EDI: Electronic Data Interchange

y Electronic data interchange (EDI) is the structured

transmission of data between organizations by electronic means. y It allows one computer system to communicate with another computer system using a standardized electronic form. y It is more than mere e-mail; for instance, organizations might replace bills of lading and even cheques with appropriate EDI messages. It also refers specifically to a family of standards.

CONT
y It is used to transfer electronic documents or business

data from one computer system to another computer system, i.e. from one trading partner to another trading partner without human intervention. y Information exchange can be:y Transaction data. y Request for quotes. y Order acknowledgement. y Shipping status/schedule

Components of EDI
y Interbusiness: y Transmission of data between businesses. y Most companies using EDI, use third part service provider or Value Added Network (VAN).

VALUE-ADDED NETWORK
y a VAN (value-added network) acts as a regional post

office. They receive transactions, examine the 'from' and the 'to' information, and route the transaction to the final recipient.

y VANs provide a number of additional services, e.g.

retransmitting documents, providing third party audit information, acting as a gateway for different transmission methods, and handling telecommunications support.

Components of EDI
y Computer-to-Computer y Providing online links between buyer s and seller s business application. y Delivery of information is done using electronic transactions. y Standard Transaction: y Electronic version of standard business form y EDI handles standard business transaction in machine readable form. y Standard Format: y Transaction must be transmitted in predefined form.

STANDARDS
y Standards are a necessary part of EDI. Every business

has application files that are used to manipulate their data in ways that are familiar to the business. All business that conform to specific standards can share data in the formats delineated by those standards. y EDI can be formally defined as the transfer of structured data, by agreed message standards, from one computer system to another without human intervention

Some major sets of EDI standards: y The UN-recommended UN/EDIFACT is the only international standard and is predominant outside of North America. y The US standard ANSI ASC X12 (X12) is predominant in North America. y The TRADACOMS standard developed by the ANA (Article Numbering Association now known as GS1) is predominant in the UK retail industry. y The ODETTE standard used within the European automotive industry

Electronic Data Exchange

y How does EDI work? (Figure 11.4) y Supplier s proposal sent electronically to purchasing organization.
y Electronic contract approved over network. y Supplier manufactures and packages goods, attaching

shipping data recorded on a bar code.

y Quantities shipped and prices entered in system and flowed

to invoicing program; invoices transmitted to purchasing organization

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Electronic ships order. Data Exchange y Manufacturer

y Shipment notice EDI transaction sent (not shown) y Purchasing organization receives packages, scans bar

code, and compares data to invoices actual items received.

y Payment approval transferred electronically. y Bank transfers funds from purchaser to supplier s

account using electronic fund transfer (EFT).

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Figure 11.4
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Benefits of Electronic Data Interchange

Drawbacks
y Improvement is required to be the perfect solution for y y y y

information flow. It is expensive and requires huge investment to launch and maintain technology. It is point to point. It requires expensive VAN networking. It is not easy to use, learn or implement.

Justify EDI
y Volume of data. y Frequency of document transmission and reception. y Content sensitivity. y Time sensitivity.