American National Standards Institute X12 is a message standard used in American EDI which ASC developed to standardize the entire process of electronic data interchange transactions in North America. Electronic data interchange is one of the most prominent methods to exchange information among organizations, especially those related to employees. The data transfers and seamless communication may turn into a big problem for organizations that work together. If you think about it, dedicating a resource specifically for taking care of communication is a complete waste.
There were times when people were hired just to ensure that the documents sent and received were accurate, the data gathered to finish the communication was proper and yet, the handwriting errors and human mistakes made the transaction inaccurate. The issue of accuracy has often caused a lot of trouble which is why electronic data interchange is implemented.
What is EDI? An Overview
Electronic data interchange, commonly known as EDI, is a set way of exchanging and transmitting important data that not only makes the process simpler but makes it much faster and more reliable. The file sets are defined along with the formatting which makes it more and more accurate for professional uses. The best example of ED managed services is the implementation of EDI 834, which is used in almost every other corporate office as it deals with employee benefits enrollment and maintenance.
How an EDI works is quite simple to understand while it may seem like a typical concept to digest. Let us take the example of EDI 834 to understand the process. Take a look at the following steps
- The data relating to employees such as name, contact details, relationship with the organization, and other identification is captured by the organization.
- This data is then encapsulated in an EDI 834 file. Such a file is used to create a data connection between organizations that are in business together.
- The organization in which the employee works creates the file and sets it up for the interchange.
- The interchange takes place on an EDI-specific network. It is transmitted through a system that can only be decoded by the other organization for which it is intended. In this case, the insurance partner with which the company works.
- The EDI system which is set up at the insurance carrier’s end feeds the data sent by the organization automatically. This completes the process. Now, the insurance company can send the invoice or any other document by the exact same channel. This is how EDI works.
As you might have understood, EDI is the fastest and simplest way to propagate data and interchange important documents between two partnered organizations. Now, where do ANSI X12 EDI basics come into action? To understand the exact use case, make sure you read the next section carefully.
ANSI X12 EDI Standards Explained
The EDI documents always have a set structure and code that it follows. There is hardly anything that requires modification which means no matter what organization you are in business with, the standards of communication and the structure of the message stay the same. The consistency in these messages is brought about by the implementation of ANSI X12 standards. What are these standards? What do these define? Let’s answer these questions one by one to understand how exactly it all works out.
The process of EDI must follow a specific set of rules and format. There is no denying the fact that consistent communication is a much-needed aspect in every partnership. EDI is a step that can enhance the quality of communication and reduce the margin of error while transferring data. To maintain integrity, there are some set regulations that must be followed in every EDI, these regulations are defined by the American National Standards Institute.
These standards define the basic principles of the documents such as the message structure and format. These are used to normalize multiple types of documents such as invoices, delivery notes, purchase orders, etc. so that no matter which organization uses the EDI, there are no inconsistencies in the communication. There are detailed sub-commodities in ANSI X12. These commodities are basically a detailed version of a comprehensive structure that everyone uses. These include -
- X12C - Communications & Controls
- X12F - Finance
- X12I - Transportation
- X12J - Technical Assessment
- X12M - Supply Chain
- X12N - Insurance
These divide the types of communication on the basis of the departments to which they correspond. It makes the classification super easy and the best part is you do not have to worry about them getting confused in the codes that you receive.
Talking about the documents and messages that are received, let us take a quick look at the structure of the message that you get with ANSI X12 EDI. Ideally, the message has 3 sections -
The Header
It holds the details about the sender as well as the topic of the message. Usually, the header is enough to understand the basic meaning of the message as it conveys who sent it and why.
The Body
Also known as the details section, the entire message can be found in this section. The EDI allows you to interchange details that are crucial to the communication.
The Summary
The summary is the terminating segment of the message and ends the interchange. The trailer segment SE is used to end the message which is also known as the summary section.
If we talk technically, every message initiates with the transaction set header ST and ends with set trailer segment SE. To complete the message, multiple titles and IDs are placed in the desired sequence which is defined as the body or details of the message. There are multiple types of messages that can be sent and received. Some of these are shown in the following image
The Conclusion
ANSI X12 EDI is one of the most important concepts that you must be aware of prior to implementing EDI in your organization. Ideally, using EDI as a service is a better way to go about it. However, knowing the basics never hurts. If you are in the market, trying to understand what exactly EDI is and how it works, you should fix an appointment with a service provider rather than getting confused due to multiple forms of information available online.
Knowing how important these standards are and the use cases of EDI, you might have got a clear understanding of the changes and smoothness that EDIs can bring to your business. Not to mention, with the help of an expert, you can create a channel that is helpful for you and your organization that also matches all the standards of working in an EDI-based environment. There are so many things that you need to work on but firstly, you need solid backup and assistance, which can only be found with a proper EDI professional.
This brings us to the end of this post. Hope you understand the basics of ANSI X12 and got the answers to the questions you had. Good luck!