Understanding The Role of EDI Transaction Codes

Electronic Data Interchange (EDI) enables businesses to trade using established, mutually agreed electronic documents, resulting in a well-integrated, interoperable supply chain.

EDI has been found to accelerate business cycles by 61%, with 70% of business users rating enhanced order accuracy and efficiency as the technology’s top benefits.

In this blog, we focus specifically on EDI transaction codes. These codes are the building blocks of EDI, dictating how data is structured and communicated between trading partners.

Transaction codes primarily belong to the North American ASC X12 EDI or UN EDIFACT standards—the two dominant EDI standards used worldwide today.

Read on to discover what transaction codes are and the role they play in EDI data exchange.

Understanding EDI Transaction Codes

At the heart of EDI are transaction codes, also called EDI transaction sets, which are standardized formatted messages representing different types of business documents.

Each transaction code conveys specific information in a widely recognizable format, ensuring the receiving party interprets data as intended.

Transaction codes are developed by the Accredited Standards Committee (ASC) for the X12 standard and the United Nations Economic Commission for Europe for EDIFACT.

In both cases, EDI transaction codes enable businesses to ‘plug in’ to each other and send/receive data securely. They guarantee predictability in the transaction process.

The Role of Transaction Codes

Transaction codes are crucial for several reasons.

Firstly, they provide a structured way to exchange complex business data, from pricing and quantities to shipping details and payment terms.

Secondly, they enable automation by allowing computer systems to process and understand these documents without human intervention, drastically reducing processing time and eliminating manual errors.

For instance, in a typical purchase order (PO) process, a buyer will send an EDI document with its specific transaction code attached (EDI 850 for ASC X12).

The supplier's system recognizes this code, automatically processes the order, generates an invoice, and initiates shipping without manual data entry.

Why Transaction Codes Support EDI

EDI excels because it offers quick, efficient communication. Since transaction codes are pre-defined, they enable trading partners to easily conform to the same standard.

That’s why EDI has been around for 50 years and is still going strong today—the language is pre-developed and ready to implement.

Let’s move on and take a deeper look at the two core standards: ASC X12 and EDIFACT.

US ASC X12 Standards

The ASC X12 standard was developed by the American National Standards Institute (ANSI) in 1979. It’s widely used in North America and tailored to meet the specific requirements of healthcare, insurance, and retail industries.

The use of ASC X12 is mandated in some US sectors. The Health Insurance Portability and Accountability Act (HIPAA) requires EDI for healthcare claims, remittances, eligibility inquiries, etc, for example.

The ANSI X12 EDI standards encompass a broad range of transaction sets, but here are some of the most widely used:

General Business and Retail

The following are among the most common of the 300+ types of ASC X12 transaction codes.

• EDI 810 – Invoice: Electronic version of a paper invoice, detailing invoice number, date, product details, shipping, and payment information.
• EDI 820 – Payment Order/Remittance Advice: Electronic cash receipt issued post-receipt of an EDI 810 invoice, signifying intent to pay.
• EDI 824 – Application Advice: Provides feedback on a previously sent transaction's status (accepted, rejected, changes needed).
• EDI 850 – Purchase Order: Electronic purchase order for goods, including shipping details, product names, prices, and quantity.
• EDI 855 – Purchase Order Acknowledgement: Confirmation of receipt and acceptance/rejection of an EDI 850 purchase order.
• EDI 860 – Purchase Order Change (Buyer Initiated): Adjustments to a purchase order before shipment.
• EDI 861 – Receiving Advice: Reports the receipt of shipments or acceptance of returned defective items.
• EDI 865 – Purchase Order Change Acknowledgement: Acknowledges changes made to a customer order post an EDI 855 transaction.

Shipping and Inventory

In addition to the above, shipping-related EDI transaction codes are also commonly used, including:

• EDI 862 – Shipping Schedule: Detailed shipping schedule requirements sent to a supplier.
• EDI 866 – Production Sequence: Requests the order of shipment or unloading of goods.
• EDI 856 – Advance Shipping Notice: Details contents of a shipment, including barcode, tracking, delivery dates, and times.
• EDI 997 – Functional Acknowledgement: Confirms receipt of an EDI transaction, without validating content accuracy.

Transportation/Logistics

ASC X12 EDI codes for transportation include:

• EDI 204 – Motor Carrier Load Tender: Request for shipment pickup.
• EDI 990 – Response to the Load Tender: Confirmation of shipment pickup.
• EDI 211 – Bill of Lading: Detailed shipment information.
• EDI 212 – Delivery Trailer Manifest: Contents of a multi-shipment trailer.
• EDI 214 – Shipment Status Message: Updates on shipment details.
• EDI 210 – Freight Details and Invoice: Invoice for transport services.
• EDI 820 – Payment Order/Remittance Advice: Payment information to carriers.

Warehouse Operations

ASC X12 EDI codes for warehouse operations include:

• EDI 940 – Warehouse Shipping Order: Instructions for warehouse shipping.
• EDI 945 – Warehouse Shipping Advice: Confirmation of shipped items from a warehouse.
• EDI 944 – Warehouse Stock Transfer Receipt Advice: Confirms receipt and verification of warehouse shipments.

Grocery/Retail Specific

ASC X12 EDI codes for grocery and retail include:

• EDI 816 – Organizational Relationships: Details on company locations and their interrelations.
• EDI 846 – Inventory Inquiry/Advice: For inventory level inquiries and updates.
• EDI 864 – Text Message: One-time messages such as notifications or contract information.
• EDI 875 – Grocery Products Purchase Order: Specific to grocery retailers for ordering goods.
• EDI 876 – Grocery Products Purchase Order Change: Notifies changes to an initial EDI 875 order.
• EDI 880 – Grocery Products Invoice: Invoice for grocery products delivered.

Healthcare

Here are a few examples of healthcare-specific codes from the ANSI X12 code list:

• EDI 270/271 – Eligibility, Coverage or Benefit Inquiry: Healthcare eligibility/benefit inquiry and response.
• EDI 276/277 – Health Care Information Status Notification: Healthcare claim status request and notification.
• EDI 278 – Health Care Services Review Information: Healthcare service review information.
• EDI 837 – Health Care Claim: Healthcare claim transaction set.

UN/EDIFACT Standards

UN/EDIFACT, developed under the United Nations (UN), is an international standard that is more prevalent in Europe and Asia.

The same as ASC X12, it facilitates trade by providing a common language for international EDI communications.

Below are some notable transaction codes in the UN/EDIFACT standard.

General Business and Retail

Among the most widely used transaction codes from the complete EDIFACT EDI codes list are:

• ORDERS: Purchase orders for goods or services.
• ORDRSP: Responses to purchase orders.
• INVOIC: Invoices for goods or services provided.
• RECADV: Receipt advice for goods received.
• ORDCHG: Changes to purchase orders.

Other Industries

There are many industry-specific EDI codes. Examples are as below:

Transportation and Logistics

• IFTMIN: Transport instructions.
• IFTMAN: Arrival notice of transport means.
• DESADV: Dispatch advice, similar to the ANSI X12 856 (Advance Shipping Notice).
• IFTSTA: Status report of a transport operation.

Healthcare

• MEDRUC: Medical drug prescription.
• MEDREQ: Medical service request.
• MEDRPT: Medical report.

Finance

• CREMUL: Multiple credit advice.
• DEBMUL: Multiple debit advice.
• PAYMUL: Multiple payment orders.

Manufacturing

• DELFOR: Delivery schedule or forecast.
• DELJIT: Delivery just-in-time schedules.
• CALINF: Call-off information.

Customs and Trade

• CUSDEC: Customs declaration.
• CUSRES: Customs response.
• CUSCAR: Cargo report.

Comparing ASC X12 and UN/EDIFACT Transaction Codes

Some ASC X12 standards are immediately comparable to EDIFACT standards, such as EDI 810 and INVOIC for invoices and EDI 850 and ORDERS for purchase orders.

However, there are some key differences and similarities that are worth breaking down.

Key Differences and Similarities

• Structure and Complexity: X12 tends to be more segment-based with fixed format EDI document numbers and codes, making it somewhat less flexible but easier for domestic businesses to implement. In contrast, UN/EDIFACT is more variable and adaptable, accommodating a broader range of international business needs.
• Industry Specificity: X12 has a wide range of transaction sets tailored to American industries, such as healthcare (e.g., EDI 837 for healthcare claims). UN/EDIFACT, while also diverse, focuses more on international trade and customs transactions (like CUSDEC for customs declarations).

Business Considerations for Standard Selection

• Geographic Location: Businesses in North America often prefer X12 because it is compatible with regional trading partners and compliant with local regulations. Conversely, companies engaged in international trade, especially in Europe and Asia, tend to adopt UN/EDIFACT.
• Industry Requirements: Certain industries have standardized on specific EDI formats (e.g., healthcare in the US often uses X12). Understanding industry norms enables seamless integration with existing systems and trading partners.

Where Do Transaction Codes Fit Into the EDI Workflow?

Transaction codes are a fundamental component of EDI, but where do they slot into the end-to-end EDI workflow?

1. Data Translation

At the beginning of the EDI process, when business documents are generated in a company's native system (like an ERP), they are formatted uniquely to that system.

ERPs often play a key role in EDI data exchange; as Joe Cicman, senior analyst for ecommerce and digital transformation at Forrester Research, says, “When you step back from EDI, you see that it’s more than just a delimited file format. It’s actually two enterprise resource planning (ERP) systems talking to one another.”

The first step is translating these documents into a standardized EDI format, such as X12 or EDIFACT.

This is where transaction codes come into play. Each type of document (e.g., purchase order, invoice) is assigned a specific transaction code. For instance, a purchase order might be assigned the code 850.

Codes enable the receiving system to immediately identify the type of document it's processing.

2. Transmission and Receipt

Once the document is translated and the transaction codes are assigned, they’re ready for transmission to the trading partner.

The transaction code acts as a key identifier during transmission, ensuring the document is recognized and processed correctly upon receipt. On reaching the destination, the transaction code enables the data validation process.

It confirms that the document adheres to the agreed-upon format and contains the correct information.

Following validation, the document, identified by its transaction code, is translated back into a format compatible with the receiving system and integrated for further native processing.

3. The Significance of Transaction Codes

As we can see, transaction codes are not just identifiers—they’re an integral part of ensuring data integrity and consistency in EDI communications.

Codes allow for the automation of document processing, reducing the potential for errors that can occur with manual handling.

Summing Up

EDI enables businesses to connect their B2B transaction systems using singular, mutually agreed standards.

Standards are organized via codes, which mark documents and their purpose, from commonly used purchase orders and invoices to niche, industry-specific documents.

The two dominant EDI standards are ASC X12, primarily used in North America, catering to its domestic healthcare and insurance industries, and EDIFACT, mainly used in Europe and Asia and used widely for international trade.

Many of these codes broadly correspond, particularly the fundamental ones such as 810 and INVOIC for invoices and EDI 850 and ORDERS for purchase orders.

Adopting EDI is often a rite of passage for businesses seeking to increase their trading relationships, particularly within regions and industries where the technology is thoroughly embedded into B2B trading infrastructure.

If you’re interested in becoming EDI-integrated, whether you’re planning to expand and trade with new partners or have been instructed to use EDI by a prospective customer or client, 1 EDI Source can help.

We offer a comprehensive suite of in-house or hosted EDI solutions and can even manage EDI transactions on your behalf. Contact us today to discover how we can support your EDI transformation.