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    Explanation: Electronic Data Interchange Standards

    By Joan O. Pupik

    The EDI standards can be explained by answering several basic questions.

    • Who defines the EDI standards and who uses them?
    • What are the EDI standards?
    • When were the EDI standards developed and what does the future hold?
    • Why should EDI standards be used?
    • How are EDI standards implemented?

    Who defines the EDI standards and who uses them?

    In the United States

    The Transportation Data Coordination Committee (TDCC), renamed Electronic Data Interchange Association (EDIA), was instrumental in developing standards and providing education and support in the use of EDI. It was replaced by Data Interchange Standards Association (DISA) current secretariat for American National Standards Institute Accredited Standards Committee (ANSI ASC X12), the EDI standards organization in the United States. ANSI is the US representative to the International Standards Organization (ISO).

    ASC X12 membership is open to "any individual, company, or organization that may be directly and materially affected by ASC X12 activities."

    ASC X12 has agreed to move toward EDIFACT standards as indicated by the existence of the X12/EDIFACT Alignment Task Group (ATG), a standing task group of ASC X12.

    Internationally

    United Nations Economic Commission for Europe (UN/ECE) Working Party on Facilitation of International Trade Procedures (WP.4) Group of Experts on Data Interchange and Elements (GE.1) is an international, intergovernmental organization that makes decisions related to UN/EDIFACT.

    Six regional UN/EDIFACT Boards represent the consolidated opinions of their member nations:

    • Pan America (North, Central, and South America)
    • Western Europe
    • Eastern and Central Europe
    • Africa
    • Asia
    • Australia/New Zealand

    The United States is a member of the Pan American EDIFACT Board (PAEB) which coordinates the regional activity in EDI message development, maintenance, and technical assessment. DISA is the secretariat for both PAEB and ASC X12.

    Users of EDI

    EDI was initially used mainly by the transportation industry. The auto industry and its suppliers, and large retailers discovered the advantages of EDI and began to require that their trading partners conduct business via EDI. Most industries had their own standards but gradually conformed to X12 standards.

    The United States Department of Defense and other government agencies were slow to adopt EDI due to legal restrictions, but have moved strongly to the use of EDIFACT.

    A 1992 study by EDI Research, Inc. found that 79% of business transactions are via paper, 15% verbal, 4% fax or e-mail and only 2% EDI. The concentration of users is in the Fortune 1000 because the greatest benefit is to the larger companies. Small businesses find that the investment is sometimes too great a price to pay. However, as more business is conducted via EDI, it may become a required cost. Some companies already require that all their trading partners do business via EDI.

    Movements toward the use of the Internet as the electronic media will make EDI a possibility for more users.

    VANs

    Value Added Networks (VAN) provide a secure electronic link between two or more trading partners using EDI. They usually offer a wide range of services to facilitate establishing and maintaining an EDI arrangement. A VAN can deal with any incompatibilities between partners such as media, code, or timing. The use of VANs permits each trading party to adapt to individual requirements and restrictions.

    What are the EDI standards?

    There are two main standards that define EDI, ANSI ASC X12 and EDIFACT.

    ANSI ASC X12

    The ANSI ASC EDI standard defines the data structure and content for business transactions transmitted between computer applications. The data is grouped to represent all the information required for a particular business function, such as a purchase order.

    ASC X12 specifies business forms by defining standard data elements with dictionaries that specify name, length of data field, description, data type, and meaning.

    Full X12 standard consists of:

    • x12.3 Data element dictionary
    • x12.5 Interchange structure-the envelope
    • x12.6 Application control structure-the formal description of the EDI architecture
    • x12.22 Directory of lists of related data elements-e.g. multiple lines of address

    UN/EDIFACT

    United Nations Rules for Electronic Data Interchange For Administration, Commerce and Transport (UN/EDIFACT) is a set of internationally agreed upon standards, directories and guidelines for the electronic interchange of structured data that relate, in particular, to trade in goods and services.

    EDIFACT consists of data elements (a value), segments (a logical group of data elements), and messages (a collection of segments relating to a business function), and rules for combining them.

    Each data element has attributes such as

    • coded tag or identifier(code dictionary)
    • title
    • plain text description
    • format (length and datatype or class)
    • year of insertion in Directory (previous issue in parenthesis)

    The full standards consists of:

    • Data element directory (ISO 7372)
    • Segment dictionary
    • Message dictionary
    • Syntax which defines a hierarchical structure with implicit data element identification, flexible length data structures and mandatory or conditional status of data elements and segments.

    ANSI ASC X12 versus UN/EDIFACT

    The two standards are similar. X12 has more, but smaller messages, with more single data elements. EDIFACT has fewer, but more comprehensive messages, with composite data elements. EDIFACT always uses the same begin message header.

    X12 was developed in response to industry needs and put to practical use. EDIFACT emphasizes design and has been slow to achieve practical use.

    Recently, ASC X12 has agreed to develop standards based on EDIFACT principles. The US government has also adopted the use of EDIFACT.

    The X12 standard and its use is ahead of EDIFACT. As of 1994, EDIFACT had only 43 standard messages defined, and 14 messages in development. In 1992, there were 37,000 users of X12 in the United States, while only 1% of businesses in the United Kingdom used EDIFACT.

    When were the EDI standards developed and what does the future hold?

    This section defines the time line of the EDI standards, the past, the present and the future.

    Past

    The EDI movement began when more and more businesses computerized their internal operations. Once data was entered into the computer system processing was quick. But the transfer of information via traditional methods, and the entering of data into the computer system delayed the process.

    Individual industries saw the benefits of electronic transfer of information and began to develop industry specific procedures. These industries saw the need for standards and began to develop them independent of government assistance.

    The Transportation Data Coordination Committee (TDCC) developed standards for the transportation industry. In 1969, it was renamed the Electronic Data Interchange Association (EDIA) reflecting the broader application of its work. The auto industry and large retail chains moved to EDI through the 1970's.

    Gradually industry specific forms were abandoned in favor of standard forms. In 1979, ANSI ASC X12 was formed to develop cross-industry standards based on the work of EDIA.

    In 1983 X12 published 5 standards, by 1989 there were 32 and by 1990 there were 100 standards. Industries converting to the EDI standard also increased over the years from 5 in 1983, 14 in 1986 to 30 industries by 1992.

    Acceptance of X12 was helped by ready inclusion of industry specific requirements (i.e. it absorbed industry forms as subsets.) With each transition users had to endure multiple versions. In 1989, grocers merged with X12 and ANSI accepted their transaction sets and grocer-specific definitions. Drug manufactures accepted more sophistication than they needed in order to comply. Individual trade groups accepted changes neede by others. As a result, no new proprietary industry standards have been developed outside X12 since early 1990s.

    The Department of Defense (DOD) was limited in its use of EDI due to legal restrictions. However, it began to use EDI in 1988. An estimated 92% of all DOD paperwork was to be replaced by EDI by 1996. DOD has also worked to prototype Intelligent Gateway Processors between VAN and mainframe and pushed ANSI for formats query of stock availability, price quotes, status reports, etc.

    Work on what was to become EDIFACT (EDI for Administration, Commerce, and Transport) was started in the 1960s by United Nations Economic Commission for Europe. In September, 1987, Technical Committee 154 of International Organization for Standardization agreed to EDIFACT, designated ISO 9735.

    Present

    EDI has grown rapidly with usage up 50% a year since mid 1980s. Most Fortune 1000 companies use it. Major users swear by it. It saves time and reduces inventories. User groups continue to introduce new forms to be added.

    But EDI is not universally accepted. Growth has been slowed by incompatible software and standards, lack of sophisticated capabilities, and lack of cross industry standards.

    Small businesses have been slow to get onboard due to cost of implementation, but using the Internet will enable more use.

    Future

    ASC X12 has agreed to merge with EDIFACT, but users in the United States tend to view EDIFACT as foreign rather than global. Likewise, Europeans are reluctant because EDIFACT is already a compromise between X12 and European standards.

    A 1988 MIT Sloan School of Management study found that EDI would grow but users would gain little or no competitive advantage. It would become a cost of doing business without significant benefits. EDI can lower costs, but maybe not as much as thought. As large companies increase their use of EDI, all businesses within the associated enterprise will be forced to use EDI.

    Conversion to EDI may require overhauling some business practices. "Just in time" stocking which generates purchase requests based on point of sale data sent directly to vendor will monitor inventory levels automatically.

    The use of EDI will continue to grow as more industries adopt its use. Currently, most banks are not EDI capable. The National Automated Clearing House Association (NACHA), which administers the electronic banking network in the United States, is exploring whether to require banks to be EDI-capable.

    A 1995 article noted that there were 30,000 users of EDI in Europe and the number is expected to rise to 300,000 by the year 2000.

    Why should EDI standards be used?

    As the cost of technology declined and computer use increased, the time to process internal transactions decreased. Delays still existed in the transfer of information and the reentry of data into the computer.

    EDI speeds the process and improves the accuracy of getting information into the user's computer system. The traditional connections between businesses are telephone and mail. Both can be slow and require human intervention. EDI uses direct links to the computer system to minimize the transmission delay.

    Direct links also eliminate the need for transcribing the data into the computer. This reduces errors and saves time.

    EDI solves business problems, offers cost savings, and strategic benefits, and provides a competitive edge and improved marketshare.

    EDI helps organizations improve communications and increase competitiveness, efficiency, and customer service by cutting costs and maximizing productivity and profitability.

    EDI can lower costs by reducing inventory investments by more timely ordering. EDI can enable better business practices, such as "just in time" stocking. If point of sale data is sent directly to vendors, inventories can be monitored and orders automatically generated to minimize overstocking.

    How are EDI standards implemented

    Before using EDI trading partners must set up a trade agreement which will define all the parameters of EDI.
    • Each partner in a EDI trade agreement must independently determine a method to translate internal data to and from EDI formatted messages.
    • Each must agree on the communications media and arrange the method for transmitting information. This may involve any of several methods, such as a dedicated communications link, a VAN or the Internet.
    • Each must provide for system recovery in case of failure or error, security and timely response.

    The sender must convert data from an internal system to EDI formats for transmission. The receiver must be ready to receive transmissions must in a timely fashion as agreed by trading partners. This could be instantaneous or at regualar time intervals. Data could be transmistted to a VAN and stored for later retrieval by the receiver. The receiver converts the EDI transmission data to the internal system for processing.

    Each transaction set represents a single business form. The header area contains the preliminary information such as business name, address, date, etc. Next is the actual transaction information, the item, description, quantity, etc. where each line corresponds to on segment and each item in the segment is a data element. Last is the summary data which contains the control information.

    Each data element is assigned a unique reference number in the EDI master data element list. The structure of each message is strictly defined while allowing for variable length data. The transfer of information can be done by any electronic media from magnetic tape to telecommunication. EDI standards are designed to be independent of communications media. Before any transaction can occur the sender and receiver must ensure that a valid connection has been made.

    Methods of error checking and recovery must be established to safeguard against lost of data.

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    3/17/97
    UNDER CONSTRUCTION jop@lis.pitt.edu