Electronic Data Interchange

Electronic Data Interchange (EDI) is a system which allows document information to be communicated between businesses, governments structures and other entities. It is a set of standards which creates a cohesive system within which all parties are able to electronically exchange data information within a set of protocols. Although it can be considered that EDI consists of only the actual conveyance of the document, it is also seen as the implementation of the operating systems whereby EDI can be put into practice. EDI is the data format of most electronic commerce transitions in the world. There are other competing conveyance portals such as XML services, Internet and World Wide Web; however, EDI remains the dominant data format. The EDI standards describe structures that represent documents such as an invoice or shipping order for a company. EDI sets up a system whereby businesses and other entities with non compatible operating systems are able to communicate on the same page, so to speak. EDI provides applications whereby a more efficient and environmentally friendly network is created between communication partners. It allows a homogenous viewing of all documents put through the system. However, its potential is not just in creating automated system networks - as in for automatic reordering. It enables companies to exchange information at a speedier rate, and ensure greater security of delivery. Moreover, it creates a greater ability for businesses to become more efficient and streamlined. As EDI is a non-internet based information exchange system, it was assumed that it would disappear when the Internet became more entrenched in society and business. However, EDI has survived, and is used by many industries. EDI establishes a firm connection between businesses that does not necessarily rely on Internet options. However, it can be used over the open Internet, as is increasingly occurring. Electronic transmission began in the 1960s within the transport industries. This change also required a parallel standardization of documentation. A committee was formed to coordinate the development of translation rules among four existing sets of industry-specific standards. At about the same time, the United Kingdom was also developing its own standards for documents called Tradacoms. These were later extended by the United Nations Economic Commission for Europe, and were eventually accepted by about 2000 export organizations. Problems arose when these two differing organizations of information attempted to exchange information during trade. These information sets were largely incompatible, and required a working party to begin to create a range of documents that were able to be internationally understood and transmittable. Currently, EDI is used by thousands of companies throughout the world, including companies in USA, UK, Australia, New Zealand and Singapore. It is because of the advantages of reduced human interference and increased speed of processing that the EDI system is favored by many corporations. Adjuncts

EDI creates a system whereby companies, governments, and entities that work on different computer systems to exchange information efficiently. EDI is a standardized format of relevant data which can be transmitted from one computer system to another with minimal human intervention. It is widely used and industry to transmit what would have formerly been sent as a document, through the post. By utilizing EDI, the communication partners are able to send a range of documents electronically, which provides and increased efficiency rate as well as reduced paper expenditure. There are currently hundreds of documents that can be exchanged electronically between multiple trading partners. The Internet has allowed for an increased flow of these exchanges, rather than those allowed through closed computer systems. EDI is a popular and efficient way to send and receive documents that would otherwise be spending wasted days on the road in the back of a delivery van. However, there is Value Added Network (VAN) used in this situation, and it is similar to a post office. It is a middle man warehouse where EDI documents can be storage until the receiver is ready for them. This ensures that important documents do not bounce back to the sender, or get lost in the tray. Although VAN is used by many companies, and in particular the healthcare industry, many EDIs are being sent over the internet. However, as VANs provide a myriad of other services such as retransmission of the document, provision of third party audit information, and acting as a gateway for different transmission methods, handling telecommunications support etc., they are quite popular within vicarious industries. Increasingly, EDI documents are being embedded into other transmission vehicles such as XML, which is being seen as one way to reduce costs. Although EDI originated in its current form in the United States, its origins can be seen throughout international co-operative operations which require standardized manifests and instructions. EDI Elements Variables EDI sounds similar to electronic mail (email), but is actually quite different. While email allow for free unstructured test messages to be sent from one computer to another (or multiple) computers, EDI supports structured business messages to be transmitted between partners. Previously these would have been hard copy documents or printed business documents. So rather than having documents pass from person to person, they go from computer to computer. Essentially, EDI is made of four elements. Firstly, EDI are based on the use of an electronic transmission medium, such as a VAN, but now increasingly on the open Internet. This is opposed to the physical storage mediums of magnetic tapes and computer disks. Secondly, EDIs use structured formatted messages that are based on agreed standards - in this way the messages can be read by any system that understands the rules they are governed by. However, this is not always as simple as it seems, as there are also the provision of EDI translation software packages. These are required to set up an interface between the company computer and the EDI sent/received document. EDI provides a relatively fast delivery of electronic documents from sender to receiver. And lastly, EDI provides direct communication

between applications, rather than between computers. EDI requires some degree of technology infrastructure. This includes data management and networking capabilities, data processing, the efficient capture of data into electronic form, the processing and retention of data, controlled access to it, and efficient and reliable data transmission between remote sites. Although it is possible for communication partners who use EDI to be directly linked to one another, it is most likely preferable to use a third party service provider. The EDI system creates a protocol by which businesses and governments alike are able to swiftly exchange information with a unified code system to recreate documents that are sent electronically. Overview EDI provides a safe, easy and paper free exchange of information between businesses, companies and governments using protocols that allow different systems to understand each other. EDI opens up communication between applications, thereby eliminating the human element, which can be not only prone to error, but also time consuming. So rather that putting documents into an envelope, finding a stamp, addressing the envelope and sending it through the post, what EDI does is eliminate this process and replace it electronically. However, EDI is only considered to be the standardized format of the transmitted message. EDI itself is a highly regulated protocol which allows the message to be sent between entities that may not work on the same system. The EDI consists of many symbols and words that can be read with a solution and thereby be a document that is understood by both entities. The advantages of EDI have been proposed as being the reduction of unnecessary re-captures of data, and the automation of existing processes. It is used world wide by over 30,000 Corporations and Businesses to conduct business transactions electronically. Not only does it provide increased efficiency due to limited human interference, but it allows for international protocols to be recognized, and thereby stream line corporation communications. Although the fullest range of business documents have not been devised which can cater to the international needs, they are in the process of production. Industries such as inventory management, transport and distribution, administration and cash management can all benefit through the use of this system. It directly reduces the amount of data capture and transcription, which generally reduces the incidence of errors, handling time and incidence of delays, which are critical to businesses. It is these delays which can often make or break business ventures. However, with EDI, these can either be eliminated or heavily reduced. Underlying the increased efficiency, these systems are run on what are now internationally agreed upon standards and protocols which allow information to be freely and securely exchanged through a variety of mediums. No longer are companies, corporations or governments constrained by the speed at which a package, or document pile can travel within a transport vehicle. The transmissions using EDI can be almost instantaneous, and thereby alleviate some stresses, and increase the ability of users to communicate more effectively.

Evolution of EDI EDI has been established within various industries as a reliable and efficient form of data transmission. It is a technical representation of a business conversation between two entities, either external or internal. From its inception, EDI was applied differently within these industries, and therefore different standards were set up. In the late 1960s, EDI was established within the transport industry, and they created their own standards. Soon other industries followed suit and various standards were created. Thus each of these standards is not necessarily compatible, which causes confusion and an inability to communicate. EDI was designed to function outside of communication and software technologies, and can be transmitted between sender and receiver via any means the two share. These may include modem, FT, AS1, AS2, Email or HTTP. Although the methods of EDI transmission are changing - as with the increased use of Internet options - the actual EDI documents have remained the same. And this is due to the use of standards within the field of electronic data interchange, which have established and maintain the continuity of data information transmission. The History of EDI Standards During the 1960s processing of business orders and shipping data was transmitted using networks. This was referred to Electronic Data Interchange or EDI. This occurred within the transport industry, where it was found to be more time efficient to transfer data between trade partners on the same network. As such, the networks required to be talking about the same information in the same language. A set of documentation was created for this purpose. The Transportation Data Coordinating Committee was formed to coordinate the development of translation rules among four existing sets of industry-specific standards. Standardization was more in range when the X12 standards of the American National Standards Institute (ANSI) were issued. These were an expansion on the TDCC standards, and eventually replaced them. At the same time, the UK Department of Customs and Excise in collaboration with the British Simplification of Trade Procedures Board (SITPRO) was also making moves to create standards for its documentation in international trade called Tradacoms. These were eventually extended by the United Nations Economic Commission for Europe (UNECE) into the General purpose Trade Data Interchange standards (GTDI), and were gradually taken on by about 2000 British exporter organizations. As two of the major traders of the world had created different and somewhat incompatible systems of standardization, problems arose. These have been addressed by the formation of a United Nations Joint European and North American working party (UN-JEDI). Hence began the development the Electronic Data

Interchange for Administration, Commerce and Transport (EDIFACT) document translation standards. The automotive industry went through a similar confusion when GM attempted to reduce costs by holding an inventory which would be only a days worth of supply. In this way, their inventory costs were reduced considerably. They did this through EDI and thus set up their own mode of communication with suppliers. This style was soon adopted by other automotive entities in order to similarly reduce their costs. This led to a need for standardized documentation across the industry. These were made clear through the Automotive Industry Action Group which worked with automakers and suppliers to develop an EDI standard for the entire industry. As such, the industry was able to create a standard which was related just to the automotive industry. Currently there is a large list of business documents which the standard covers, from shipping to trucking, to re-ordering. This list has developed over the last ten years, and includes the finance, health, trucking, shipping, automotive and various other sectors of industry. It has widened the scope of efficiency, decreased human related errors and reduced delays. EDI is used worldwide from Australia to Alaska. Improvements can be seen in areas such as inventory management, transport and distribution, administration and cash management. Currently EDI is in a great phase of expansions, where it is being used in collaboration with other data tools such as XML, and the Internet. These allow for the potential of EDI to come through as a tool not simply for data transmission, but as a means to create closer ties and networks for businesses and corporations. New EDI Standards Since EDI was established, and despite new technologies emerging, there are still an increasing number of businesses and corporations taking on EDI as a method of data transmission. The four major sets of standards are: UN/EDIFACT: the only international standard, which is mainly used outside of North America ANSI ASC X12 (X12), which is mainly in North America TRADACOMS standard used mainly in UK retail industry ODETTE standard used within the European automotive industry These standards dictate the formats, data elements and character set which are required for the use of EDI. The codes are a string of letters, numbers and characters which provide information to the receiver regarding what the document concerns. Some information is mandatory, while other information is optional. Two documents can follow the same code, but appear completely different, depending on what industry they are associated with. For example, a dog food company may send information regarding expiry date, while an automotive company sends information regarding size of tire. Since 2002 new standards have emerged, as more trading partners are using EDI through the Internet. These standards enable EDI to be securely transferred through e-mail, HTTP and FTP.

While the use of the Internet as a protocol for EDI transmission has increased, VANs remain a valuable part of the EDI process for many users. The Codes Electronic Data Interchange requires standards of data formatting to function. These standards include EDIFACT, HL7, which are used world wide and various others which are used within certain regions. These standards are data formats, and each one has characters and symbols that identify what each row is recording. The data items are separated by special characters. EDIFACT or UN/CEFACT EDIFACT arose from the issues of using EDI not just across nations but across the globe. As there were different standards between Europe and the U.S., a single format was created that was sanctioned by the United Nations. This allows international communications to also enjoy the benefits of the fast and efficient communications which EDI provides. EDIFACT was born of the fact that there were differing standards across Europe and indeed the world. For this purpose, EDIFACT allows documents to be sent and received from Europe to American (and the reverse) easily. EDIFACT is highly used in the European markets, and was established early. Therefore current competing systems such as XML, while making inroads are not likely to have major impacts within these markets due to the existing hardware and software that many of these industries such as civil aviation, retail and tourism have implemented. X12 X12 is a standard which yet again regulates format type of and EDI document it was created by the Accredited Standards Committee. HL7 This standard is health-related EDI which allows for exchange of health information electronically. It standards are used worldwide, and encourage the improvement of management, delivery and evaluation of health services within clinical practice. AS2 This is the Internet Standard which allows for the secure and fast transmission of EDI documents via the Internet. It utilizes encryption and other authentication codes to ensure reliable and secure transmission. Since EDI began many years ago, various codes have enabled trading partners to communicate with improved efficiency and accuracy. As the trading partners evolved to worldwide proportions, so did the standards. While various trading areas maintain their own standards, international standards allow for improved global communication.

Although trading use more open technology forms such as Internet, Email and HTTP, EDI through these means continues to provide secure and efficient transmission of data. As such, the standards will continue to evolve as do the industries and trading partners using the technology doing the same.
EDI Benefits

Within various industries, EDI has been used to great advantages, and many benefits have been expounded in its regard. EDIs benefits relate to environmental impact, improved time efficiency, improved accuracy and increased flexibility, enhanced partnership, labor costs, shipping. EDI creates a system whereby documents and data can easily be transported from one source to another, and is able to overcome incompatibility issues. EDI is a set of standards which govern data formats and thereby allows disparate computer systems to be able to read the data which is sent. EDI documents are also able to be stored at a Value Added Network (VAN), which is like a virtual storage house, and is able to transmit the message to the receiver when they are available. The advantage of a VAN is that they are able to re-transmit the message to the receiver if it does not go through. The EDI provides advantages to both small and large businesses and creates an efficient business environment with little to no human intervention, which makes it perfect for automated services. Therefore EDI is used highly within departments such as invoicing and ordering. The Improvements EDI will reduce and improve various elements of any business or corporations expenditures. It allows some processes to become fully automated, thus reducing the amount of human time required on them. It can fully take over in data entry, manual reviews and reconciliations, sorting, copying and filing documents. However, importantly, the number of errors is heavily reduced due to the minimization of human input. Therefore the number of hours required for a person to process an order from bid request to invoicing is greatly reduced. In this way, labor costs are reduced, and time efficiency improved. Transactions are faster, more efficient and accurate. EDI enables the processing of business data up to the last second of deadlines as it is an automated electronic transmission. As EDI compliance is somewhat of a must in this business climate, once the business is in line, it will reap benefits from this efficient system. Businesses will be able to promote mutual profitability by employing EDI, and thus create enhanced partnership situations. EDI allows for a reduction in deductions and credits for mistakes; an improvement in the number of quality purchase orders; hours saved in paper administration; increased speed to retail of new items; major improvements in retail scanning accuracy. Due to this increased efficiency of non-paper accounts, cash flow will improve as electric fund transmission is able to begin much earlier than previously. Shipping is also improved as EDI provides quick and efficient information as it relies on barcode information to communicate. It is able to track inventory and eliminates the incidence of lost packages due to their isolation from the larger shipping order. EDI greatly improves accuracy of data as it is all automated. There is a

reduction of re-keying errors, as there are none required. Therefore fewer items will be lost, returned or required from back order. EDI simplifies the manufacturing process as it is able to provide one time data entry; reduced errors; on line data storage; faster management reporting and automatic reconciliation. Industry Applications of EDI The benefits of EDI can be seen across various industries which have embraced the data interchange system. It is widely used within the health industry, government agencies, and the automotive industry and general businesses. It is used widely is automated document services which can include: export/import information for international shipments carrier-to-carrier way bill exchange; reservation or pickup requires; shipment information from shipper to carrier; freight bill data, carrier to payer; shipment tracing information; payment data, payer to bank, bank to bank, bank to payee. All of these various industries which utilize EDI have standards of their own, but these can be minimized when using the standardized EDI document formatting. EDI provides a varied number of documents which are standardized across industries. Within these industries, there are benefits to the buyer such as lower inventory levels, quick order acknowledgment and efficient invoicing processing. The benefits for the supplier have been previously listed. Within the automotive industry, EDI helped to improve inventory costs, as they were able to apply EDI in order to establish the single day inventory lists. While this helped the buyer, it put pressure on the supplier to absorb the costs. Although the industry was improved, it led to some confusion, as each major automotive maker used its own standards. However, these were made clear through the Automotive Industry Action Group which worked with automakers and suppliers to develop an EDI standard for the entire industry. As such, the industry was able to create a standard which was related just to the automotive industry. Government entities are also benefiting from EDI such as the Minnesota Department of Labor and Industry, which utilizes EDI in its injury claim reports. They claim that EDI increases the level of reportage of injuries, and improves on reporting times. They are also able to automatically send out report maintenance documents, reducing the level of human interference, and thereby reducing labor costs. The medical health industry also utilizes EDI in order to process claims more swiftly for medical providers. Within the health industry, the benefits include those of time effectiveness and reduced paper load. However, it also allows consumers from insurance company, hospital, physician or supplier to enjoy these benefits. Current EDI standards are able to support all the support for health care industry standard documentation. This includes government regulations which provide for the privacy and security of electronic transactions. EDI is able to comply with the standards, as it is completely secure. EDI is also able to integrate with other systems such as the clinical and accounting systems of hospitals and private clinics. The financial sector is also well entrenched with EDI as it is used to establish credit checks, statement orders, lockbox data and debit advices. Internet EDI Benefits

Although EDI can be run over a variety of electronic communication systems, currently many industries are looking at internet EDI, due to its ability to reduce costs. Using other forms of electronic mediums, companies may be required to use VANs which store the electronic information until the receiving partner is ready to accept. When this is eliminated, it could reduce the cost to companies considerably. Therefore internet EDI is being explored by many. It allows the partnering businesses to use secured lines of communication to transmit information. Internet EDI provides the benefits of EDI in that is almost instantaneous transmission, and therefore will cut down on time which would normally be eaten up by postal delays. It is currently used by the automotive, health and the financial sector. These businesses are able to further reduce their transmission costs through the use of internet EDI. By utilizing the Internet, EDI is able to access an increased variety of businesses that may not be able to afford the setup of other media transmissions. It can allow for reduced costs through the process of either request or delivery or of error produced through rekeying. Overall, Internet benefits are open to all businesses that require EDI services. Looking Ahead By the end of the 1990s many industries were being impacted by the use of EDI in everyday practices. Currently, the EDI is no longer a trend but an integral part of many businesses and their management. While EDI has existed since the 1960s it has kept up to date and can now provide electronic transmissions in various electronic means such as modem, HTTP and the internet. With these options available, and with many industries on board, the future of EDI looks strong. However, there may be some traps EDI could fall into. Software must be accessible and easy to use. Users should be aware of the varied options EDI can provide for businesses. Proponents of EDI should be clear in their advertising, and explain the system thoroughly and clearly. Currently EDI is being connected with other systems such as XML, which can only be of benefit. These systems together create an efficient and fast delivery of data transmission. There are a varied amount of services which offer companies and businesses the opportunity to increase their profit margins as well as their ability to contact trade partners more efficiently. They are able to extend the use of EDI through the many modes of transmission is can go through. Also EDI is able to evolve with new systems and therefore supply an up to date system that is well established within many businesses and company systems. It is this kind of flexibility which will allow EDI to continue into the future as it has since its inception.