EDI 101

What is EDI?

Electronic Data Interchange (EDI) is the computer-to-computer exchange of standardized business documents between business partners electronically. Some examples of documents are purchase orders, purchase order acknowledgements, advance ship notices and invoices.

How does EDI work?

There are several steps in the EDI process flow. First, the data is extracted from the business partner’s (also known as a trading partner) back end system or ERP system in an electronic format. The data at this stage of the process is called application data, or source data. The EDI system then retrieves the application data and based on the configuration that has been set up in the EDI application, identifies the receiving trading partner, document type, and which map is to be used to translate the data. The map reads the application data, and based on specific processing instructions, creates the destination data or electronic output file that will be sent to the trading partner for processing. The output file can be an application file format, proprietary delimited or fixed length file, Idoc, XML, EDI (X12, EDIFACT etc.) or any format mutually agreed upon by the trading partners. Once the data has been translated, it is ready to be transmitted based on the agreed upon method for the individual trading partner. The most commonly used methods include using a Value Added Network (VAN), FTP, SFTP or AS2.

The receiving trading partner executes the agreed upon communication method to receive the file. The EDI application system retrieves the file and based on the configuration that has been set up, identifies the sending trading partner, document type, and which map is to be used to translate the data. The map reads the inbound data file, and based on specific processing instructions, creates the application data file that will be sent to the back end system or ERP system for processing.

What is a translator?

A translator is a piece of software that accepts electronic transmissions and converts the data into another format. Examples of files that can be converted are proprietary delimited or fixed length files, Idoc, XML, EDI (X12, EDIFACT etc.) or any format mutually agreed upon by the trading partners.

What is a VAN?

A value-added network (VAN) is a 3rd party network provider used to facilitate electronic data interchange (EDI) or provide other network services. A VAN is analogous to a Post Office. Your company has a mailbox at the VAN and your trading partner has a mailbox at the VAN. The sender and receiver communication IDs used in the ISA segment of the EDI transaction (interchange control header for an EDI X12 interchange) identify what mailbox the data should be routed to at the VAN.

What is FTP?

File Transfer Protocol (FTP) is a standard network protocol used for transmitting files between computers over a TCP/IP network, such as the internet. One computer acts as the server to store information and the other acts as the client to send or request files from the server.

What is SFTP?

Secure File Transfer Protocol (SFTP) allows for the transfer of files and other data over a connection that has previously been secured using Secure Shell (SSH) protocol. SFTP encrypts both commands and data, preventing passwords and sensitive information from being transmitted in clear text over a network.

What is AS2?

AS2 (Applicability Standard 2) is a form of EDIINT, which stands for EDI over the Internet. AS2 uses the HTTP protocol (Hypertext Transfer Protocol, or it’s more secure version HTTPS) and is a more direct and realtime connection for transmitting EDI data between companies. This communication method intended to ensure the proper level of security for data transmitted over the internet. It does this through the use of encryption and digital signatures as well as the use of MDNs (Message Disposition Notification). This provides non-repudiation, meaning the recipient cannot dispute the fact that they received the document.


HTTP (Hypertext Transfer Protocol) is a TCP/IP based communication protocol, which is used to deliver data on the internet. It provides a standardized way for computers to communicate with each other. HTTP specification specifies how clients request data will be constructed and sent to the server, and how servers respond to these requests.

HTTPS (HTTP over SSL or HTTP Secure) is a secure version of the Hyper Text Transfer Protocol (http) that uses Secure Sockets Layer (SSL) or Transport Layer Security (TLS) as a sublayer under regular HTTP application layering to provide encryption and secure identification of the server. Whether or not client certificates are in use, SSL/TLS provides point-to-point encryption and tamper protection during transmission.

What is X12?

The American National Standards Institute (ANSI) chartered the Accredited Standards Committee (ASC) X12 to develop and maintain EDI standards along with XML schemas for inter-industry electronic exchange of business transactions globally. The diverse membership of ASC X12 includes technologists and business process experts, encompassing health care, insurance, transportation, finance, government, supply chain and other industries. In addition, ASC X12 also contributes to UN/EDIFACT messages that are used widely outside of the United States.


UN/EDIFACT (the United Nations rules for Electronic Data Interchange for Administration, Commerce and Transport) comprise a set of internationally agreed standards, directories, and guidelines for the electronic interchange of structured data, between independent computerized information systems. EDIFACT is widely used across Europe, mainly due to the fact that many companies adopted it very early on.

What is XML?

Extensible Markup Language (XML) is a markup language that defines a set of rules for encoding documents in a format that is both human-readable and machine-readable. XML can be used by any individual or group of individuals or companies that want to share information in a consistent way.