EDI Technology, EDI Standards, EDI Communications, EDI Implementation, EDI Agreements, EDI Security

13/02/2024 0 By indiafreenotes

Electronic Data Interchange (EDI) technology is a standardized method for exchanging business information between organizations electronically. It replaces traditional paper-based documents like purchase orders, invoices, and shipping notices with electronic equivalents, enabling faster, more accurate, and efficient communication. EDI technology is widely used across various industries, including retail, manufacturing, healthcare, and logistics, facilitating seamless B2B transactions and supply chain management.

EDI Technology:

  1. EDI Standards:

These are predefined formats for documents that ensure consistency and compatibility between different systems and organizations. Common standards include ANSI X12 (used primarily in North America) and EDIFACT (used internationally).

  1. Translation Software:

This software converts the company’s internal data format into the EDI standard format and vice versa. It ensures that the data exchanged can be easily integrated into the organization’s internal systems, such as ERP (Enterprise Resource Planning) or SCM (Supply Chain Management) systems.

  1. Communication Network:

EDI documents can be exchanged through various networks. The Value-Added Network (VAN) is a private, hosted service that acts as an intermediary to receive, store, and forward EDI messages. Alternatively, organizations might use direct connections (point-to-point), AS2, FTP/FTPS, or even blockchain-based networks for secure and direct document exchange.

  1. EDI Software and Services:

Beyond translation, EDI software can offer features for document tracking, error checking, and workflow management. Managed EDI services provide companies with the expertise and infrastructure to implement and maintain their EDI environment without significant in-house investment.

EDI Standards:

  • ANSI X12

Developed by the American National Standards Institute (ANSI), the X12 standard is widely used in North America across various industries, including retail, healthcare, and transportation. It provides a framework for exchanging a wide range of business documents, such as purchase orders, invoices, and shipment notifications.

  • EDIFACT (Electronic Data Interchange For Administration, Commerce, and Transport)

EDIFACT is an international standard developed under the United Nations. Unlike ANSI X12, which is primarily used in North America, EDIFACT is used globally, supporting international trade with a wider set of messages and covering more industries. It’s particularly popular in Europe and Asia.


An older standard primarily used in the UK retail sector, TRADACOMS was developed before EDIFACT and is still in use by some organizations within the UK. However, many are transitioning to more modern standards like EDIFACT for international compatibility.


GS1 EANCOM is a subset of EDIFACT developed by GS1, focusing on the retail industry and goods movement. It leverages GS1 identification numbers, like barcodes, to standardize product and shipment information globally, facilitating supply chain and inventory management.

  • UBL (Universal Business Language)

UBL is based on XML (Extensible Markup Language) and is designed to standardize the way that electronic documents are exchanged. Developed by OASIS (Organization for the Advancement of Structured Information Standards), UBL is used for a variety of business documents, including those related to procurement and transportation.

  • ebXML (Electronic Business using eXtensible Markup Language)

Developed jointly by the United Nations and OASIS, ebXML is a suite of specifications that allows enterprises of any size and in any geographical location to conduct business over the Internet. It encompasses a wider range of business processes and messaging standards, aiming to make global e-commerce easier and more accessible.

  • HL7 (Health Level Seven International)

Specific to the healthcare industry, HL7 focuses on the exchange of clinical and administrative data. It addresses the need for a standardized format for health-related information, such as patient records, laboratory results, and billing information, to be shared across different healthcare systems.

EDI Communications:

  1. Value-Added Network (VAN)

A Value-Added Network (VAN) is a private, hosted service that provides secure and reliable EDI transmission services. VANs act as intermediaries that receive, store, and forward EDI messages between trading partners. They offer additional services such as message tracking, delivery confirmation, and translation services. VANs simplify connectivity but can be more costly than other options.

  1. AS2 (Applicability Statement 2)

AS2 is a widely used protocol for transmitting EDI data over the Internet. It supports secure and reliable data transmission by using digital certificates and encryption. AS2 sends data over HTTP or HTTPS, thereby ensuring that the data exchange occurs in real-time, which is a significant advantage over some other methods. AS2 has gained popularity for its ability to provide confirmation of data delivery (Message Disposition Notification – MDN).

  1. FTP/FTPS (File Transfer Protocol/Secure File Transfer Protocol)

FTP is a standard network protocol used for the transfer of computer files from a server to a client on a network. FTPS is an extension of FTP that adds support for the Transport Layer Security (TLS) and the Secure Sockets Layer (SSL) cryptographic protocols. These protocols are used for exchanging files over a network securely but do not provide real-time confirmation of file delivery.

  1. SFTP (SSH File Transfer Protocol)

SFTP, also known as Secure File Transfer Protocol, is a method of transferring files securely over a private and secure channel. Unlike FTPS, SFTP uses the Secure Shell (SSH) protocol to provide encryption and secure file transfers. SFTP ensures that data is securely transferred using a private and encrypted connection.

  1. Direct EDI (Point-to-Point)

Direct EDI or point-to-point EDI involves establishing a direct connection between two trading partners, typically using internet protocols like AS2, FTPS, or SFTP. This method allows companies to exchange EDI documents directly without the need for an intermediary, such as a VAN, potentially reducing transaction costs and increasing data transmission speed.

  1. Web EDI

Web EDI refers to web-based applications that allow businesses to exchange EDI documents via a standard web browser. This method is particularly useful for small to medium-sized businesses that may not have the resources to invest in traditional EDI software and infrastructure. Web EDI provides a cost-effective way for smaller companies to comply with EDI requirements and participate in electronic data exchanges.

  1. API (Application Programming Interface)

While not traditional EDI, APIs are increasingly being used for real-time data exchange between systems, applications, and platforms. APIs allow for more flexible, web-service-based integration, enabling businesses to automate and streamline their operations beyond traditional EDI documents.

EDI Implementation:

Implementing Electronic Data Interchange (EDI) involves setting up the necessary software, hardware, and protocols to enable the electronic exchange of business documents between companies. This process can significantly streamline operations, improve efficiency, and reduce costs associated with manual processes.

  1. Assessment and Planning
  • Identify Business Needs:

Understand the specific business processes that will benefit from EDI, such as procurement, invoicing, or shipping.

  • Select EDI Documents:

Determine which types of documents (e.g., purchase orders, invoices, shipping notices) will be exchanged electronically.

  • Choose EDI Standards:

Decide on the EDI standards (e.g., ANSI X12, EDIFACT) that will be used based on industry norms and partner requirements.

  1. Selecting EDI Partners and Providers
  • EDI Service Provider:

For many businesses, especially those without extensive IT resources, partnering with an EDI service provider can simplify the implementation process. These providers offer software, network services, and support.

  • Software and Hardware:

Based on the volume of transactions and existing IT infrastructure, decide whether to host EDI solutions on-premises or to use cloud-based EDI services.

  1. Legal and Security Considerations
  • Agreements:

Establish agreements with trading partners that outline the terms of EDI exchanges, including confidentiality, data formats, and processing times.

  • Security Measures:

Implement security measures such as encryption, authentication, and non-repudiation to protect the data being exchanged.

  1. Developing and Testing
  • Integration:

Develop or configure EDI software to integrate with existing business systems (e.g., ERP, WMS) to automate data flows.

  • Mapping:

Create EDI document mappings that convert business documents from the company’s internal format to the agreed-upon EDI format and vice versa.

  • Testing:

Conduct thorough testing with EDI partners to ensure that documents are accurately sent, received, and integrated into business systems. This often involves sending test transactions and verifying their accuracy.

  1. Implementation and Training
  • Rollout:

Begin exchanging documents with partners. Start with a pilot program involving a limited number of transactions or partners before fully scaling up.

  • Training:

Train relevant staff on new processes, software, and handling exceptions. Ensure that there is a clear understanding of how EDI transactions are managed.

  1. Monitoring and Maintenance
  • Monitoring:

Regularly monitor EDI transactions for errors or issues. Establish protocols for resolving any problems that arise.

  • Updates:

Keep the EDI system up to date with changes in standards, regulations, or business needs. Periodically review agreements and processes with partners.

  1. Evaluation and Expansion
  • Review Benefits:

Evaluate the impact of EDI on business efficiency, cost savings, and partner relationships.

  • Expand EDI Use:

Consider expanding the use of EDI to additional documents, partners, or business areas based on the initial implementation’s success.

Key Considerations:

  • Cost:

Understand all costs involved, including software, service providers, and potential transaction fees.

  • Scalability:

Ensure the chosen solution can scale with your business needs.

  • Compliance:

Be aware of any industry-specific compliance requirements that must be met through the EDI implementation.

EDI Agreements:

EDI (Electronic Data Interchange) agreements are formal contracts between trading partners that specify the rules and standards for the electronic exchange of business documents. These agreements play a crucial role in ensuring a smooth, efficient, and legally compliant EDI relationship between companies.

Key Components of EDI Agreements:

  • Scope and Purpose:

Defines the objectives of the EDI relationship and specifies the types of documents (e.g., purchase orders, invoices) to be exchanged.

  • Standards and Specifications:

Details the EDI standards (e.g., ANSI X12, EDIFACT) and versions to be used, including any customizations or subsets.

  • Confidentiality and Data Protection:

Outlines measures to protect sensitive data and ensure compliance with data protection laws (e.g., GDPR, HIPAA).

  • Technical Requirements and Procedures:

Specifies the technical setup, including communication protocols (e.g., AS2, FTP), encryption, and data formats. It also includes procedures for testing and validating the EDI exchange.

  • Operational Procedures:

Describes the processes for transmitting, receiving, and processing EDI documents, including timing, frequency, and handling of errors or exceptions.

  • Compliance and Legal Requirements:

Addresses compliance with relevant laws and regulations, including any industry-specific standards.

  • Liability and Dispute Resolution:

Outlines each party’s liabilities in case of data errors or transaction failures and establishes a mechanism for resolving disputes.

  • Change Management:

Describes the process for making changes to the agreement, including modifications to EDI standards, document types, or technical requirements.

  • Termination Conditions:

Specifies the conditions under which the agreement can be terminated and the procedures for termination.

Considerations for EDI Agreements:

  • Flexibility vs. Standardization:

While standardization is one of the main benefits of EDI, agreements must also allow for a certain degree of flexibility to accommodate changes in technology, business practices, or regulations.

  • Security and Compliance:

Given the sensitive nature of many EDI transactions, it’s vital to ensure that agreements have strong provisions for data security and privacy, aligning with both partners’ security policies and legal requirements.

  • Partner Capabilities:

The agreement should consider the technical and operational capabilities of both partners to ensure realistic expectations. For smaller partners, for example, more straightforward, web-based EDI solutions might be necessary.

  • Costs and Responsibilities:

Clearly define who bears the costs for EDI implementation, operation, and maintenance. This includes software, hardware, and any services from third-party providers.

  • Monitoring and Reporting:

Establish guidelines for monitoring EDI transactions and reporting requirements to ensure that both parties have visibility into the EDI exchange’s performance.

Benefits of EDI Agreements:

  • Clarity and Predictability:

Well-defined agreements provide a clear framework for EDI exchanges, reducing the risk of misunderstandings or disputes.

  • Legal Protection:

Formal agreements offer legal protection by clearly outlining each party’s rights and obligations.

  • Operational Efficiency:

By setting clear standards and procedures, EDI agreements help streamline operations and improve efficiency.

  • Stronger Partnerships:

Clear agreements can strengthen business relationships by ensuring that both parties are aligned in their expectations and commitments.

EDI Security:

Security in Electronic Data Interchange (EDI) is paramount due to the sensitive nature of the data being exchanged between businesses. EDI security measures are designed to protect data integrity, ensure data confidentiality, and authenticate trading partners. Implementing robust security practices helps prevent unauthorized access, data breaches, and fraud.

  • Authentication

Ensure that the entities exchanging data are who they claim to be. This can be achieved through digital certificates and the use of secure communication protocols like AS2 (Applicability Statement 2) which incorporates digital certificates for authentication.

  • Authorization

Implement strict access control measures to ensure that only authorized personnel can access EDI data. This involves defining roles and permissions within the organizations involved.


  • Encryption: Encrypt data both at rest and in transit to prevent unauthorized access. Standard encryption protocols, such as TLS (Transport Layer Security) for data in transit and AES (Advanced Encryption Standard) for data at rest, should be used.
  • Secure File Transfer Protocols: Use secure file transfer protocols such as SFTP (Secure File Transfer Protocol) or FTPS (FTP Secure) which provide an additional layer of security through encryption.


  • Data Integrity Checks: Implement mechanisms to ensure the integrity of the data being exchanged. This can include the use of checksums or hash functions to verify that the data has not been altered during transmission.
  • Non-repudiation: Utilize digital signatures to ensure non-repudiation, providing proof of the origin and integrity of the data, ensuring that senders cannot deny their actions.

Audit and Compliance

  • Audit Trails: Maintain comprehensive logs and audit trails of all EDI transactions. This not only helps in troubleshooting and monitoring but also ensures compliance with relevant regulations and standards.
  • Compliance: Adhere to industry standards and government regulations relevant to EDI security. This may include standards set by the Payment Card Industry Data Security Standard (PCI DSS) for financial transactions, Health Insurance Portability and Accountability Act (HIPAA) for healthcare data, or the General Data Protection Regulation (GDPR) for data protection and privacy in the European Union.

Continuity and Recovery

Have robust disaster recovery and business continuity plans in place. This ensures that EDI operations can be quickly restored in case of an incident, minimizing downtime and data loss.

Regular Updates and Training

  • Software Updates: Regularly update EDI software and infrastructure to protect against known vulnerabilities. This includes applying patches and updates to EDI applications, operating systems, and network devices.
  • Employee Training: Conduct regular training sessions for employees involved in EDI processes to raise awareness about security best practices and the importance of following established protocols.

Monitoring and Detection

  • Intrusion Detection Systems (IDS): Deploy IDS to monitor network and system activities for malicious activities or policy violations.
  • Regular Security Assessments: Perform regular security assessments, including vulnerability scanning and penetration testing, to identify and mitigate potential security risks.