate the exchange of business documents, such as purchase orders, invoices, and shipping notifications, between different organizations and computer systems. stands for Electronic Data Interchange for Administration, Commerce and Transport. This multi-country and multi-industry EDI language is widely employed in Europe, particularly in the retail sector, which was the first to start using it. Over time, its application has expanded to include industries like construction, logistics, and healthcare.

Tradacoms

Tradacoms is an EDI standard that was a precursor to EDIFACT. It is not used much today outside of the UK retail market.

UBL

The Universal Business Language (UBL) is an XML-based global standard used for electronic data exchange. While UBL is primarily designed for EDI, it can also be used for other business applications such as document management and workflow.

IDoc

The Intermediate Document Standard was first developed by the United Nations Standardization body in 1980. IDocs are used to exchange various types of information, as well as to integrate different software applications, such as ERP and CRM systems.

EANCOM

EANCOM was created as a subset of the EDIFACT standard. It was originally made for the retail industry, but it has expanded since and today it is also used in healthcare, publishing, construction, and logistics.

RosettaNet

RosettaNet is mainly used between high-tech organisations such as consumer electronics and major computer manufacturers.

Top 7 EDI documents to integrate and automate (7 most common EDI transactions)

EDI transaction codes vary by industry, and the list of EDI transactions is very long, with hundreds of different codes. There is a code for every kind of document in every industry – however, you don’t need to know or use all those transactions. It all depends on your particular needs and the needs of your business partners. Let us now take a look at some of the most common types of EDI transactions, commonly used by many different businesses and industries.

EDI 850: Purchase Order (X12) / EDIFACT ORDERS / UBL Order

A PO serves as a request for certain goods or services from the supplier or vendor. It is usually the first step in a business exchange and it enables partners to safely share sensitive data such as pricing, since EDI transactions are encrypted.

EDI 855: Purchase Order Acknowledgment (X12) / EDIFACT ORDRSP / UBL Order response

Following a PO is a PO Acknowledgment, which is a document stating that the purchase order can be fulfilled and executed.

EDI 856: Ship Notice/Manifest (X12) / EDIFACT DESADV / UBL Despatch advice

This EDI transaction is also known as an EDI Advance Shipping Notice or EDI ASN, and it is used to notify the recipient of a shipment and describe the contents of a shipment. The document is sent before the shipment arrives at the destination and is commonly used by suppliers, manufacturers, distributors and retailers.

EDI 895 Delivery/Return Acknowledgement or Adjustment (X12) / EDIFACT RECADV / UBL Acknowledgement of receipt

EDI 895 is sent by the customer to confirm or modify the contents of a direct-to-store order and it essentially completes the order. It improves data accuracy of information exchanged between trading partners

EDI 895 Delivery/Return Acknowledgement or Adjustment (X12) / EDIFACT RECADV / UBL Acknowledgement of receipt

EDI 895 is sent by the customer to confirm or modify the contents of a direct-to-store order and it essentially completes the order. It improves data accuracy of information exchanged between trading partners

EDI 810: Invoice (X12) / EDIFACT INVOIC / UBL Invoice

An invoice is sent from the vendor to the buyer to request payment after receiving the goods. It also confirms the amount or quantity of goods received.

EDI 997: Functional Acknowledgment (X12) / EDIFACT CONTRL / UBL Application response

Used as a response to an EDI 810 – an invoice – to notify the vendor or the supplier that the invoice has been successfully received.

EDI 940: Warehouse Shipping Order

An EDI 940 is normally used by the supplier to instruct a third-party logistics firm to send a shipment to the buyer. It includes essential data, such as what to ship, when, and in what quantity.

EDI Transactions in Various Industries

Every industry has its own EDI transaction set and this is why a reliable EDI gateway is important for ensuring smooth communication and effective EDI transmission among business partners. Before starting the communication with your partner, you first need to configure the document transformation, which includes defining the starting format. Fortunately, this is easy to do with Omnizon – you just need to follow the instructions we have prepared for our clients. Here is an overview of some of the most common ways EDI transactions can be used in various industries.

Manufacturing

There are certain industries in which electronic data interchange has firmly established itself, and manufacturing is one of them. This is due to the fact that, historically speaking, most manufacturing companies have occasionally had difficulty maintaining inventory levels in their supply chain. Without an EDI solution, it is difficult to maintain stable supply chain management and, consequently, keep your trading partners happy. EDI also helps you integrate various file formats and engineering files.

Retail

One of the first industries to automate orders and invoices was the retail industry. Recently, retailers have had to adapt to increased delivery demands and stock-keeping unit (SKU) counts provided by direct store delivery (DSD) suppliers. Automating the DSD process with the help of EDI can relieve congestion at the retailer’s back door and reduce check-in times. The key EDI document here is the ASN (Advance ship notice). Congestion at the retailer’s back door can be relieved, and check-in times can be shortened, by automating the DSD process using EDI. The Grocery Manufacturers of America found that electronic ASNs can save receiving times by up to 60%. A corporation with 250 stores might save 65,000 receiving hours annually if only 25% of deliveries used automated ASNs. The ASN can ensure that every link in the supply chain is informed of the current condition of the items, and checking goods at a pallet level is no more difficult than checking at an individual case level.

Transportation and logistics

Organisations involved in the global supply chain have been using EDI systems since the late 1960s. For instance, the largest trucking businesses of today use EDI to streamline document transfers and B2B communication, which reduces costs and delays, improves data accuracy, and boosts customer satisfaction. EDI in transportation and logistics helps ensure accurate and timely delivery of everything from purchase orders to shipment confirmations, integrate warehouse management systems, maximise the cost efficiency of load tendering and assure contract compliance. Being able to scale quickly is imperative in this industry. Modernised EDI systems give organisations the control that they require to conduct business with customers and trading partners. These vital business-to-business data transfers must be standardised, automated, appropriately integrated, and streamlined. Without these four essential components, logistics businesses may struggle.

Automotive

EDI has been in use across the automotive industry for over forty years. The global nature of the automotive industry means it is crucial for automakers to be able to swiftly onboard their suppliers, wherever they may be located in the world. Today’s automobile production lines depend on the efficient interchange of business documents between automakers and their supply chain. The “Toyota Production System” served as the foundation for several best practices, including Just-In-Time (JIT) and lean manufacturing. Many production lines throughout the world depend on JIT and Lean Manufacturing procedures to operate smoothly, and EDI offers a quick and effective solution to transfer business documents in support of these manufacturing operations. Making JIT and Lean manufacturing processes successful requires providing visibility into inventory levels and alerts for when shipments are expected to arrive at the production line.

Food processing

EDI automates and standardises documents such as purchase orders (EDI 850) and invoices (EDI 810) between you and your vendors, providing you the power to always know where your product is. Electronically processing your purchase orders means the product will get to the consumer faster, eliminating the fear of out-of-stock or overstocks for your customer. A very important role of EDI in the food and beverage industry is improving visibility and traceability. Food-borne incidents like the E. coli outbreak continue to make headlines. In addition to the obvious harm to human health, this damages the reputation of restaurant companies, especially when the incident is not quickly managed. If the restaurant is unable to identify the source of the contaminated food, the outbreak is made even worse. ASNs make it simple to trace everything back to its source, which helps food suppliers better isolate and control epidemics and product recalls.

Government

The term “e-government” has become synonymous with modern and efficient administration. New technology makes access to public authorities easier and the use of public services more efficient. Currently, this applies to manufacturers and suppliers whose invoices will soon be accepted in digital format only. Depending on the country, different approaches and data formats have been defined. With EDI, data archiving required by law can also be done automatically. In the government sector, EDI technology is utilised to reduce human error and labour expenses throughout the supply chainA supply chain refers to the entire process involved in the production, distribution, and delivery of goods or services from the supplier to the end consumer. It encompasses all the stages, activities, organizations, resources, and technologies involved in the movement and transformation of raw materials into finished products or services. The supply chain typically includes suppliers, manufacturers, distributors, retailers, and logistics providers., which includes manufacturers, suppliers, customers, contractors, and vendors, among others. The ability for governments to deliver customs documentation via EDI has also brought positive changes for the import/export business.