Online Profits:

• AIAG - Automotive Industry Action Group
• American National Standards Institute
• ANSI
• ANSI X12
• Certification Authority (CA)
• Consumer EDI
• Continuous Replenishment
  
  
• Trading Partner Agreement
  • A statement of intent
  • Clarification of Liability
  • Security
  • Signatures
  • Receipt
  • Confidentiality
  • Arbitration
  • Miscellaneous
    
    
• Transaction set

AIAG - Automotive Industry Action Group

Founded in 1982, the Automotive Industry Action Group established a standard method for EDI communication across the US automotive industry, eliminating the multiplicity of systems created by each major manufacturer and supplier having developed its own message formats and software. AIAG’s Executive Director captures its purpose succinctly: “In today’s industry, communication and interaction throughout the supply chain is critical. More than 60 percent of the cost of a new vehicle comes from the supply chain.... and the way to minimize that cost while protecting profits is to work together as an industry on pre-competitive issues, eliminating waste and streamlining processes.... and that is why AIAG was created.” (EDI Insider, November 10, 1996)

AIAG was one of the very first associations to gather together all the major participants in an industry’s business-to-business commerce to address their shared data requirements and develop an action process to combine their differing needs and systems. It’s typical of the cooperative approach to the use of electronic commerce that is becoming the norm now; companies can’t go it alone but need to get together with competitors and adopt the philosophy of Walter Wriston, the legendary Chairman of Citibank who more than any single individual moved banking into the electronic era: cooperate in the morning so you can compete in the afternoon.

AIAG membership not only includes the automobile manufacturers but also suppliers, transportation companies, petrochemical companies, banks and many other organizations who support the industry’s operations. There are over 1200 companies paying dues to AIAG, which is a non-profit trade association whose main activities are (1) to identify, prioritize and address existing and emerging common issues, and apply new and current technology to increase the efficiency of the industry; and (2) to promote a sense of urgency in adopting EDI-based business processes. The group meets on a regular basis to discuss issues and provide updates to its Implementation Guide, which provides practical advice on the implementation of ANSI X12 EDI standards (theses are the main generic EDI standards) and other relevant documentation. As well, the industry’s positions on new and emerging EDI standards are generated and validated within this group. For instance, it works with relevant non-automotive ANSI X12 committees that may be developing new transaction sets for, say, insurance or warehousing applications. AIAG is thus a both a clearing house for information and advice, a coordination point for industry action, and a communication link to other industries.

One lesson the experience of the automotive industry provides for all companies is that the industry is the main lever for progress in electronic commerce. The AIAG is effective because it is viewed by its members as a decision-making and direction-setting force, not just a committee. Much of this proactive cooperation for real action came from the crisis in the US car industry of the 1970s and 1980s where it lost position everywhere to Japanese competitors. The American firms had to entirely rethink the basics of their business: quality, cost, design, time to market, employee relationships, training, and supply chain. They had to act as an industry, not just individual firms.

As individual companies, they could them exploit the opportunity to transform their supply chain. Chrysler illustrates the role of electronic commerce in this process. Business Week (November 25, 1996) describes it as “Detroit’s profitability champion”, which has “rewritten the book on supplier relations.” Chrysler’s development of what The Harvard Business Review calls a US keiretsu, the equivalent of the Japanese holding companies and their operating units that are built around a set of close relationships with suppliers and subsidiaries, took around seven years. The first step did not involve basic changes in relationships, but Chrysler both encouraged more open communication and provided suppliers with more information. This became the base for bringing them into Chrysler’s own initiatives in product development and process improvement. Chrysler stopped pitting suppliers against each other, a reversal of the previous tradition, whereby the relationship was fundamentally adverse, one with the power players pushing suppliers every year to beat each others’ prices and terms. It developed a formal system for planning and measuring joint cost improvement programs, SCORE. In its first two years, 1990-91, SCORE produced 875 ideas provided by suppliers that generated savings of $171 million. By the end of 1995, the total was 5,300 ideas, worth $1.7 billion a year.

Between 1989 and 1996, Chrysler cut its supplier base from 2,500 to 1,140. This has been a contributor to its success in slashing development time from 234 weeks to 160 and development costs by 20-40% Profit per car increased from $250 to $2,110. Its specific focus has been on adding value in design without adding costs. Its success in this is indicated by its 1996 engineering costs of 2.7% of revenues versus over 5% for Ford and General Motors, with close supplier relationships a substantial contributor to it. The AIAG standards provided the industry-wide base on which Chrysler could build its combination of business strategy, relationship strategy and company-specific information systems.

• Move from a focus on defining standards to helping members address the practical issues of implementation. “Standards enable implementation, they are not implementation.” That’s a point often ignored by users and suppliers. Once a standard has been precisely defined, approved and published, it has to be embodied in software, hardware and telecommunications systems. Often, this leads to “minor” differences in interpretation, programming, etc. The standard- setting organization in most instances has neither the ability, interest, resources or reason to play an active role in implementation.
  The PIDX experience suggests that they will need to and that users of new standards need to anticipate the complexities of implementation. Move from emphasizing unspecified benefits to identifying specific measurable results. This can be restated as “No more hype.”
  
  
• Move from inadequate stakeholder communication to frequent and meaningful business level interaction. This point zeroes in on one of the problems people involved in EDI most often highlight in our own interactions with them: getting the message to top management and to the core of the business and to the business people in trading partner organizations. The very success and cohesion of industry standard-setting groups can too easily lead to them largely talking to themselves and later finding that no one else is listening. For example, only a tiny fraction of business managers have even heard of ANSI X12, even though its activities and outputs are increasingly opening up new opportunities for them and generating substantial change in processes and relationships.
  
  
• Move from unmanaged expectations that over-promise and under-deliver to managed expectations. Restated: “forget the Something of the Future, and The Internet Will Take Over the World syndrome.” Overselling in the information technology field has again and again generated a backlash. Our own view is don’t even try to hype electronic commerce; just look at the proven benefits, provide plenty of examples and build the business case on the expectation of 20% improvements in operational measures of business performance. 
  Our recommendation to all firms is that they should draw on any strong industry association in their strategies for electronic commerce and make sure that they are well-represented on it. Cooperate in the morning to compete in the afternoon.

See also: ANSI X12.

“The Great Marshmallow Debate flared up on a cold February in Atlanta [at a meeting of an ANSI X12 committee defining Warehouse Information Network Standards]. Marshmallow manufacturers, pitted against retailers... turned to the committee to resolve the burning question: Given that the weight of marshmallows changes as they age, should the purchase order note the weight at time of shipment or the weight at time of receipt?” (the committee found a compromise) – “One more EDI obstacle had been tackled and conquered.” (EDI Forum)

American National Standards Institute

The American National Standards Institute was founded in 1918 and is now a central organization for the development of standards for US industry. It has 1,300 members, which include companies, government agencies and trade associations. ANSI has become the central US forum for EDI standard-setting, with its X12 committee the focal point for the evolution of a more and more comprehensive and consistent set of what are termed X12 “transaction sets”: a complete and precise definition of trade terms and message formats for such basic transactions as purchase orders (X12 850) and more specialized ones such as an electronic notification of a levy or garnishment of wages by agencies assigned to collect delinquent child support payments (X12 521).

ANSI is a voluntary organization, with no legal authority. It’s a combination of a committee-centered business association, a lobbying group, and most of all a forum. Users and vendors work together to resolve the many complex principles and details involved in the standard-setting process. Its committees argue, make horse trades, and compromise. Standards are about details, so that some standards may require hundreds of pages of specification and several stages of propose-publish-vote-approve-implement. Apart from EDI, ANSI is a central force in the evolution of many standards for computer programming languages and other areas of information technology, though here leading vendors play a stronger role, particularly Microsoft, in their efforts to impose their own product or preferred standard. For them, cooperation is compromise and at best a reluctant acceptance that the relevant parties can’t go it alone. With, EDI, cooperation is essential. ANSI has become the main vehicle for this.

ANSI represents the United States in international standard-setting organizations. The main one relevant to EDI is EDIFACT, which is sponsored by the United Nations.

See Also: ANSI X12, EDIFACT

ANSI

In 1983, when ANSI issued the first X12 EDI standards, there were just 4 transaction sets. By 1986, there were 16. At the end of 1996, there were 273, as much an indication of how influential and respected ANSI X12 has become as of the energy of activity. It has enough clout now to influence the language of major legislation in the healthcare field. For example, The Health Insurance Portability and Accountability Act of 1996 includes requirements for the use of X12 standards as part of ensuring uniformity of information and transmission of messages. The law took effect in January, 1997 and mandates compliance except in special cases, making X12 a powerful force for coordination of a very fragmented industry with very high administrative costs. Those costs will be cut by compliance with the EDI requirements, simply because EDI slashes the cost of processing inter-organizational documents.

ANSI X12 - FOUNDATION TERM

ANSI X12 stands for The American National Standards Institute (ANSI) X12 Accredited Standards Committee (ASC). The X12 committee has oversight responsibility for a wide range of subcommittees and task groups that develop EDI standards for a growing variety of transaction for business in general and for specific business and public sector applications. Think of X12 as the master blueprint by which standards for the following and many other “transaction sets” can be developed systematically and within an overall general framework: purchase orders, mortgage applications, student loan applications, shipment advice, notification of product test results, debit/credit advice, health insurance claims, invoices, and tax remittance.

X12 is by far the most influential and effective force in the development of EDI, to - the extent that “X12” is virtually equivalent to “EDI”. X12 is a cross - industry standard and has developed over 200 different types of electronic transaction sets, each of which - replaces the paper - based document equivalent. Almost any conceivable type of business transaction from a purchase order to an invoice to a payment is covered by the standard. Also, extremely complex exchanges such as the transfer of CAD/CAM designs, or student transcripts can be facilitated by one of the many standardized X12 document formats.

The ANSI X12 standards began to come into active use about 1985 and evolved out of the automotive industry’s need for high information content remittances to accompany orders. X12 represents a merging of a number of similar, industry - specific organizations involved insetting EDI standards such as VICS (retailing), WINS (warehousing) and many others. ANSI X12 is primarily a North American standard, used by business and government in the US and Canada most prevalently. The other, more international standard, is EDIFACT. ANSI and EDIFACT standards have differences in how they are constructed (syntax) and in how many documents or messages are covered. However they both use the same data element dictionary (words) and concept of converting a physical document into a machine readable electronic one.

To create or contribute to an X12 standard requires an organization to join the committee, participate in one of the many subcommittees, and to submit specific changes or additions for review. A typical change can take 1 to 2 years to implement and a new transaction can take 3 to 5 years. An example of the ANSI process is the ongoing development of a standard to streamline the college student financial aid process. In August, 1995, a group from government agencies, college admissions officers, student organizations and lending institutions set up Project EASI (Easy Access for Students and Institutions) to entirely rethink the national system for delivering student aid. It worked under the aegis of the X12 Education Subcommittee. The aim is to enable students to access information from and apply to multiple schools without having to provide the same data on many different forms. The new system will include payment mechanisms and ones for repayment of the loans when the student leaves school. The expected savings will be huge. The total sum now spent by the Federal Department of Education on managing the $35 billion of student loans is $300 million a year. The New York Stock Exchange, which manages trillions of dollars of trades, is run on $250 million.

X12A has been working in parallel with EASI on student financial aid transaction sets, with a special task group set up, which presented its charter to the monthly X12 meeting in October, 1996; the charter was approved. Several transaction sets already under development were transferred to X12A (Education) from X12F (Finance). The leader of the new task group commented that EASI is a project born out of mutual interests among a wide range of communities: “EASI would really change the lives of everybody involved in financial aid. This would cut the cost dramatically from the government’s point of view, getting the data from the institutions and the banks and so forth would be much easier to send and receive electronically. It would be pretty seamless so that things would work much better than they do today from the point of view of the students and it would help parents and students prepare for the costs of their education maybe sooner than they do today.” (EC/EDI Insider, September 30, 1996) The leader of EASI adds that “It’s a massive job, a multi-year effort.”

The EASI team worked full-time for ten weeks to define its goals and vision. It saw X12 as central to the vision. An official from the Department of Education who is on the team comments that “The way the Department does things now is we come up with solutions and we mandate them to our colleges. We say if you want our money, you’ll do it our way: the typical proprietary electronic commerce scenario....[Instead] rather than beating them over the head with it we take it to X12. Everybody who wants to, everybody’s who’s concerned enough, has one vote.....If you have a standard format, it democratizes the process. We can come up with a standard format and say everybody’s got to use it, and maybe everybody would, but X12 democratizes that.” The Department is planning to take an active part in X12 TG3 (Task Group 3). Members of the EASI team have taken ANSI’s one-day X12 course. A White Paper, due in 1997, will lay out the specific transactions, forms and processes to be included in the new X12 transaction sets. That will provide the blueprint for the X12 task group’s work. From there on, the group will design the standard, which will then be formally presented to X12 for review by members. Once it is agreed on, there is a formal process of sending it out for balloting. There are many open information forums along the way, plenty of often intense debate, and reviews with Technical Assessment subcommittees. The many stages towards a final transaction set include New Project Proposal Approval, Approval To Publish (prior open items under the 10% rule and initial ballot items, under the 3% rule), and Approval for X12 Ballot or Reballot. It’s a complex process and, like most committee-dominated operations, X12 has its problems of bureaucracy and slowness. But it works pretty well. Ventures like EASI would be very unlikely to accomplish much without it.

In the US X12 is by far the dominant EDI standard but internationally EDIFACT is highly influential. EDIFACT is focused on enabling EDI for international trade transactions. It thus includes transaction sets for customs, trade documentation, letters of credit and the like. There was a view in the early 1990s that the EDIFACT and the ANSI standards would merge in the late 1990s. This has not come to pass. One of the reasons this has occurred is the fact that there is a substantial investment in ANSI based EDI systems in North America and the costs for change without clear business value are not yet seen as justified. At the same time, the take up rate of EDI outside of North America has been less aggressive and there has not yet been a clear signal from businesses that to carry out international trade electronically, the EDIFACT standard is the clear winner. So, X12 and EDIFACT coexist and increasingly cooperate.

See Also: EDIFACT, standards

Certification Authority (CA)

Certification authority is the term used in applications of public key based cryptographic security, where there is a need for an unbiased third party to intermediate the exchange of keys - and data - between two entities. A key is the secure code used to encrypt and decrypt data. Cryptography is the complex mathematical procedures from turning, say, “$1,000,000” or “Buy 20,000 shares of IBM” into a stream of bits that can’t be interpreted, altered or misused; the encrypted message then looks like a random jumble of electronic garbage.

The CA is a trusted entity who determines the identity of a person or organization and then confirms that identity to others. In other words, a CA is an organization who verifies and certifies that you, or your organization, exist and are who you say you are. Beyond this, the CA then can provide a “certificate” for this verification - in the form of an electronic key or value - which can be presented electronically to the CA for verification and confirmation at any time by a trading partner. In this way, the ability to conduct EC anonymously, or at least without a prior relationship in place, is made practical. It’s analogous to being able to have your credit card accepted and payment authorized in thousands of stores and restaurants around the world. The merchant doesn’t know who you are but can verify your identity and the validity of your use of the card. Certification authorities provide the equivalent guarantee. By the same token, there is a need for a standardized and recognized methodology and “directory” for CAs, this has not yet come to pass. There is no CA equivalent of a MasterCard.

Organizations that are perceived as candidates for this essential role in extending electronic commerce to the widest market are the Postal Service or other quasi - governmental organizations who can be seen as unbiased and comfortable and legitimate in the role. As well, there are a number of trade or industry associations who also are considering their participation as a CA on behalf of their constituents or members. As the application of public key based cryptography grows, it is likely that there will emerge a specialty field for providing such a service, for a fee. This is still an unresolved aspect of the concept of public key cryptography and will likely result in the emergence of a number of competing schemes and CAs.

See Also: Public Key Cryptography

Consumer EDI

Consumer EDI is the term for the extension of electronic data interchange between businesses to using it to reduce the costs of processing the routine paper documents the firm sends to its customers, most obviously monthly bills. Many utilities and insurance companies now send invoices via EDI to their large commercial customers. Now that more and more households have PCs and are linked to the Internet, the infrastructures are in place for them to begin adding consumers to their electronic commerce base.

The key word here is “begin.” In early 1996, an ANSI X12 working committee published guidelines for consumer billing via EDI. It has developed three X12 transaction sets: one for invoicing, one for payment and one for requesting billpaying services from a “Consumer Service Provider.” The committee envisions CSPs as the intermediary between company and consumer. They would provide a single point of communication for consumers. Your phone bill, insurance renewal invoice and credit card statement is sent to your CSP, which is most likely to be your bank. The CSP forwards it to you via the Internet or an on-line service provider like CompuServe. You review the electronic bills and authorize a direct debit from your bank account.

It will be mid- to late-1997 before the new transaction sets are used by even a handful of companies. Companies have been cautious about trying out an innovation for which there’s no evidence that consumers are interested. Without a critical mass, there’s little value to the consumer; if just, say, your phone bill and payment are handled electronically but not your credit card, insurance, electricity, bank and other monthly statements, why bother? If, though, they are all handled through a CSP, both you and the billing party each save the cost of a stamp, and payment is made immediately and reliably. For companies that send out large volumes of small bills, the benefits should be substantial. One of the problems of processing payment by check is that every envelope and its contents have to be treated as a special case; people forget to put their account number on the check, forget to enclose the original bill, leave out data and so on.

One of the first implementers of consumer EDI is CheckFree, which began to roll out an Internet bill delivery service in late 1996. It began with just seven billers, for whom it handles a range of technical functions, including setting up databases, and adding promotional material to the electronic bill the customers see on their PC screen. Queried about problems of security on the Internet, which have greatly inhibited its widespread use, a CheckFree executive commented that “Yes, there are security concerns, but what security do you have today? You get your bill in the mail and how many stories are there about people rifling through envelopes?” (EC/EDI Insider, September 16, 1996)

CheckFree is cautiously phasing its system and reckons it will need several years and plenty of marketing and education of both companies and consumers for consumer EDI to take off. It clearly will take off at some point. For anyone who checks his or her electronic mail daily and links to the Internet even once a week, consumer EDI is just another type of message. For the millions of people using such software packages as Quicken for managing their finances, it’s more convenient that messing around with bills, checks, envelopes and stamps scattered on the desk on which your PC sits.

The Internet will be integral to the success or lack of it of consumer EDI, because of costs. There are many EDI systems provided over value-added networks (VANs), banking clearing houses company networks, but the cost per transaction is 5-30 cents. Over the Internet, the incremental cost is basically zero, though the set up costs may be high. The new ANSI X12F WG4 committee’s guidelines provide the standardized base for consumer billing. The Internet provides the established infrastructure and the PC the access point.

Continuous Replenishment

Continuous replenishment (CR) is the dynamic, constant matching of the flow of materials and parts to their usage in manufacturing production or their taken off the shelf in stores. As part of the Just in Time (JIT) inventory management that has become the foundation of modern manufacturing, Continuous replenishment is the term used to refer to the part of the activity that relates to the physical logistics of JIT. CR defines and refines the parameters for the cycle time, or the relationship between how long a product remains “on the shelf” and the time it takes for it to be replaced. Often, one of the most challenging parts of a JIT implementation is not in whether or not a supplier can deliver the goods in a timely and speedy manner, but whether the goods, once delivered to the buyer, find their way to the actually use point.

In manufacturing, this means delivering the materials as close to the production line where that item will be used; and in many cases the plant requires physical modification to accommodate this approach. Ford Motor company has dozens of delivery points along the production line for automobiles, so that pre - assembled components such as engines or dashboards can be delivered directly to their installation point, in some cases less than 50 feet from the loading dock. In retail apparel, Continuous replenishment means the efficient and accurate use of bar coding and, in some cases, packing the boxes in sequence to their shelf unloading/ restocking order, with the point of sale register accurately by the minute recording changes in inventory.

Continuous replenishment is a key element in the motivation for the application of electronic commerce. It is only with the speed and accuracy of electronic messaging that suppliers can be expected to deliver replacements for goods consumed only a few days, or sometimes hours, before. Furthermore, it is reliant on the process of direct interchange of purchase information from the point of sale, right from the electronic cash register, through EDI links from the inventory management system of the retailer to the order entry system of the vendor.

Trading Partner Agreement - FOUNDATION TERM

Trading Partner Agreements are formal contracts between organizations that wish to use EDI in their business relationship. TPAs reflect the lack of clear rules about the applicability of existing contract law, rules of evidence, issues of liability, and the like, all of which were designed in the age of documents as the core of trade, to the era of electronic messages as not yet the norm but the inevitable long-term mainstream. The American Banking Association, Defense Department, industry associations, and comparable organizations in other countries have defined model TPAs.

In developing electronic commerce programs, there are a number of key elements which should be addressed to ensure that appropriate controls are in place. Trading Partner Agreements (TPA) are often viewed as a solution for preventing disagreements and misunderstanding between trading partners. The problem is that often, there are too many elements which have to be reviewed on an individual basis and, if an organization has a lot of trading partners, there could be an unmanageable number of discussions about individualized agreements. Added to this the fact that large corporations, and governments, tend to force their contracts and terms on smaller organizations, there is a significant issue with leverage and the real value of preparing such an agreement in the first place.

What seems to be of value to resolve this situation is the use of key phrases or elements within existing agreements or contracts. Essentially, this means changing the face of the normal, existing, agreements to identify and accept that commerce may be done in an electronic fashion as well as on a paper basis, where applicable - and that both parties accept that as a valid process.

Some of the key elements in doing this are:

• A statement of intent - This is where trading partners outline their intentions to do business electronically and should state that their EDI transactions shall not be held invalid or unenforceable.
  
  
• Clarification of Liability - If there are third party service providers involved, such as VANs, there should be some provision for the apportionment of liability and costs between the trading partners for acts of third party service providers. This can simplify the application of appropriate actions should there be a loss.
  
  
• Security - There should be the application of sufficient security procedures. Security procedures, in part, are intended to improve or to ensure the ultimate reliability of electronic contracts and there has even been legislation in the United States, under the Uniform Commercial Code 4 (a) which states that “commercially reasonable” levels of security are necessary in the application of EDI in a financial transaction to ensure that the corporate consumer is protected.
  
  
• Signatures - As was the case with the PIN in the ATM example organizations should adopt symbol(s) or code(s) as their signatures. This could be in the form of a Message Authentication Code (MAC)or other forms of corroboration of the identity of the transaction ,such as digital signature. If this is combined with appropriate security procedures, a MAC can provide an electronic substitute for conventional signatures.
  
  
• Receipt - A message receipt can occur when:
  • the transaction arrives at the recipient's mailbox;
  • at a VAN or third party mailbox;
  • or when the message arrives at the recipient's computer system;
  • or only after the recipient communicates a valid acknowledgment to the originator.

Some agreements also consider time limits in which trading partners must check their electronic mail boxes and respond - either negatively or positively, to the status of the transaction.

• Confidentiality -Trading partners should review their anticipated data exchanges and decide whether they should be considered confidential. While many business transactions may not be considered confidential in the paper world, the power of computers to integrate and make data available in more accessible and intelligent forms may be a key factor in reevaluating the value and impact of data exchanges.
  
  
• Arbitration - Arbitration may increase the probability of an easier interpretation of signed writing requirements, in addition to saving time and money, the agreement that an EDI legal expert hear any dispute.
  
  
• Miscellaneous - Provide an agreed upon attachment or list of the transaction standards, implementation guidelines, approved third party service providers, allocation of costs and efforts.

Finally, there is the matter of common sense. In any business relationship, there has to be a desire to build and sustain the relationship and to try and resolve problems and disputes amicably. Sellers tend not to sue or litigate against their clients. It just isn’t good business practice. At the same times, in most reasonable circumstances, buyers tend to just not do business with difficult or litigious suppliers - the market is usually too competitive to support non-conforming organizations and with electronic commerce, the key to success is cooperation.

There is no simple solution to the legal question, and the law has yet to be definitive about the best or most appropriate way to deal with the electronic commerce world. It is not always possible to resolve all the terms and conditions of an business relationship. Trading partners can attach each party's terms and conditions covering the underlying business transaction to the trading partner agreement and allow the law to determine which of the attached terms and conditions shall control in the event of a dispute. Otherwise, they call do nothing; and leave these matters for the courts or arbitrators to resolve.

Although EDI doesn’t have a long or significant legal track record as yet, clearly the fact that the practice has been around for over two decades with no recorded dispute as to its validity speaks strongly for its future. The fact that there has been no major court cases that establish precedent and very little formal statute law are reinforcement that the technology and applications of EDI work and have been gaining acceptance in the general market.

Transaction set - FOUNDATION TERM

A transaction set is the term used for an EDI document, as defined in the ANSI X12 language or standard. This is as opposed to the term Message which is the same thing as a Transaction Set, only in the EDIFACT Standard. A transaction set is composed of data segments, which are themselves composed of data elements. An easy way to look at a transaction set is to think of it as a document or paragraph that is commonly used in business, such as a purchase order or an invoice. A data segment is the same as a line of data in a document or a sentence in a paragraph. A data element is the same as a word or a term. There is a common data element dictionary for both the EDIFACT standard and the ANSI standard, however, segments and transaction sets/messages are constructed differently.

Below is an example where a Purchase order is represented as an ANSI X12 850 transaction set. You can see the correlation of the physical data to the structure of the electronic message.

ANSI X12 Purchase Order 850