What Is X12 EDI? Understanding the Basics of EDI

Exchanging data between organizations — or even within an organization — can be a challenge. X12 EDI is an electronic data interchange (EDI) standard designed to streamline communications, eliminating many pervasive issues of electronic information processing.

What is X12?

Chartered by the American National Standards Interchange (ANSI), X12 is a non-profit organization that develops standards for business-to-business communication.

The goal of X12’s standards is to provide universal formats for exchanging electronic information between or within companies. The standard was first developed in 1979 and is still used by companies of all sizes across many industries.

X12 refers to business documents, such as invoices or purchase orders, as "transaction sets." There are more than 300 defined transaction sets spanning five functional subsets, including finance, insurance, and supply chain transactions. These transaction sets provide a framework for businesses to exchange information on common ground.

What are the benefits of X12 EDI?

X12 standards enable U.S.-based companies to communicate without incompatible software or insecure data transfer methods getting in the way.

The X12 format covers many familiar tasks and features several industry-specific subsets to ensure businesses comply with relevant rules and regulations while transferring documents, such as HIPAA for health care providers.

The standard offers rules for structuring data. It also includes the Interactive Exchange Protocol (I-EDI), which helps improve the security, speed, and stability of data transfers.

Most North American trade employs X12 standards, but other standards are more popular abroad. Many of X12’s transaction sets map to the internationally used UN/EDIFACT standards, helping U.S. companies benefit from streamlined international communication.

X12 EDI documents: core structural elements

X12 EDI documents provide a systematic way to define and transfer data. Business application developers use this standard to ensure other applications can read the documents created by their software. Here are some of the ways X12 organizes transactions:

Subsets

EDI is used by businesses in many different industries. There are five functional subsets to distinguish the transactions’ uses, and each is divided into industry-specific subsets. The five functional subsets are:

• Communications and controls
• Finance
• Insurance
• Supply chain
• Transportation

The industry-specific subsets are:

• HIPAA: Health Insurance Portability and Accountability Act
• AIAG: Automotive Industry Action Group
• CIDX: Chemical Industry Data Exchange
• EIDX: Electronics Industry Data Exchange
• PIDX: Petroleum Industry Data Exchange
• UCS: Uniform Communication Standard
• VICS: Voluntary Inter-industry Commerce Standard

These industry-specific subsets include transaction sets commonly used by companies within those industries, facilitating robust, reliable communication and compliance with data and communication regulations.

Message types

X12 standards feature more than 300 message types, many of which are industry-specific. Each message type has a three-digit identification number to communicate the contents of the transaction.

Common message types include the following:

• 100: Insurance Plan Description
• 105: Business Entity Filings
• 132: Human Resource Information
• 139: Student Loan Guarantee Result
• 155: Business Credit Report
• 204: Motor Carrier Load Tender
• 210: Motor Carrier Freight Details and Invoice
• 214: Transportation Carrier Shipment Status Message
• 274: Healthcare Provider Information
• 810: Invoice
• 846: Inventory Inquiry/Advice
• 850: Purchase Order
• 855: Purchase Order Acknowledgement
• 990: Response to a Load Tender

Data segments

In addition to the three-digit code identifying message types, X12 documents include segments beginning with a two- to three-letter code. Some data segments are mandatory, while others are optional. Here are the required data segments of an X12 document:

• ISA: This is the interchange header and includes information about the document sender and intended recipient, such as their ISA ID.
• GS: The functional group header defines the functional group of the transaction set and includes information such as the date and time the document was prepared.
• ST: This header marks the beginning of a transaction set.
• GE: This trailer segment includes the number of functional groups in the segment and the control group number. It marks the end of a group of transaction sets.
• IEA: This segment marks the end of the interchange. It includes the interchange control reference number and information about the number of functional groups.

Some institutions may demand you include other segments when exchanging information with them. Large organizations often publish EDI implementation guidelines to help others produce documents within their standards.

Implementation guidelines are helpful if you need to convert data from another format, such as converting JSON to X12.

X12 process examples

X12 standards are used whenever a business needs to communicate electronically with a partner via ERP software, accounting software, or another tool.

For example, here is a common chain of communications between a retailer and a supplier, along with their corresponding X12 transactions:

• Raising a purchase order (EDI 850)
• Acknowledging that purchase order (EDI 855)
• Sending a shipping notice (EDI 856)
• Issuing an invoice (EDI 810)
• Supplying payment with remittance advice (EDI 820)

Let's examine another use case that involves the transportation of goods. Wherever there's communication between transportation brokers, shippers, and carriers, there's an X12 EDI message type covering that communication. This is a typical series of transactions:

• Transportation broker sends request to carrier (EDI 204)
• Carrier responds to transportation broker and accepts (EDI 990)
• Shipper sends transportation broker Bill of Lading (EDI 211)
• Carrier sends transportation broker periodic shipment status updates (EDI 214)
• Carrier sends a detailed breakdown of freight charges transportation broker and an invoice to shipper (EDI 210)

Streamline your communications with EDI X12 and Orderful

X12’s EDI standards can make your communication more efficient, but first, you must ensure your business is EDI-capable. Fortunately, we can help.

At Orderful, we go beyond EDI basics. Our Cloud-based EDI solution offers a variety of tools to improve your EDI systems without changing your existing workflows. Contact us to speak to an expert and learn how you can transform your business.