EDI Flows Overview: Inbound & Outbound EDI Process and Business Cycle Explained

Inbound Flow:
1) The inbound, EDI data needs to be collected.
2) The collected data should be De-enveloped (removing the headers) to get the message part also.
3) Using the header information (Interchange, Group, Message and version) the Envelope setup (Trading Partner setup) will be identified.
4) The Envelope setup contains (points) the Map which can be used to translate the data.
5) The translated data can be extracted to the specified directory.

Outbound Flow:
1) Collect the files.
2) Use the Typer map or Data extraction map to extract the data to identify the User and partner information.
3) These info can be used to identify the Envelope which points to a map.
4) The Map translates the data and Envelopes the data with the header segments.
5) The translated files can be extracted to the specified directory.

EDI And The Business Cycle

A typical business cycle may be as follows:

1. A buyer has a need for merchandise and creates a Request for Quote (RFQ) document.

2. The seller responds with a Quote providing the price and other pertinent information as to how the request would be

fulfilled.

3. Upon acceptance of the quote, the buyer sends a purchase order document to the seller requesting goods at quoted

prices.

4. The seller responds acknowledging that the goods can be delivered at the prices specified and in the time frame

indicated. A functional acknowledgment transaction may also be sent indicating successful receipt of any EDI transaction

without indicating any conditions or details of the business transaction.

5. The seller ships the goods and sends a shipping notice providing details regarding the carrier, product identification,

dates, and other information about the shipment.

6. The seller sends an invoice document, billing the buyer for the goods. There is also an EDI document that allows a

combined shipment and billing notice.

7. The buyer notifies his bank that payment is to be made (payment order) and uses another form of the same document

(remittance advice) to inform the seller that payment is being made.

Some Common EDI X12 Transactions

 Transactions that could be used to implement previous example:

 840 - Request for Quotation

 843 - Response to Request for Quotation

 850 - Purchase Order

 855 - Purchase Order Acknowledgment

 856 - Ship Notice/Manifest

 810 - Invoice

 820 - Payment Order / Remittance Advice

 Other common ANSI X12 transaction sets:

 811 - Consolidated Service Invoice/Statement

 813 - Electronic Filing of Tax Return Data

 832 - Price/Sales Catalog

 857 - Shipment and Billing Notice

 880 - Grocery Products Invoice

 997 - Function Acknowledgment

Industry Acceptance Of EDI

The transportation industry was one of the first to use EDI concepts. It was Edward Guilbert who

conceived EDI after experiencing problems moving paper-based information during the Berlin Airlift.

Back in the U.S. he founded the Transportation Data Coordinating Committee (TDCC), an organization

that was among the first in using EDI standards as we know them today.

Since the transportation industry effects so many others, soon other industries, such as grocers, were

asking about the electronic paperwork in use by the TDCC. The grocery industry Uniform

Communication Council (UCC), founder of the familiar UCS bar code, adopted their own set of EDI

standards.

As EDI use grew and was recognized as essential to other industries, the American National Standards

Institute (ANSI) formed the X12 committee to address EDI standards. The United Nations sponsored

EDIFACT Boards (EDI for Administration, Commerce, and Transport) adopted a standard with a very

similar syntax to X12.

Transportation and EDI

Here we see an example of transaction flow for the transportation industry. The Ship Notice/Manifest

856 transaction soon became a major component of many EDI processes across industries. It supported

concepts such as Just In Time (JIT) and Continuous Flow Manufacturing (CFM).

Banking and EDI

Another industry that effects all others is the banking industry. Although the banking industry already

has specific industry standards for the formatting and transmission of electronic data, there are also a

number of EDI transactions that facilitate the communication of financial data to and from banks.

Banking standards rather than EDI, however, are generally used for bank-to-bank communications.

Retail and EDI

With high volumes of transactions, large inventories with millions of productions, and numerous

suppliers, the retail industry is one of the areas for high return on investment with EDI. Large retailers

are often EDI "hubs" forcing suppliers ("spokes") to accept purchase orders electronically in EDI format.

Vendor Managed Replenishment Systems (VMRS) allow vendors to supply retailers automatically, based

on electronic reports of product sales. This process eliminates purchase orders and reduces inventory

and retail "stock out" problems.

Quick response is a process that uses real-time transactions to trigger replenishment responses in the

supply chain for manufacturers or retailers. This improves inventory turns, product allocation and

replenishment times and helps retailers avoid running out of important stock.

"Enterprise Resource Planning" software solutions address interactions between the various functions

Sales, Distribution, Manufacturing, Materials, Finance, Human Resources, and Maintenance. They

provide a common, consistent system for capturing data organization wide, with minimum redundancy.

Throughout the process, bar codes may be used to capture product and process identification and often

are used to provide input to processes that produce data for EDI systems.

Vendor Managed Replenishment Systems

In the past a company's inventory was housed on-site. This often would be costly when supply

outweighed demand. In today's business environment it is become increasingly more cost effective to

rely on vendors to replenish a company's inventory as needed. Using this method, reliable transport is

essential to ensure a reliable supply based on supply and demand.

Healthcare And EDI

The use of Electronic Data Interchange permeates virtually all aspects of the healthcare system. In expediting the transfer of

important medical documents, EDI is vital in the health of the patient.

Examples of Healthcare Transactions

The diagram above shows the flow of information among the Healthcare Provider, the Policyholder, the Provider of Benefits, and

the Service Organizations and Banks.

Refer to the next visual for a list of these and other healthcare transactions.

Healthcare Transactions

Examples of Healthcare Specific EDI Transactions

 270 - Eligibility, Coverage or Benefit Inquiry

 271 - Eligibility, Coverage or Benefit Information

 272 - Property/Casualty Loss Notification

 273 - Insurance/Annuity Application Status

 274 - Health Care Provider Information

 275 - Patient Information

 276 - Health Care Claim Status Request

 277 - Health Care Claim Status Notification

 278 - Health Care Services Review Information

 279 - Health Care Services Review Request

 834 - Benefit Enrollment/Maintenance

 835 - Claim Payment/Advice

 837 - Healthcare Claim

EDI Today

Virtually all industries have adopted some form of EDI today. Examples of EDI documents include purchase orders, invoices,

power of attorney, and price information. Many industries use specific EDI documents such as motor carrier rates, student

records, tax returns, vehicle shipping orders. Companies want to achieve 100% electronic transaction volumes.

What Does EDI Involve?

 Application

 "Business documents"

 Translator

 "Standard format"

 Communications Vehicle

 "Electronic Exchange

Application Document Formats

 In the traditional business environment, there are no agreed upon standards for

paper documents or file formats

 Applications produce different document formats and require different information

 Locating and interpreting information on different document formats reduces

productivity

Multiple Application File Formats

 When computer applications create business documents, the files that generate the documents are in different formats

 Different file formats require that the receivers reformat or translate the file before it can be used in their own system

 Dealing electronically with many trading partners can be complex

Translation

 Most companies purchase or lease translation software

 Translation software translates business documents into a common EDI standard for transmission

to a trading partner

 Translation software also translates EDI Standard data into a format suitable for application

processing

 EDI outsourcing services are also available

Translation Software

 Bi-directional software which converts data to and from the EDI standard formats

 Some translators provide any-to-any translation capabilities

 Translators exist for all platforms (mainframe, mid-range, micro, PC)

Communications

 Transmission method is not addressed by the EDI standards

 Alternatives

 Value Added Network

 Point-to-Point (Direct)

 Proprietary Network

 Internet Service Provider

 Combinations of above

 Some communication products can be tightly coupled with translation

EDI System Components

Although the translator is the heart of any EDI system, the nature of EDI requires that the transactions be communicated with a

trading partner. And as the source or target of data processed by the translator, the application also plays a key role. These

components may be uncoupled from the translator, loosely coupled, or tightly coupled.

When the application and communication components are uncoupled from the translator the data may be physically moved from

one step in the process to another and the processing by the components is not synchronized or coordinated with no

communication between the components other than the passing of data files.

A loosely coupled system may involve one component launching or causing the execution of another component. The

communication program may pass status of communications back to the translator to allow administration at the translator with

information regarding the status of translation, enveloping, and communication.

A tightly coupled EDI system will often involve an Application Programming Interface (API) that is responsible for the execution

and status of all components of translation. The API may then provide the central point of control and administration of the EDI

process.

Traditional EDI System

The "traditional" EDI system uses Value Added Networks (VANS) for communcation between trading partners. VANS often

specialize in EDI data, using Interchange Control Header information to identify senders and receivers. They may also

interconnect with other VANS, allowing companies on different VANS to communicate without establishing connectivity to the

VANS of all their trading partners. VANS provide a high degree of security, reliability, and accountability for network

transmissions.

Other Forms of EDI

 Paper Oriented

 EDI to Fax - An EDI system may produce FAX output to be sent to a trading

partner.

 EDI to Print - Inbound or outbound EDI data may be printed for local processing

or for a trading partner.

 People Oriented

 Forms-based documents are available on the Internet allowing entry and

transmission of EDI data.

 VAN or Extranet access to EDI applications is also an option.

 New Methods for EDI:

 Allow more trading partners access to EDI function and thereby assist large

enterprises in achieving 100% EDI.

 Assist small and medium business (SMBs) with implementing EDI without the

complexity and cost involved with complex EDI systems and VAN requirements.

EDI Benefits:

There is no doubt that EDI can bring significant benefits to organizations. These can generally be classified into:

Strategic, operational, opportunity

Strategic benefits include:

Ø      Faster trading cycle.

Ø      Ability to adopt new business processes such as Just-in-Time manufacturing techniques.

Ø      Ability to win new business or retain existing customers leading to improvements in business efficiency. Ability to respond too highly competitive new market entrants.

Operational benefits include:

Ø      Reduced costs - paper and postage bills cut - reduction in money tied up in stock - manual processing costs (e.g. associated with verification, keying and re-keying of documents and the cost of manual filing systems).

Ø      Improved cash flow.

Ø      Security and error reduction.

Ø      Acknowledged receipt.

Opportunity benefits include:

Ø      Enhanced image

Ø      Competitive edge

Ø      Improved corporate trading relationships