E-COMMERCE
CIT 245
By Mohammed A.
Saleh
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COURSE SCHEDULE
➩ Foundations of Electronic Commerce
➩ Business-to-Consumer Applications
➩Business-to-Business Applications
➩Customers, Market Research and
Customer Support
➩Electronic Payments
➩Electronic Strategy (e-Strategy)
➩ Infrastructure and Support
It’s not as complicated as it looks ...!!!
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Electronic Data Interchange (EDI)
✵ Used by organizations for transactions that occur on
regular basis. For most part it is used in for purchase
transactions.
✵ Mostly applied in the Execution and Settlement phases of
the trade cycle, it may also be used for Pre-Sale and After
Sale.
✵ Examples of EDI applications in use:
In the UK, National Health Service (NHS)
British Telecom (BT) : for its bills from the gas, electricity
and heating oil utilities.
 EDI applications reduces delays, inaccuracies
and inefficiencies associated with exchange of data on paper.
 Developed in mid-70’s, by 2003 EDI transactions totaled to
$3.4 trillion, that is over 25% of the $13.5 trillion trade
among firms (eMarketer, 2003).
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Cont ...
Search
Negotiate
Order
Deliver
Pre-Sale
EDI
Execution
Invoice
Payment
Settlement
After Sales
After Sales
Figure 1.0: The Trade Cycle
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EDI Definition
✵Simply termed as Paperless Trading
✵International Data Exchange Association (IDEA) formally
define EDI as:
‘ The transfer of structured data, by agreed message
standards, from one computer system to another, by
electronic means.’
 Four elements essential to an EDI system:
• Structure Data: transactions contain codes, value and
pieces of text, each piece of information with a defined
purpose. Codes for the customer and product.
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EDI Definition
• Agreed Message Standard: a universal standard not only
agreed between business partners but also national and
international bodies. A Purchase Order is one the agreed
standards.
• From One Computer System To Another: any EDI message
is sent between two computer applications. A message is
directly sent between the customer’s Purchasing System and
the supplier’s Order Processing System.
• By Electronic Means: what is involved is a networking
channel designed for EDI for the transmission of the
message.
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The Benefits of EDI
 EDI replaces the previously used fax machines and
traditional mail with computer (replace paper transactions
with electronic transactions). It should then considerably
save time and cost.
 The advantages can be seen when an organization fully
restructures its business transactions and maximizes the full
potential of EDI (enabling technology to change the way a
business operates).
 Prime examples of EDI is Just-in-Time (JIT) manufacture
and quick response supply.
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Advantages of EDI
1. Cost Cutting
Minor costs reduction are postage and stationery costs. Major
savings are staff costs. The cost savings need to be offset
against the system development and network costs.
2. Shortened Ordering Time
Orders are directly sent into the network and the only
possible delay is the amount of time the supplier retrieves
messages from the system.
3. Fast Response
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Advantages of EDI
4. Accurate Invoicing
An e-Invoice is automatically matched against the original
order (made by the customer) and cleared for payment,
eliminating any sort of queries.
5. EDI Payment
Payment can also be made by an EDI system. Electronically
matching against the relevant invoices.
6. Elimination of errors
It eliminates the source of errors - the customer will get what
the customer asked for.
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EDI Technology
 Its technology is defined by EDI standards, EDI networks
and EDI software that interface with the business
applications. The technology however plays only a small part,
as it is often said that ‘EDI is 90% business and 10%
technology.
EDI Standard
Essence of EDI is the coding and structuring of the data into
a common and generally accepted format - anything less is
nothing more than a system of file transfers.
Standards have been developed in various sectors for the
coding and structuring of data to be used in business
transactions.
✵ These bodies include American National Standards
Institute (ANSI X12 standards) and International bodies such
as the UN (EDIFACT standards).
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Why the need for EDI standards ...?
Provides linkage between two trading partners
 Data is exchanged in a common format; without that it is
considered meaningless
Scenario:
Customer
Supplier
Best Bread
Super
Food
Fresh Fruit
Save Food
Mighty
Meat
Sava Store
Very Veg
Figure 2.0: Interchange between Customer and Suppliers
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Why the need for EDI standards ...?
✵ With 12 separate interchanges, each customer would
develop its own standard.
✵ Each supplier would then have three standards to cope
with, but the overall picture would be one of complexity and
incompatibility.
✵ EDI standards overcome this and attempts to provide a
suitable standard for data interchange that is:
• Ready formulated and available for use
• Comprehensive in its coverage for any given transaction
• Independent of H/W and S/W
• Independent of special interest of any party in the trading
network
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Tasks TO DO ...
READ ABOUT:
➩ National and Sectoral Standards
➸ Evolution of EDI Standards
➸ Early EDI Applications
➸ Sector and National EDI Standards
➸ The International EDI Standard
➩ The EDIFACT Standard
➩ Coding Standards
➸ EAN/ UPC Codes
➸ Generic Products
*Resources : The Internet, recommended books and any other relevant materials
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EDI Communications
 Standards specify a syntax for coding of the eDocument,
and NOT the method of transmission.
✵ Methods of transmitting an eDocument are:
i) A magnetic tape or diskette
ii) A direct data communication link
iii) A value added data service (VADS), also known as value
added network (VAN)
Postboxes and Mailboxes
✵ VADS basic facility is a post and forward network
✵ Each user of the system has two files:
• postbox - where outgoing messages are placed
• mailbox - where incoming messages can be picked from
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EDI Communications
Customer
VADS
Super
Food
postbox
mailbox
Save Food
postbox
mailbox
Sava Store
postbox
mailbox
Supplier
postbox
mailbox
Best Bread
postbox
mailbox
Fresh Fruit
postbox
mailbox
Mighty Meat
postbox
mailbox
Very Veg
Figure 3.0: VADS - Postbox and Mailbox Files
What are the processes involved for an EDI interchange
between Sava Store and Best Bread, Mighty Meat and Very
Veg suppliers?
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EDI Communications
The postbox/ mailbox system is also referred to as a ‘store
and forward’ system.
 Principle advantages:
i) Time Independence
The sending and receiving of the interchange are
asynchronous. These two processes can be carried out at the
convenience of all users involved.
ii) Protocol Independence
The type of a communication link to be used is an option
available for each user of the VADS system. Low volume
users will opt for a dial-up modem link whereas high volume
users may use leased line or a packet switching network.
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Value Added Data Services (VADS)
 This is a service that has been set up by several
organizations.
 Extensively used by IBM network and GEIS (General
Electric Information Service)
Most important facility is the postbox/ mailbox provision.
Other facilities may be:
• Trading Community: EDI VADS will have large number of
clients all with an interest in eTrade.
• Inter-network Connections: It facilitates trade between
partners that subscribe to the same VADS but not between
partners that might be using different VADS.
• International Connections: VADS are nationally based with
a single computer service providing the switching service- a
set-up appropriate for domestic trade. When VADS are part
of international organization or have an alliance in other
countries, it facilitates international trade.
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Value Added Data Services (VADS)
• Privacy, Security and Reliability: privacy provisions includes
user credentials user-id / password protection of postboxes
and mailboxes. EDI message can be encrypted with
eSignatures. Security is built into the VADS system and
Reliability comes from the appropriate H/W and S/W
configurations to make sure that the service is always
available.
• Message Storage and Logging: Users will have there new
messages stored in the postboxes and mailboxes. Called off
messages may also be retained. Logging facilities provides an
audit trail for the messages.
• Message Validation: messages will be
conformance with the chosen EDI standards
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validated
for
EDI Implementation
EDI in the Internet
 The Internet has started to be used as an EDI VADS by
several organizations. Here security and reliability are two
major concerns and unlike the traditional VADS, the Internet
does not guarantee delivery of data sent.
 The Internet on the other hand is cheaper than any other
commercial network.
 The technical element of the EDI system is the EDI
software.
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EDI Implementation
Pens and
THings
Packaging
Solutions
Production
Control System
Production
Control System
EDI Software
VAD
S
EDI Software
Figure 4.0: Sending an order using EDI software
• If Pens and Things is to send an order from its production control system to Packaging
Solutions it needs to code that order into the agrees EDI standard and squirt it into the chosen
VADS. On the other end Packaging Solutions needs to extract the data from the network and
decode the data from the EDI message into its order processing system
• The coding/decoding of the EDI message and the interfacing with the VADS is normally
achieved using EDI software.
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Tasks TO DO ...
READ ABOUT:
➩ EDI Software
➩ EDI Integration
➩ EDI Operation
➩ EDI Alternatives
➩ EDI Agreements
➩ EDI Interchange Agreements
*Resources : The Internet, recommended books and any other relevant materials
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