The Basics of EDI

The basics of EDI

The following text has been adapted from the National Institute of Standards and Technologyat

Electronic data interchange (EDI) defined

Electronic data interchange is defined as the exchange of computer processable data in a standard format between organisational entities. The formats and procedures needed to generate EDI forms have been standardised. Although many EDI standards exist today, the X12 and EDIFACT (EDI foradministration, commerce, and transport) family of standards are the two most widely used.

EDI transactions can be divided into two components: form generation and communication. EDI forms are generated by combining standard EDI elements according to standard procedures. The forms have a wide range of application. Some apply to wide sectors of the economy (eg invoices, price quotations, etc.), while others are sector specific and developed by special groups (eg insurance forms, transfer of funds, etc.).

Commercial EDI software provides the mapping and translation functions for generating EDI forms. Mapping functions convert data from a local representation used by an EDI application to an internal representation of a standard EDI form, and vice versa. Translation functions convert an internal representation of a standard EDI form to an encoded standard EDI form and vice versa.

Once an EDI form is generated and encoded, it must be communicated to a trading partner. EDI standards specify data formats but are designed independently of communications protocols. Traditionally, EDI users communicated over value added networks (VAN). As Open Systems become an integral component of our computer environments, X.400-based electronic mail systems and file transfer access and management (FTAM) systems have become more frequently used in EDI communications. As time has progressed, new EDI initiatives have been ‘wrapped’ in the XML format.

EDI example

To give an example of an EDI transaction, consider the table below. The unstructured format represents data that may appear on a purchase order form; the transaction set represents data that may be transmitted in an EDI communication.

Unstructured format / Transaction set
ST*850*0001^
Purchase Order Number: 4001
Purchase Order Date: December 31, 1992 / BEG*00*NE*4001**921231^
Buyer: Allen Manufacturing / N1*BT*Allen Manufacturing^
123 North Street / N3*123 North Street^
Largetown, NY11111 / N4*Largetown*NY*11111^
Vendor: Baker Supplies / N1*VN*Baker Supplies^
P.O. Box 989 / N3*P.O. box 989^
Somewhere, NY 10009 / N4*Somewhere*NY*10009^
Ship to: Plant 1 / N1*ST*Plant 1^
456 West Ave / N3*456 West Ave^
Smallsville, NY10006 / N4*Smallsville*NY*10006^
4 cases part number BC436 @$12.50/cs / PO1*1*4*CA*12.50**VP*BC436^
Number of line items / CTT*1^
SE*14*0001^

(Emmelhainz, 1993, p 62)

EDI standards

Standards for EDI can be found at the United Nations Directories for Electronic Data Interchange for Administration, Commerce and Transport home page at

When producing a report that refers to EDI standards, it is appropriate to reference a source of information (website) and the appropriate standard, rather than copying and pasting large sections of text from a site.

EDI and XML

Many see EDI used in conjunction with XML as a driving force of Internet-based business-to-business commerce. An EDI implementation can be a very expensive operation to undertake. The mapping, the start-up costs for hardware and software and the maintenance costs can be prohibitive for small to medium-sized companies. EDI tends to be complex, requires substantial technical expertise and an inflexible architecture, while XML tends to be simpler in design, uses an open standard and can be used on non-dedicated networks.

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