EDI Standards and Protocols: What You Need to Know

Electronic Data Interchange (EDI) is a veteran B2B technology that supports global supply chains.

Despite the technology itself being over four decades old, the EDI market is still growing, expected to expand from $1.98 billion in 2023 to $4.52 billion by 2030 at a compound annual growth rate (CAGR) of 12.5%.

However, it’s well known that although it contains lots of exciting possibilities for improving supply chain practices, the  world of EDI can be intimidating—especially for those who are new to the concept.

With numerous EDI standards and protocols to choose from, each with unique characteristics, it's essential to understand how they work to determine which are best suited for your business needs.

With this guide, we’ll demystify the building blocks of EDI—its standards and protocols—to help you learn the lingo and tricks of the trade.

Let’s dive in.

Understanding the Difference Between EDI Standards and Protocols

Before delving into the specifics of EDI standards and protocols, it’s important to understand  the difference between the two:

• EDI Standards: Standards define the structure, content, and format of business documents exchanged electronically between trading partners. They help ensure that the data sent and received is consistent, accurate, and easily interpretable by the partners' systems.
• EDI Protocols: Protocols establish the rules and methods for securely and reliably transmitting business documents between trading partners. They act as the delivery mechanism, so that the data is transferred efficiently and both parties can confirm the receipt and validity of the transmitted information.

In essence, EDI standards are the language of B2B communication, while EDI protocols are the vehicles that transport standardized data from one trading partner to another.

EDI Standards and Protocols 

EDI Standards: The Language of B2B Communication

At the heart of EDI lies a set of standards that serve as the common language for B2B communication.

EDI standards define the structure, content, and format of business documents exchanged electronically between trading partners.

EDI X12 (also called ANSI X12 or ANSI EDI X12, primarily used in North America) and EDIFACT (primarily used in Europe and Asia) are the most widely used EDI standards by a huge margin, but there are several others.

Let’s break each standard down in detail:

EDI X12

Developed by the American National Standards Institute (ANSI), EDI X12 is widely used in North America. It’s well-maintained and supports virtually every industry, from healthcare to automotive and manufacturing.

Some 300,000 businesses worldwide are using EDI X12, according to some estimates.

One of the key features of EDI X12 is its use of transaction sets, identified by three-digit numbers. For example, the 850 transaction set represents a purchase order, while the 810 represents an invoice.

Each transaction set has a specific structure and format, helping ensure that the information exchanged is standardized and easily processable by the recipient's system.

EDIFACT

EDIFACT, short for Electronic Data Interchange for Administration, Commerce, and Transport, is an international standard overseen by the United Nations (UN). It’s used extensively outside North America, particularly in Europe and Asia.

EDIFACT messages are identified by six-letter codes, such as ORDERS for purchase order and INVOIC for invoice.

TRADACOMS

TRADACOMS is a UK-based standard that predates EDIFACT. Although made technically obsolete in the mid-1990s, it’s still widely used in the UK retail sector.

ODETTE

ODETTE, which stands for Organization for Data Exchange by Tele Transmission in Europe, is primarily used in the European automotive industry.

ODETTE messages, such as DELFOR for delivery forecasts and CALDEL for call-off delivery instructions, are specifically designed to exchange information between automotive manufacturers and their European suppliers.

VDA

VDA, or Verband der Automobilindustrie, is another automotive-centric industry standard mainly used in Germany. It’s often vital for businesses trading with Germany’s large automotive sector, which includes the likes of BMW, Volkswagen, and Mercedes.

HL7

HL7, which stands for Health Level Seven, is a standard specifically designed for the healthcare industry.

HL7 messages, such as ADT for patient admissions and ORU for observation results, help ensure the accurate and secure transfer of patient information across different systems.

RosettaNet

RosettaNet is primarily used in the high-tech industry, providing standardized processes for the electronics and semiconductor sectors. It’s commonly used by Microsoft, Cisco, Bosch, and Hewlett-Packard, among others.

Unlike other EDI formats, RosettaNet is  XML-based (as opposed to text) and uses Partner Interface Processes (PIPs) to define specific business processes and exchange structured data.

EDI Standards Comparison

EDI Protocols: The Transmission Mechanisms of EDI

While EDI standards define the structure and content of business documents, EDI communication protocols establish the rules and methods for transmitting these documents securely and reliably between trading partners.

Think of them as the delivery mechanism—they help transfer the data efficiently and securely from one party to another. Here are the main EDI protocols you need to know:

AS2

AS2 (Applicability Statement 2) is a communication protocol developed specifically for B2B document exchange. It rose in popularity after the turn of the millennium following Walmart’s decision to mandate its use for EDI transactions.

As Joe Cicman, a senior analyst from Forrester, explains, “When I look at the spread of EDI, I look at the power map in a supply chain…Buyers like Walmart and Ford have the power. They mandate that their suppliers adopt EDI. That’s how it spreads.”

AS2 utilizes the HTTP(S) protocol to transmit EDI messages securely through an encrypted tunnel. Typically, files are sent as 'attachments' in an AS2 message. If necessary, these messages can also be digitally signed to help ensure authentication.

AS2 is particularly popular in today's healthcare industry because it complies with the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

Advantages of AS2:

• No limit on the amount/size of data you can exchange
• If your organization's server is live, so is your AS2 connection
• Ability to exchange all file formats
• No yearly or transaction fees
• Possible via point-to-point or indirectly via a VAN
• Widespread adoption

OFTP2

The original ODETTE File Transfer Protocol was specifically designed for B2B document exchange in the mid-1980s. In 2007, the OFTP2 protocol was developed for use over the internet.

OFTP2 enables the secure exchange of high volumes of data via dedicated servers using a simple and elegant structure, with only 14 commands.

Unlike AS2, OFTP allows for both pushing and pulling information. Also, similar to AS2, it allows users to request signed receipts, further improving data security.

Advantages of OFTP2:

• Simple to use
• Allows for high-volume data exchange (up to 9 petabytes)
• Ability to push and pull messages
• Highly secure
• Automatic file restart
• Widespread adoption throughout manufacturing and automotive industries

API

Application Programming Interfaces (APIs) are a combination of rules and mechanisms that dictate how two endpoints (in this case, business systems) can interact and share information. It’s not an EDI technology, but can perform the same function (fundamentally, it is a form of data exchange).

API is becoming more popular for augmenting or replacing EDI workloads, as identified by IBM.

However, while extremely flexible for B2B data exchange, there’s little standardization surrounding how APIs should be created and used for this purpose. That also means that using API for B2B data exchange can become tricky as the volume of trading partners increases.

Advantages of API:

• Flexible data exchange with real-time capabilities, enabling immediate or scheduled data transmission
• Enhanced customization options to meet specific business needs and support various data formats
• Wider pool of implementation talent due to widespread knowledge among web developers—not limited to EDI specialists

EDI Messaging Protocols Comparison

Simplify Message Exchange With Modern EDI Tools

Both standards and protocols play fundamental roles in enabling efficient B2B communication.

While X12 remains dominant in North America and EDIFACT prevails in Europe and Asia, the standard of choice typically depends on industry-specific requirements and geographical considerations.

For instance, HL7 is indispensable in healthcare, while ODETTE and VDA are vital in the automotive sector.

It’s a similar scenario when it comes to protocols. AS2 has gained widespread adoption, particularly in retail and healthcare, thanks to its security features and HIPAA compliance.

However, OFTP2 is strong in the manufacturing and automotive industries, especially in Europe.

 Successful EDI Implementation

The key to a seamless EDI implementation lies in understanding that there's no one-size-fits-all solution. Your choice of standards and protocols should be guided by several key factors:

1. Industry requirements and norms
2. Geographical location and trading partner preferences
3. Data volume and security needs
4. Existing IT infrastructure and integration capabilities
5. Long-term business goals and scalability requirements

This is where partnering with a trusted EDI-managed service provider like Epicor can make a vast difference.

We offer a variety of flexible, intuitive EDI solutions to help you navigate different standards and protocols so you can cut to the chase and focus on what you need to do: trade with your partners.