If you’re trying to figure out EDI, you’re not alone.
This complex technology requires focus and dedication—which is why EDI is a career, not a skill. Most IT professionals and technology service providers can’t help you with EDI—although Corsica Technologies is the exception here. We provide unmetered EDI services for one predictable monthly price.
Because EDI is complex, it’s critical to get it working properly. After all, EDI is the primary way business documents are exchanged. Whether you already work with an EDI services provider, or you’re looking for one, you may have questions like:
- How do you tell an EDI 850 from an ASN?
- What does VAN mean, and how is it different from point-to-point?
- How do you become EDI capable?
Welcome to the world of EDI! There’s a lot to learn, but the path gets easier with an expert guide.
Don’t worry, we cover it all in this comprehensive handbook.
1. What is EDI?
EDI stands for Electronic Data Interchange. It refers to the exchange of business documents in standardized, machine-readable formats between the internal systems of different businesses. It replaces paper-based processes for sending documents and may reduce or eliminate the amount of human data entry required to process such documents.
EDI has been around since the 1970s, largely predating the modern internet. While it might sound like an outdated technology, EDI is still the primary way businesses exchange documents in numerous industries. In fact, the total market for EDI solutions is expected to grow from $30.9 billion to $66.8 billion between 2020 and 2030. If you need EDI… you’re in good company!
If anything, EDI is only becoming more important. For retail suppliers, it’s the only way to do business with major buyers like Target and Walmart. In all industries, EDI empowers any company to do business with larger trading partners, expanding your reach, revenue, and customer satisfaction.
But EDI is tough. The technology is complex, requiring dedicated specialists to build, maintain, and troubleshoot solutions that process thousands of critical documents. Major EDI providers typically sell an EDI product alongside services, which means they focus primarily on the implementation. Smaller customers can get left behind as providers focus on their biggest clients.
It shouldn’t be like this.
That’s why we’re fixing the EDI experience for midmarket companies—by acting as a true services partner. Learn more here: EDI Integration Solutions.
2. How to become EDI capable
What is “EDI capable?” In a nutshell, it’s the ability to send and receive EDI documents that are compatible with the standards of your trading partners.
While it sounds simple enough, there’s a lot to get right. To become EDI capable, you’ll have to cover several critical requirements.
- An EDI solution (either on-premises or cloud-based)
- Choosing the right data standard to achieve compatibility with your trading partners (for example, X12, EDIFACT, and so on)
- Choosing a translation solution (if you’re interacting with trading partners who use a different data standard)
- Comprehensive integration to your backend systems (for example, ERP, SCM, WMS, and/or CRM)
- Reliable managed services to deal with exceptions, new fields, mapping updates, new trading partners, and more
- An EDI partner who offers unmetered services for one predictable monthly price (rather than nickel-and-diming you)
Here’s the thing. “EDI capable” means different things to different companies—depending on the requirements of your trading partners, the cost model that works for you, and how much EDI support you can afford.
In other words, you’ll want to engage an expert EDI consultant to help you choose the right type of solution and the right support model.
Want to learn more? Download our FREE Guide to Becoming EDI Capable.
Common challenges to becoming EDI capable
No doubt about it, EDI compatibility is complex. If you dive in without clear goals and a plan to get there, you can make mistakes that turn costly in the long run.
Sometimes our clients come to us with EDI baggage. Maybe they’ve outgrown an old solution, or maybe they’ve bitten off more than they can chew. Here are some common EDI challenges we see.
- Not considering the future state of EDI compatibility
- Not engaging an experienced EDI consultant to meet the requirements of trading partners
- Not planning for future EDI relationships
- Not understanding the difference between VAN and point-to-point
- Choosing the wrong cost model for EDI
- Not accounting for technical support needs
- Not accounting for backend integration needs
Luckily, you can avoid these issues. The key is to learn about the ins and outs of EDI before you jump in.
Read more here: 7 Pitfalls to Avoid on Your EDI Journey.
3. EDI standards and formats
As you dive into the world of electronic data transfers, it’s important to understand EDI formats—also known as data standards. These guidelines for document structure are maintained by third parties. They ensure that participating organizations can transact in the same EDI language, minimizing errors and manual work.
Here are the most common data security standards that our clients use.
ANSI ASC X12
Developed by the American National Standards Institute (ANSI) in 1979, X12 remains one of the dominant data standards in North American EDI. If you see a document code with 3 digits, that’s an X12 document—for example, 850 for purchase order, 856 for advance shipment notice, and so on.
HIPAA
It’s a little misleading to call HIPAA an EDI data standard, as HIPAA law mandates the use of ANSI X12 in the healthcare industry. However, because HIPAA has its own EDI documents that typically aren’t used in other industries, it’s often treated as its own standard. Documents like healthcare claim submission (837) and eligibility/benefit response (271) are hallmarks of the HIPAA EDI world. Technically, they’re ANSI X12 documents.
EDIFACT
The EDIFACT standard was developed by the United Nations and is commonly used in Europe and the rest of the world. EDIFACT documents are identified by 6 capitalized letters that give you a clue to the document’s function—for example, ORDERS (purchase order), REQOTE (request quote), and ORDCHG (change order request).
Using the right EDI data standard
Companies typically don’t have much choice over which data standard they use. That will be determined by their trading partners. If everyone is using X12, you’re going to use X12 so you can transact without the need for a translation solution to change documents from one data standard into another.
Of course, if you’re doing business internationally, or if you have multiple trading partners using multiple formats, you may need a translation solution. The key is to map out what your trading partners are using today—then plan accordingly. We take care to get this right for our clients, since it directly impacts their ability to transact (and their EDI support cost).
4. EDI software
How do you choose the right EDI software for your organization? Here at Corsica Technologies, we find that the answer depends on numerous factors:
- Your unique business system and processes
- The requirements of your trading partners
- How many trading partners you need to connect with
- Your long-term growth plans for EDI
- Your budget
A client who needs EDI doesn’t always have these answers. That’s why we work with you to uncover your requirements, help you understand them, and suggest the right solution.
There’s quite a bit to cover here, as EDI software gets incredibly complex. But at a high level, all EDI solutions have two major components to them:
- Communication
- Translation/transformation
Communication is the actual movement of data. It can be handled via:
- Direct (point to point via sFTP, HTTPs, etc.)
- VAN (value added network)
- API (which is really a subcategory of direct)
- A combination of all the above
Translation or transformation is the process of converting data from one format into a format that the EDI solution can consume. It can be handled with on-premises or cloud software.
Of course, EDI data also needs to reach backend systems like the ERP. When it comes to integration solutions, IPaaS (integration platform as a service) includes the communication and transformation components within a single suite. That suite can either be on-premises, in the cloud, or a hybrid (like Jitterbit, Mulesoft, or Dell Boomi).
A fully managed/hosted solution handles all communication and transformation in the cloud (for example, SPS Commerce, TrueCommerce, etc.).
A VAN (value-added network) allows you to connect with multiple trading partners through one system. It can be a component of an IPaaS solution or a fully managed solution.
Confused yet? 😊
Yes, the language of EDI solutions is complicated—because there are so many ways to do EDI. But an expert EDI service provider like Corsica will know exactly what type of solution is right for you—not only for your current needs, but for any future growth plans. The key is to find a good provider and work with them to plan your ideal solution.
5. Common EDI transactions (i.e. documents)
In the world of EDI, “transaction” and “document” are synonymous. They both refer to a file format or document exchanged through EDI. “Transaction” doesn’t necessarily mean a financial transaction, although EDI can handle accounting processes; rather, it just means a transaction of information between two EDI systems.
There are numerous EDI transactions that you may need to use, depending on your industry, your processes, and your EDI data standard. That said, here are the most common EDI documents that we see. Since our clients work primarily with data standards like ANSI X12, HIPAA, and EDIFACT, we’ll focus on those.
Most common ANSI X12 EDI transactions (i.e. EDI document types)
ANSI X12 is one of the most common EDI data standards in North America. If you’re using EDI to support processes like O2C (order to cash) or P2P (procure to pay), you’ll probably interact with these documents—and many others—on a regular basis.
1. Sales and pricing catalog (832)
The days of print catalogs are over! Utilizing the EDI 832 document type allows a business to provide their catalog and prices to a trading partner electronically. The document supports images as well as text, which allows businesses to place their products in the best possible light. Since it’s distributed and accessed electronically, an EDI 832 ends the hassle of print catalogs, which become outdated the moment they arrive.
2. Request for quote (840)
After a buyer has reviewed a catalog, they may want to request a quote for a product. Perhaps the product is priced by quote only, or perhaps the buyer wants to negotiate their own pricing based on unique quantity requirements or their own market leverage. Whatever the scenario, sending an EDI 840 allows a buyer to request a quote from a supplier.
3. Response to request for quote (843)
After a buyer has sent an 840, the seller will respond with an 843, which functions as the quotation document that the buyer requested. An 840 gives the buyer pricing, available inventory, relevant delivery schedules, and any other information related to the potential sale.
4. Purchase order (PO or 850)
When a buyer is ready to place an order, they send an EDI 850 (purchase order) to the supplier. This document contains relevant information like PO number, RDD (requested delivery date), products ordered (UPC or SKU and quantity), line-item pricing, total price, and more. As you can see, EDI 850 is the bedrock of any buyer/supplier relationship using the ANSI X12 data standard.
5. Invoice (810)
How do you send or receive invoices today? Methods like paper, email, and PDF attachment are commonplace, but they can create errors when clerks reenter data into your backend systems. If you can send and receive 810s, with full integration to your ERP, you can eliminate those errors and reduce your cost of processing financial documents. That’s the value of EDI 810.
6. PO change request and acknowledgment (860/865)
How do you send a change request for a PO? In the world of ANSI X12, the buyer sends an EDI 860, which communicates the requested changes to the purchase order. The supplier replies with an EDI 865. This document indicates how the change request has been handled, including things like altered quantities and prices, additional line items, and so on.
Note: A seller can also send an EDI 865 as a request to the buyer to change an existing purchase order. At a high level, the buyer-sent document is the 860, while the supplier-sent document is the 865.
7. Advance shipment notice (ASN or 856)
Buyers often need advance notice that a shipment is coming their way. This is especially true for products that have sensitive handling requirements (for example, those that require refrigeration)—or for warehouses that operate on thin operational margins and need some warning to free up storage space. Whatever the use case, the EDI 856 or advance shipment notice lets the buyer know when to expect a shipment.
Most common HIPAA EDI transactions (i.e. documents)
In the healthcare industry, HIPAA regulation dictates exactly how documents are exchanged via EDI. This precision ensures careful handling of sensitive patient information. It also assists with portability of medical records between different providers.
HIPAA standards are derived from ANSI X12, so you’ll see the same numbering conventions. Here are the most common HIPAA documents that our healthcare clients use.
1. Benefit enrollment and maintenance (EDI 834)
This critical document allows an organization to enroll members in a healthcare plan. An EDI 834 covers essential information like new or altered enrollments, removal from enrollment, and changes to enrollee benefits. It empowers organizations to process healthcare enrollment electronically rather than relying on paper-based processes.
2. Eligibility/benefit inquiry (EDI 270)
Medical practices and hospitals use EDI 270 documents to ask health insurance providers about relevant coverage for specific patients. This document replaces processes such as sending forms in the mail or calling to ask about coverage.
3. Eligibility/benefit response (EDI 271)
This is the response to an EDI 270. A health insurance provider uses an EDI 271 to provide requested information about coverage for a specific patient.
4. Healthcare claim submission (EDI 837)
The EDI 837 document replaces paper-based processes for submitting claims. This document contains essential data like the patient’s information, the condition that was treated through specific services, the cost of those services, and so on. Medical practitioners typically send EDI 837s to HMOs, PPOs, Medicaid, and Medicare.
5. Claim status request (EDI 276)
Once a practitioner has submitted a claim through an EDI 837, they can send a 276 to ask about the status of that claim. This eliminates the need for phone calls, faxes, emails, or snail-mail documents.
6. Claim status notification (EDI 277)
The organization that processed a healthcare claim can use an EDI 277 to respond to the practitioner’s request for the status of that claim. Like every other transaction here, 277 removes the need to send documents in the mail or place a phone call.
Most common EDIFACT transactions (i.e. documents)
The EDIFACT data standard, which is widely used in Europe, has its own document types. While many of these are functionally equivalent to documents in the ANSI X12 standard, EDIFACT has its own naming conventions. If you’re using EDIFACT, here are some common transactions you may see.
1. Price/sales catalog (PRICAT)
A supplier sends a PRICAT to customers to present the latest version of its catalog with updated prices. This is the equivalent of EDI 832 in the ANSI X12 data standard.
2. Purchase order (ORDERS)
A customer sends an ORDERS document to a supplier to place a purchase order. This is the equivalent of EDI 850 in the ANSI X12 data standard.
3. Purchase order response (ORDRSP)
A supplier sends an ORDRSP to a customer to acknowledge a purchase order (ORDERS) or change request (ORDCHG). The ORDRSP document lets a customer know that their order-related communication was received and processed.
4. Delivery forecast (DELFOR)
“Delivery forecast” might sound like it’s coming exclusively from a supplier or shipping partner. However, this EDI meaning in shipping works in multiple directions.
A buyer can send out a DELFOR to a supplier, alerting them of time-sensitive requirements for materials. A supplier can also send back a DELFOR proposing a different quantity of product to be delivered. This can alert the buyer that they need to source some or all product from another supplier.
5. Insurance claim assessment and reporting (ICASRP)
This crucial document is used by various parties that deal with insurance claims. It replaces paper-based processes for handling such claims.
6. Quote message (QUOTES)
This EDI message from a supplier to a buyer provides a quote for products or services—usually in response to a quote request (REQOTE). It eliminates paper-based quoting processes.
7. Instruction for returns (RETINS)
This message allows a supplier to specify how the buyer should go about returning products. It replaces paper documents and phone calls previously used to support the returns process.
6. EDI integration
The key, then, is to find an EDI service provider who excels at managing your integrations.
But not all EDI companies are created equal. Some take a “nickel and dime” approach to billing, generating an SOW for even the smallest changes to fields, EDI mapping, and trading partner additions. This creates unpredictable cost and budget overruns.
The solution?
Look for an EDI partner who offers unmetered technology services for one predictable monthly price. This way, your budget stays healthy and you can deal with new fields, mapping, and even new trading partners as they come up—no SOW needed. That’s how we do things here at Corsica Technologies.
An EDI solution that exists in a vacuum wouldn’t be much use. Integration is the key to unlocking the power of EDI. But what does “EDI integration” mean?
The phrase is used in two ways:
- The big-picture, end-to-end integration between two trading partners, from backend system to backend system, with EDI processing technology in the middle.
- The specific integration of your own EDI solution to your own backend systems like ERP, WMS, CRM, or SCM.
Big-picture integration with trading partners
What data standard(s) and protocol(s) do your trading partners use? How is a document going to move seamlessly from their backend system through EDI technology to your backend system—all without a human touch?
These high-level questions are the key to integrating your EDI system with your trading partners. Here at Corsica, we work with our clients to answer questions like:
- What documents do you need to send and receive?
- What data standard(s) do your trading partners use (for example, ANSI X12, EDIFACT, etc.)? Will you use the same data standard, or will you need a translator?
- What communication protocol will you use to send EDI data?
- Is a VAN (value-added network) the best way to integrate with your trading partners, or is a direct (point-to-point) solution better? (The answer depends on factors like transaction volume, preferred cost model, and how big of a support burden you can afford.)
That’s the 50,000ft level—the bird’s eye view. An EDI service provider like Corsica can help you answer these questions so you integrate with critical trading partners while keeping costs reasonable.
But EDI integration happens at a more detailed level too.
Integration to your backend system(s)
EDI has so many use cases, there’s no “one size fits all” approach to backend integration. It all depends on how you’re using EDI and what your role is among your trading partners.
Here are some common backend systems that we integrate for our clients.
- ERP (enterprise resource planning). For organizations with an ERP, this is the system that runs the entire business. Financials, operations, customers, orders—everything lives in the ERP. If you’re using EDI to buy or sell products and handle billing, your ERP integration is the lifeblood of your EDI program. It eliminates the need to rekey EDI documents into the ERP, providing a seamless, automated process instead.
- WMS (warehouse management system). If your organization handles warehousing, shipping, or logistics, you may need to integrate your EDI system to your WMS. This ensures that advance shipment notices, manifests, and other critical documents appear automatically in the system where your team needs them.
- CRM (customer relationship management). If your organization is highly focused on sales and customer relationships, you may need EDI data to flow right into your CRM. This ensures your reps always have up-to-date information on the status of every account they serve—eliminating waste and manual data entry.
- SCM (supply chain management). If your organization interacts with complex supply chains—as a buyer, supplier, or both—you may depend on SCM software. In this case, you’ll need those EDI documents to flow into your SCM solution in real time, hands-free, so you always have up-to-date information.
Of course, this list isn’t exhaustive. If you have unique requirements, Corsica Technologies can help determine exactly which integrations you need—and how to achieve them. The goal is to get your EDI documents posting directly to the required systems without human intervention. This way, you really leverage the power of EDI for increased efficiency and accuracy of information.
EDI integration challenges
While EDI integration is essential, it’s not for the faint of heart (or the inexperienced). Any time an integrated system gets an update or trading partners change their requirements, things can break. You need an expert partner like Corsica managing your fields and mapping, testing new configurations, and addressing any issues that occur in production. Without this expert touch, your EDI integration can break down, leading to transmission errors and even operational disruption.
7. EDI payments
You may see the term “EDI payments” thrown around. This phrase is a little misleading, as EDI technology doesn’t process actual payments. Here’s what you need to know.
Is EDI a true payment method?
No. While it’s easy to confuse EDI, EFT, and ACH, it’s important to understand that EDI technology doesn’t support true payments. It can transmit financial documents in a standardized format, but it can’t exchange money between two bank accounts.
Instead, EDI can transmit documents related to payments—for example:
- Purchase orders
- Invoices
- Remittance advice
- Credit/debit adjustments
True payments, on the other hand, are typically processed through some form of EFT (electronic funds transfer). A few common EFT payment methods are ACH (automated clearinghouse), wire transfers, and credit/debit card transactions.
The role of EDI in payments and accounting
As you can see, EFT and EDI work together in accounting. EDI handles the business documents related to a payment, while the payment itself usually happens through EFT.
Can you run an efficient accounting operation without EDI—relying only on EFT?
Technically, no. Without EDI, you’ll still need paper documents or emails to process orders, invoices, and so on. There’s no way around the fact that you need documents in addition to raw payments. But EDI is far more efficient than paper or email, as everything is standardized for automated data processing.
Common financial documents transmitted by EDI
Here are the most common financial documents that our clients use in the ANSI X12 standard.
- Invoice (810)
- Credit/debit adjustment (812)
- Remittance advice (820)
- Payment cancelation request (829)
What it takes to succeed with “EDI payments”
It’s important set yourself up for success when using EDI for financial documents. You’ll need:
- An experienced EDI consultant who can help you audit your requirements and capabilities to choose the right solution for interacting with your trading partners.
- Your own EDI technology solution. You can’t do EDI without this!
- A solution that uses the same data standard as your trading partners. If that’s not possible, or if you have multiple trading partners using different standards, you’ll need a translation solution in place that can convert a document from one data standard to another.
- Managed services. EDI is not a “set it and forget it” technology. As your trading partners update their fields for invoices, remittances, and so on, your technology will have to adapt—both your EDI solution, and the relevant integrations to your backend systems. Global enterprises may be able to support EDI in-house, but for the rest of us, outsourcing makes a lot more sense when you look at the numbers. If you can’t afford to hire a team of experts on staff, you’ll need an EDI service partner like Corsica Technologies maintaining your solution.
8. EDI providers
Succeeding with EDI requires two essential things:
- Right-fit EDI software (plus integration software)
- A reliable EDI service provider
The software requirement is obvious, but it’s easy to overlook the services component. Many EDI software providers also offer services, but they’re not always a great fit for every customer.
In fact, our clients often come to us with baggage from outsourcing EDI. Their current EDI provider isn’t cutting it, and they’re suffering from:
1. Broken integrations
Updates are always happening in the world of EDI. Trading partners change their fields, connected applications change, and integrations can break down if not supported by experts.
EDI service providers are supposed to stay on top of these things, but midmarket companies often encounter an uncomfortable truth. They’re simply not as important to their EDI provider as bigger customers.
Which leads us to the next problem…
2. Low prioritization
Whatever their SLAs say, larger EDI service providers don’t always provide the same level of service to every customer. This hurts midmarket companies the most—and they’re the ones who are least likely to have EDI experts on staff.
That’s why Corsica Technologies brings the operational infrastructure of a leading MSP to every client’s EDI solution. We’re filling the gap with a can-do attitude and a “true partner” billing model.
Speaking of which, another common problem is…
3. Highly unpredictable billing
Larger EDI service providers often bill for every little thing. Whether you need to change a field, update a map, handle an exception, or add a new trading partner, larger providers will gladly write an SOW for every little project.
This means makes EDI costs unpredictable when you work with a larger partner. Your costs can fluctuate wildly due to seasonality, software updates, or other things outside your control.
Here at Corsica, we’re fixing this problem with a totally new approach. You get unmetered EDI services for one predictable monthly price. We cover field updates, mapping, exceptions, adding new trading partners, and more. For our clients, only the most complex projects require an SOW. It’s a fresh approach to EDI outsourcing that’s making life easier for our clients.
4. Outdated EDI solutions
Let’s face it, EDI has been around for some time now. If you got into the game a while ago, you probably didn’t foresee your future needs.
Maybe that VAN solution is eating into your profits as you get billed for every transaction even as you scale up.
Or, at the other end of the spectrum, maybe that point-to-point solution is getting so complex, you can’t afford to support it.
Here at Corsica Technologies, our goal isn’t for you to buy the most expensive EDI solution. We want you to buy the right one—and we want it to lay the ground for your future growth rather than causing problems down the road. This ensures that EDI keeps working for you even as your business evolves.
5. Ballooning costs
Unfortunately, large EDI providers tend to view midmarket customers as a source of revenue extraction—not as companies who need real help from a true partner. We talk to many companies who are seeing rising costs without a corresponding rise in service quality, attention, or growing value from EDI.
It shouldn’t be like this. The right EDI service provider will take a true partner approach and demonstrate a “can-do” attitude.
That’s what we’re all about here at Corsica.
Moving forward with EDI
Our unique service approach helps companies win with EDI. You get:
- Unmetered EDI services
- One predictable monthly price
- Deep expertise in EDI, cybersecurity, and IT
- Full data integration services and capabilities
Ready to take the next step? Contact us today to take the next step on your EDI journey.
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