Electronic Data Interchange is now the most popular and widely used communication method for businesses. From small enterprises to large corporations, almost all organizations across the world rely on EDI integration services. We know that to run a business and interact with trading partners, it is essential to exchange and process many documents on a daily business. Of course, paper-based methods or manual processes cannot accomplish these tasks effectively, and even if they could, it is time-consuming and involves higher chances of errors. Hence, EDI is an automated, faster, and more efficient electronic mode.
In the world of EDI, the two most common standards used in varied industries are ANSI ASC X12 and EDIFACT. Although both are quite similar, there are numerous differences between them as well, making them different.
In this blog, we are going to understand these standards in detail and compare them based on various factors:
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A Brief Introduction to EDI X12
EDI is a flat-file technology or format used by businesses or trading partners in different organizations to securely share business transactions, information, or files. The EDI X12 format is based on ASC, Accredited Standards Committee, and X12 standards. Organizations prepare the documents according to ASC X12 data standards and then translate them into a common language.
After that, they send the translated documents through a point-to-point secure EDI connection.The protocols used for this format include FTP, API-based systems, such as AS4, web-based via AS2, etc. The segregation of this standard was further into sub-standards or formats for easier and quicker information exchange. Additionally, every industry vertical was leveraging and using ANSI X12 with a dedicated format to transmit a specific data type.
Below are a few formats :
These standards were –
- EDI 834– Benefit Enrollment and Maintenance
- EDI 837- Healthcare Claim Transaction Set
- EDI 835 – Healthcare Claim Payment/Advice
- EDI 270/271 – Healthcare Eligibility, Coverage or Benefit and Information Response
- EDI 278 – Healthcare Services Review – Request for Review and Response
- EDI 820 – Payroll Deducted and Other Group Premium Payment for Insurance Products
Apart from businesses that use X12 to send and receive EDI documents and files, such as invoices, purchase orders, and more, this EDI solution is also used across various industries, which include insurance, healthcare, and e-commerce for audit trails. It ensures security and features such as automation, cost-saving, and time-effectiveness. Moreover, it offers a common language for exchanging information between two or more organizations and mitigates risks associated with paper-based and email data transmission.
Advantages and disadvantages
Here are some advantages and disadvantages of using ANSI Standard X12 EDI Format:
- Widely adopted: ANSI X12 is widely adopted across different industries in North America, making finding EDI solution providers who can help you implement it easier. Many businesses, particularly in the healthcare and retail sectors, have adopted ANSI X12 as their standard EDI format.
- Structured format: ANSI X12 has a structured format, which makes it easy to interpret and integrate with other systems. Standardizing data elements and transaction sets means businesses can easily map data fields and automate the processing of EDI transactions.
- Robust and comprehensive: ANSI X12 supports various business transactions and data sets. It makes it suitable for businesses of all sizes and industries to exchange data electronically, whether exchanging purchase orders, invoices, shipping notices, or other business documents.
- Implementing ANSI X12 can be complex, particularly for businesses with limited technical resources. It is because the standard has many transaction sets and data elements, which can be challenging to navigate without expert guidance.
- Limited global adoption: ANSI X12 is primarily used in North America and has limited adoption outside the region. It can disadvantage businesses operating in global markets, as they may need additional EDI solutions to communicate with partners in other regions.
- Costly maintenance: Maintaining ANSI X12 can be costly, particularly for businesses that need to update their systems frequently to comply with new regulations or changes to the standard. It can disadvantage small businesses that need more resources to invest in EDI solutions.
ANSI Standard X12 EDI format is widely used in the US and Canada to facilitate electronic data interchange (EDI) between different business partners. It has several use cases in various industries, including:
Retail and supply chain management:
X12 EDI format is commonly used in retail and supply chain industries to exchange documents such as purchase orders, invoices, and advanced shipping notices. It helps to streamline the ordering process and reduce the need for manual data entry, resulting in faster processing times and fewer errors.
In the healthcare industry, the X12 EDI format is used to exchange patient health information, medical claims, and other administrative documents between healthcare providers, insurers, and other stakeholders. It helps improve the healthcare system’s efficiency and reduce costs by minimizing paperwork and manual processes.
Finance and banking:
X12 EDI format is used in the finance and banking industries for various purposes, including electronic funds transfer (EFT), wire transfers, and remittance advice. It helps to speed up financial transactions and reduce the risk of errors or fraud.
Manufacturing and distribution:
X12 EDI format is also used in the manufacturing and distribution industries to exchange documents such as product catalogues, inventory reports, and shipping notices. It helps to improve supply chain visibility and reduce the time and costs associated with manual data entry.
X12 EDI format is used by government agencies to exchange a wide range of documents, including tax forms, permits, and licensing applications. It helps to streamline government operations and improve the efficiency of government services.
EDI solution providers offer a range of EDI solutions that support the ANSI Standard X12 EDI format. These solutions typically include software and services that enable businesses to securely and efficiently exchange electronic documents with their trading partners securely and efficiently. Some common features of EDI solutions include document translation, data mapping, and trading partner management.
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A Brief Introduction to EDIFACT
EDIFACT stands for Electronic Data Interchange for Administration, Commerce, and Transport. It is an international EDI standard developed under the United Nations so that EDI is structured to work for multi-country and multi-industry exchanges.
Commercial and governmental organizations use EDIFACT to transmit information using a common language. It is commonly used in Europe, and many businesses in the US and the Asia Pacific regions have also started adopting this EDI standardized process for secure data exchange.
Advantages and disadvantages
Here, we will discuss the advantages and disadvantages of using EDIFACT compared to the ANSI Standard X12 EDI format–
Advantages of using EDIFACT:
- Global Acceptance: EDIFACT is a global standard supported by the United Nations and widely used in Europe and other parts of the world. EDI solution providers supporting EDIFACT allow companies to trade with partners worldwide without worrying about differences in regional EDI standards.
- Wide Range of Messages: EDIFACT offers a vast array of messages across various industries, including finance, retail, healthcare, and more. EDIFACT has pre-built messages for most business processes, including orders, invoices, shipping notices, etc. This feature saves time and effort for businesses that need to implement EDI solutions.
- Cross-Industry Standard: EDIFACT is not specific to any industry, and it can be applied to all types of businesses, including manufacturing, healthcare, retail, and more. This universality enables businesses to communicate with each other regardless of their industry.
- Reduced Manual Processing: EDIFACT messages can be processed automatically without manual intervention, reducing processing time and improving accuracy. This automation saves businesses time and resources, which can be used for other critical tasks.
Disadvantages of using EDIFACT
- Learning Curve: EDIFACT can be challenging to learn and implement, especially for businesses new to EDI. EDI solutions providers may need to train employees on the new system, which can take time and resources.
- Limited Usage in North America: While EDIFACT is widely used in Europe and other parts of the world, it has limited usage in North America. Businesses in North America may have to implement a different EDI standard, such as ANSI X12, to trade with local partners.
- Customization Limitations: EDIFACT has predefined messages, which can be limiting for businesses that need to send customized messages. The customization options for EDIFACT are limited, and businesses may need to find alternative solutions or use a different EDI format.
- Incompatible with Legacy Systems: Some legacy systems may not support EDIFACT, which can create challenges for businesses that need to exchange messages with these systems. This incompatibility may require additional customization or system upgrades, adding to the cost of implementing EDI solutions.
EDI Service providers offer EDI Solutions that support the EDIFACT standard for a wide range of use cases. Some of the most common use cases of EDIFACT include:
- International Trade: EDIFACT was in wide use to exchange information related to shipping, customs clearance, and other trade-related activities. The standard supports various documents, including invoices, purchase orders, bills of lading, and more.
- Healthcare: The healthcare industry uses EDIFACT to exchange patient data, medical records, and other healthcare-related documents between healthcare providers, insurance companies, and government agencies.
- Automotive: The automotive industry uses EDIFACT to exchange information related to the production, shipping, and delivery of automotive parts and vehicles.
- Retail: The use of EDIFACT in the retail industry is to exchange information related to orders, invoices, and shipping information between retailers and their suppliers.
- Transportation: For the transportation industry, the use of EDIFACT is to exchange information related to shipping, logistics, and freight forwarding.
Compared to EDIFACT, the ANSI Standard X12 EDI Format is widely used in North America and is often favoured by regional businesses. Some critical differences between EDIFACT and ANSI X12 include the structure of the messages, the data elements and segments used, and the syntax of the messages. EDI Solution Providers offer solutions that support EDIFACT and ANSI X12, allowing businesses to choose the standard that best fits their needs. Ultimately, the choice between EDIFACT and ANSI X12 will depend on various factors, including the industry, trading partners involved, and use case.
EDIFACT vs X12
Electronic Data Interchange (EDI) is an essential tool for businesses that want to streamline their communication processes, improve data accuracy, and reduce costs associated with manual data entry. EDI Service Providers provide services, which facilitate the exchange of electronic documents between trading partners. Two of the most widely used EDI standards are X12 and EDIFACT. This blog section will explore the key differences between these two standards.
Geographical location plays a significant role in choosing between X12 and EDIFACT for companies seeking EDI services. EDI service providers often cater to specific regions, and their offerings may vary depending on the location of their clients. UN EDIFACT, a standardized format for EDI transactions, is more commonly used in Europe and other parts of the world, while X12 is more prevalent in North America. Companies operating in different regions may need to adapt to the local standard to comply with regulations or industry practices.
Moreover, the distance between trading partners can also affect the choice of EDI format. X12 messages are usually shorter and require less bandwidth, which makes them more suitable for companies with partners located far away. On the other hand, EDIFACT messages are more robust and better suited for companies with nearby partners, as they can handle larger volumes of data.
- ANSI X12 EDI is mainly used in the healthcare industry to ensure HIPAA compliance in healthcare documents.
- On the other hand, the use of EDIFACT is not for HIPAA documents but is prevalent in other industries, such as government, supply chain, finance, etc.
EDI service providers play a crucial role in implementing these standards, as they offer the software and infrastructure necessary for businesses to send and receive EDI messages. While there are many EDI service providers, selecting a provider that supports the standards required by your trading partners is essential.
- ANSI ASC X12 EDI standard was developed and maintained by Accredited Standards Committee X12, also known as ASC X12 and chartered by the ANSI in 1979.
- Electronic Data Interchange for Administration, Commerce, and Transport, or EDIFACT, is supported by the United Nations Economic Commission for Europe (UNECE) and the International Organization for Standardization (ISO).
Both EDI standards have unique strengths and weaknesses, so it’s essential to consider which is best suited for your business needs.
Regarding EDI services, the most commonly used standards are X12 and UN EDIFACT. One of the key differences between these two standards is the use of Terminators/Separators. Both EDI standards use special characters to separate segments and elements in the documents.
- ANSI X12’s interchange header is marked ISA, and it generally uses a tilde (~) to separate segments and an asterisk (*) to terminate elements.
- EDIFACT’s interchange header is marked as UNB. It uses a period or dot (.) between segments to separate them and a (+) sign between elements. However, both of them can use different characters as well based on the specific implementation.
EDI service providers must know these differences when working with clients who use different standards. For example, suppose a provider is working with a client who uses X12 and needs to send data to a client who uses UN EDIFACT. In that case, they must ensure the data is correctly formatted with the correct separators. Understanding these differences and working with X12 and UN EDIFACT can be valuable skills for EDI service providers and help them better serve their clients in the global marketplace.
Although the message structures of X12 and EDIFACT are similar, both use different terminologies. Messages in both EDI data formats include Transaction Set, Functional Group, Interchange, and EDI Document.
Here is how our EDI-managed services provider explains the differences –
Transaction Set and Message:
This is the main body of the message, like order details in a purchase order. It is known as a Transaction Set in X12 while a message is in EDIFACT.
The Functional Group:
The header specifies where the message will go, such as a company department. There can be multiple messages or transaction sets like invoices and PO. For both the EDI standards; there is a header and a footer segment. X12 uses GS and GE for the header and footer, respectively. EDIFACT uses UNG and UNE for the header and footer.
It includes a header and footer and specifies the recipient company of the message or document. The former calls the header ISA and the footer IEA. The latter uses UNB and UNZ for them.
The EDI Document:
This is an optional segment which EDIFACT uses to define characters for terminators and separators in the document.
Composite Elements comprise two or more elements similar to an array and separated by a composite separator symbol. They are available in both standards. However, they are rarely used in EDI ANSI X12 and are common in EDIFACT.
The former uses Greater Than (>) to separate elements, while the latter delimits them with a colon (:).
Security authentication is available for both X12 and EDIFACT, but they support different standards.
The former uses ASC X12.58 security structures that include compression, authentication, encryption, and assurance. This ensures that the EDI files reach their destination in the original format. It monitors that there is no tampering with the files and assures the recipient of the original sender.
The latter follows the following security standards:
- ISO 9735-5 to address message, group, and interchange level security for integrity, authenticity, and non-repudiation of origin.
- ISO 9735-6 defines authentication and acknowledgement message AUTACK.
- ISO 9735-7 addresses group, message or package, and interchange level security for confidentiality.
- ISO 9735-9 is for the security key and certificate management message KEYMAN.
One of the critical differences between X12 and EDIFACT is their syntax. X12 uses a delimiter-based syntax, meaning that a specific character, such as a colon or a comma, separates each data element in a segment. EDIFACT, on the other hand, uses a hierarchical syntax. First the grouping is into segments and then to the messages.
Knowing the critical differences between EDI X12 and EDIFACT will help you select the right solution for your business. Both the standards are a bit complicated to comprehend entirely. You still may have many queries before you make your decision.
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Frequently Asked Questions (FAQs)
What are the two formats of EDI?
The two formats of EDI (Electronic Data Interchange) are X12 and EDIFACT. X12 is a standard developed by the American National Standards Institute (ANSI) for electronic data interchange between businesses based in North America. At the same time, EDIFACT is a standard given by the United Nations for electronic data interchange between businesses worldwide. X12 and EDIFACT define specific segments, data elements, and codes to represent data in electronic documents. Choosing between the two formats depends on the business’s and its trading partners’ specific needs and requirements.
What is the use of ANSI X12 standard?
ANSI X12 is of wide use in healthcare, retail, transportation, and logistics industries to streamline communication and improve data accuracy. It defines specific segments, data elements, and codes to represent data in electronic documents. The late 1970s saw the evolution of the standard, and since then, continuous updations have been made.
What is the ANSI X12 format?
ANSI X12 is a standard format for electronic data interchange (EDI) between businesses based in North America. It defines a specific syntax and structure for electronic documents that trading partner exchanges. The documents includes: purchase orders, invoices, and shipping notices. The X12 format uses a hierarchical structure and defines specific segments, data elements, and codes to represent data in electronic documents. It is of wide use for retail, healthcare, transportation, and logistics industries.
What is the EDIFACT format in EDI?
EDIFACT, or Electronic Data Interchange for Administration, Commerce and Transport, is a global EDI standard by the United Nations. It is a message-oriented standard that allows for the exchange of electronic documents between trading partners worldwide. EDIFACT uses a hierarchical structure and defines specific segments, data elements, and codes to represent data in electronic documents. Europe, Asia, and other parts of the world widely use it for various business processes like ordering, invoicing, and shipping. EDI Service Providers often support the EDIFACT format as part of their EDI services.
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