Running a modern business is about building connections. In addition to demonstrating their value to direct consumers and end users, companies must cultivate strong relationships with their business partners. Electronic data interchange, or EDI, protocols play a critical role in such practices. Here’s how EDI protocols work and how it’s used in B2B communication.
EDI Messaging Protocol Basics
Companies use EDI to share information about everything from supply chain fulfillment to stock prices and manufacturing. While EDI is a blanket term for various digital practices that enterprises use to share commerce data, you may also encounter the concept of EDI messaging protocols.
EDI messaging protocols are common-use standards governing how data messages should be formatted for network transmission, stakeholder security and ease of use with existing web services. Below are some of the formalized EDI standards:
Other Important EDI Standards
These are just a few of the best-known EDI frameworks. Over the years, different governmental and global entities laid down distinct rules for message formatting. Although businesses are free to choose which protocols they apply to specific tasks, understanding the landscape is fairly important.
In some cases, EDI protocol standards have come to dominate enterprise niches. For instance, although individual healthcare providers use unique types of EHR, or electronic health record, document formats for practices like rheumatology and gastroenterology, most stick to the international HL7 EDI protocol for sharing EHR-based patient information. Protocols, like HL7, help to standardize B2B communication, but customization is often required so companies can successfully exchange information.
Which EDI Protocols Are Preferred and Why?
EDI messaging protocols leverage universal web technologies, so the hurdles of implementation and usage are typically low. Choosing an appropriate standard is about understanding your use case and operational limitations. Here are a few examples:
Imagine that you’re using automated EDI software to send market data to a trading partner. The app sends scores of reports each minute, and the slow receiving server sometimes falls behind or drops a message. Your partner’s EDI system might function a bit more smoothly if you switched to a protocol like AS4. This standard lets you compress, or shrink the size of, the message’s contents, or payload, without losing any of the information in the message, so it could reduce overhead on the other end.
Sharing Custom Business Process Data
You want to set up a second manufacturing plant, but you don’t want to open up a second head office. You’ll need to duplicate your production line control system, but how will you send it new jobs from your old location? A messaging protocol like ebXML, which uses XML data structures to represent arbitrary, human- and machine-readable document information in different languages, could be the answer.
Complying With Your Partners
Regionality has a huge impact on the suitability of different messaging standards. For instance, in the U.S., most organizations use the American National Standards Institute, or ANSI, (ASC) X12 protocol, which represents things like purchase orders and contracts with three-digit codes. In a majority of other countries, however, the United Nations’ EDIFACT, which represents messages via alphabetical codes, is the standard.
Suppose you wanted to compare foreign and domestic supply vendors. You might benefit from using pricing software that understands how to speak in both X12 and EDIFACT formats.
How Are EDI Protocols Used?
As with all forms of standardized communication, sharing business information demands effective software. Since EDI protocols have a hand in everything from what a message says to how it uses technology to say it, applications play essential roles in parsing and decoding data.
There are a few different ways to use EDI software. For instance, you can run an open-source or paid software tool on premise solution to start sending and receiving messages. Or, you might subscribe to an EDI service provider that lets you send messages via a web app. In some cases, businesses work with contractors or bureaus whose sole focus is to handle EDI data.
Your choice of EDI software impacts how much control you retain over the finer details of sending and receiving messages. Since all of these options have their strengths and weaknesses, your business plan and IT constraints should be the determining factors.
Noteworthy Pros and Cons of Different Protocols
It’s impossible to cover all of the different EDI messaging protocols in-depth in one short document. Here are a few fast facts about some of the standouts to get you started on your journey to EDI implementation:
The FTP Family
Standards like the File Transfer Protocol, or FTP, are well-liked because they’re straightforward and accessible. It’s easy to get up and running, and many computers ship with command-line FTP tools. Potential problems with FTP include its simplicity and lack of security. While you can upgrade to FTPS or SFTP, these tools don’t exactly cater to automation, interoperability or complex message management tasks, such as receipt confirmation.
Applicability Statement 2, or AS2, is popular for many reasons, not the least of which is its ability to work seamlessly with HTTP and HTTPS. Features like real-time acknowledgments, digital signing and widespread adoption make it quite appealing to retailers. While setting up the necessary digital certificates and encryption may be extra work for the IT department, AS2 is a go-to option for many businesses that are willing to spring for enterprise EDI software tools.
Odette File Transfer Protocol 2.0 is commonly used in applications that demand the transmission of larger files. This protocol was originally designed by the European Organization for data exchange by teletransmission in Europe to support the automotive industry. Computers can use OFTP 2.0 to send up to 9 Petabytes of data back and forth, compress messages, work with peer-to-peer network topologies, restart interrupted files and sign receipts.
As supply chains globalize, companies need to be able to source their own products and communicate with partners across language barriers. GS1 incorporates a multifaceted design that makes it easy to communicate in adherence with the UN’s CEFACT XML, XML and EDIFACT EANCOM standards. Although GS1 EDI comprehension is a must in many forms of international trade, there’s definitely a learning curve.
Setting Up and Managing an EDI Protocol That Works for You
Did this crash course on EDI protocols help you get oriented? Although there’s a lot to consider, remember that using EDI is like any other IT project. Planning, testing and life cycle management are vital to your success.