EDI

What is EDI
For several hundred years, commerce has been based upon the movement of written documents. These documents contained the information that one company needed to convey to another company in order to do business. Over a period of time the documents started to take on standard names such as Invoice, Credit Note and Order. However, the documents were certainly not of any standard layout. They did not need to be because the recipient was always a human being and humans have the ability to read, interpret and rationalise.
Electronic Data Interchange is the computer-to-computer exchange of business data and documents between companies using standard formats recognized both nationally and internationally. The information used in EDI is organized according to a specified format set by both companies participating in the data exchange.

History of EDI
The general idea behind EDI was originated by a group of railroad companies in the mid-1960s, in the United States. Much of the early work on EDI was driven by the industry sectors for:
transportation pharmaceuticals groceries automobiles banking

History of EDI
It was not until the 1970s, when work began for national EDI standards. Both client and vendors input their requirements to create a set of standard data formats that
were hardware independent; were unambiguous and could be used by all trading partners; reduced labor-intensive tasks such as dataentry; allowed the sender of data to control the exchange including receipt confirmation of by the other party

Original Model
Retailer A Wholesaler A

Retailer B

Wholesaler B

Retailer C

Wholesaler C

Retailer D

Wholesaler D

Architecture of EDI

From the lowest layer upward, these three layers are: The Communications Standards - Defining just how the data is to be transferred from the sender to the receiver. The Syntax Standards - Defining what overall standards format the EDI file will be in.

The Message Standards - Defining exactly what the message is and what information is to be placed where within this message.

Value-Added Network (VAN) communication networks supplied and managed by third-party companies that facilitate electronic data interchange, Web services and transaction delivery by providing extra networking services

VAN Model
Retailer A

Wholesaler A

Retailer B Value-added Network Retailer C

Wholesaler B

Wholesaler C

Retailer D

Wholesaler D

Web Services
Applications that use a universal language to send data and instructions to one another, with no translation required

Uses the Internet, so most of the connection problems are eliminated

http://www.computerworld.com/softwaretopics/software/appdev/story/0,10801,64099,00.html

Options
EMAIL XML DIRECT ROUTING

Direct Routing
Retailer A Wholesaler A

Retailer B

Wholesaler B

Retailer C

Wholesaler C

Retailer D

Wholesaler D

ANSI X12 Standard

Accredited Standards Committee (ASC) X12 was created in 1979 by the American National Standards Institute. It is a not-for-profit membership. Members meet three times each year to develop, maintain and build on the EDI standards. Its purpose: To standardize the EDI formatting and exchanges between companies in order to make the transfers less time consuming, due to differences in formatting and information presentation.
http://www.x12.org

ASC X12 Standard

These standards have been updated 5 times since their creation in 1979,

As the standards evolved, subcommittees were added to ASC X12.

In 1986 X12F was added for the Financial Industry In 1989 X12M was added for the Warehousing sets In 1991 X12N was formed for the B2B Insurance and Healthcare needs.

They are updated to include new facets in the business world, or update any information that has become obsolete.

http://www.x12.org

UCS History and Background

UCS = Uniform Commercial Standard Subset of ANSI ASC X12 Foundation for creation from the Transportation industry Grocery and Retail-oriented Industry 1976 Sponsorship and Funding
Manufacturers Retailers Wholesalers Brokers

UCS Development (3 phases)

1st Feasibility Study (Spring 1980) 2nd Development of message and communication standards (August 1980) 3rd Validity test of message and communication standards

By late 1982, UCS standards released for general use by industry members

UCS Implementation Guidelines

Data Administration Ordering Logistics Financial Business Support

UCS Communication Standard

Design Objective
Provide for the communication of EDI data Identify alternative communication methods Specify the communication standard for industry use Provide operational guidelines for using the standard

UCS Example (Kroger, Co.)

Kroger Co. uses EDI for:
Invoice processing Remittance advice Purchase order processing Vendor replenishment and managed inventory Advanced ship notice Product transfer and resale report Documenting price changes Promotional announcement processing Item maintenance

Item Maintenance (Kroger, Co.)

UCS 888 transaction
Receive detail finished good product information for new products or changes in the existing product specifications from suppliers

Benefits
Increased accuracy Improved timeliness

Reduced operating expenses

EDIFACT
Electronic Data Interchange for Administration, Commerce, and Transport is the international set of EDI standards Became a UN standard in 1987 Maintenance and further development is the responsibility of the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT)

EDIFACT
Includes syntax rules and implementation guidelines, message design guidelines, data elements, code sets, and other definitions Used for business-to-business (B2B) communication rather than business-toconsumer (B2C) Allows multi-country and multi-industry exchange Europe adopted EDIFACT early and has a large installed base indicating its continued use

Advantages of EDI
Lower operating costs- EDI replaces paper transactions with electronic

transmissions, saving time and reduced cost of business transaction and enabling the automatic processing of documents.
Saves time and money Less Errors = More Accuracy-With the implementation of EDI, there is

no need for re-entering data, thus, reducing the risk for human error. Each re-entry of data is a potential source of error.
No data entry, so less human error Increased Productivity-Making personnel more efficient and it improves business
capabilities by speeding up throughput.

More efficient personnel and faster throughput Faster trading cycle-EDI allows faster and streamlining trading cycle between
organizations leading to improved relationships between trading partners.

Streamlined processes for improved trading relationships

Disadvantages
High Dependence on the participation of trading partners - You need to be confident that they will do their part. EDI will be meaningless if your trading partner didn't get involved using EDI system effectively. Costly for smaller companies - Many small companies are facing resources problems in getting starter with the initial implementation of EDI system. It is beyond the resources these companies to invest tens or hundreds of thousands of dollars in setting and implementation costs, as well as weeks of personnel training, to get an EDI system running. Difficult to agree on standard to be used - Even though there are widelyaccepted and used standards, there are no ways to force trading partners to accept these standards. Cooperation between trading partners is needed in order to develop a common rules to avoid differences in interpretation.

Things you may want to remember . . . (for the test)

EDI Electronic Data Interchange VAN Value-Added Network

ASC X12 is moving towards integration with XML formatting

EDIFACT international set of EDI standards

In the near future EDI will be vital for business domestically and abroad