Electronic Data Interchange (EDI)
TRANSACTION
DATA
COMPANY A
COMPANY B
Simply termed as Paperless Trading
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EDI Definition
EDI is the computer-to-computer exchange of routine business
documents (data) in a standard format between companies.
EDI is the exchange of documents in standardized electronic form, between
organizations, in an automated manner, directly from a computer application
in one organization to an application in another organization
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”.
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EDI definition Cont….
EDI is defined by International Data Exchange Association (IDEA) as:This definition has four elements1. Structured data- EDI transactions are composed of codes, values and short pieces of text
if necessary; each element with a strictly defined purpose. For example, an order has codes
for the customer and product and values such as quantity ordered.
2. Agreed message standards- The EDI transaction has to have a standard format. The
standard is not just agreed between the trading partners but is a general standard agreed at
national or international level. A purchase order will be one of a number of agreed message
standards.
3. From one computer system to another- The EDI message sent is between two computer
applications. There is no requirement for people to read the message or relay it in a
computer system.
4. By Electronic Means- Usually this is by data communications but the Physical transfer of
magnetic tape or floppy disc would be within the definition of EDI. Often networks
specifically designed for EDI will be used.
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PAPER DOCUMENT INTERCHANGE
Data Entry
PO
Computer
Computer
Post Office
Invoice
Purchaser
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ELECTRONIC DATA INTERCHANGE
Data Entry
PO
Computer
Computer
VAN
Purchaser
Invoice
• Electronic interchange between the computer and an electronic post office eliminates these problems
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• Information is exchanged via electronic post office or VAN
EDI History
1948 – Berlin Airlift standardizes processes of airlifting of its
consignments
1960 – electronic data transmissions commenced in rail and road
transport industry
1968 – US Transportation Data Coordinating Committee (TDCC)
formed to develop transport rules
ANSI announced X12 standards to replace TDCC standards
UK developed its own standards for documents used in international trade
UN Economic Commission adopts UK standards into General purpose
TradeData Interchange (GTDI) standards
UN Joint Europian and North American Working Party develops EDIFACT to
address incompatibilities between X12 and GTDI
1991 – most countries around the world adopt EDI
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EDI Components
EDI
Four basic components of EDI:
Hardware
Standards
EDI
Hardware
Includes computers and modems
Software
Select one to fit your requirements
Communications
EDI standard
Software
Communications
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EDI Standard
One of the most important EDI components is standards EDI Standard - “A set
of rules, agreed upon, accepted, and voluntarily adhered to, by which the data
is structured into message formats for exchange of business and operational
information” (Beby, Daniel J., E-D-I or D-I-E)
Standards
Started in 1950s and 1960s
First developed for the transportation, warehouse, and grocery industries
Provide the commonality of format
Interpretation for communicated information intelligible to both the sender
and receiver
American National Standards Institute (ANSI) developed the first national,
cross-industry EDI standards
ANSI X12 is the standard for EDI transactions in the U.S.
United Nations/EDI For Administration Commerce and Trade
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(UN/EDIFACT) is the standard for international EDI transactions
ANSI X12
ELECTRONIC
DATA
INTERCHANGE
STANDARDS
UN/EDIFACT
Other Standards
Transportation Data Coordinating Committee (TDCC)
Uniform Communications Standard (UCS)
Warehouse Information Network (WINS)
Voluntary Inter-Industry Communication Standard (VICS)
EDI for Administration, Commerce, and Trade (EDIFACT)
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EDI Software
1. Document Support
Database
4. Translation
Communications
2. Mapping
X12
3. Standards Support
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Software Component:
Will help design and maintain an electronic form
Will replicate a routine paper business form
ASCII files can be used to exchange information between an application
package and an EDI package
Translators take information and translate it into an ANSI X12 format
Application packages can be mapped to eliminate data entry.
EDI software does not have to match your trading partner’s software.
Software must use ANSI X12 standards.
Software will send, receive, translate and store the data to be used by
other business applications.
Selecting the right software is a very important part of the process.
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Government
Health care
Retail
Grocery
Transportation
Policy
EDI
USERS
Advertising
Insuranc
e
Construction
Banks
Manufacturing
Chemical
Electronics
Petroleum
Automotive
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EDI Users:
Government - DOD, DOC, DOI, GSA, HHS, DOE Federal, state, and
local governments
Health care - Hospitals, Pharmacies, Labs, Insurers
Retail - Used to support Vendor Managed Inventory (VMI)
Transportation - Motor, Air, Rail, Ocean
Insurance - Property and Casualty, Health care, Life/Annuity,
Pensions, Reinsurance
Manufacturing industry uses EDI to support just-in-time material
requirement (JIT)
Automotive industry uses EDI to support Evaluated Receipt
Settlement(ERS)
Petroleum
Electronics
Chemical
Banks use financial EDI
Construction
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Advertising
EDI Benefits
No recapture of data. So faster transfers of data and fewer errors
● Reduced cycle time – result of above
● Better coordination with suppliers – no delays, missing documents in transit, no human errors in
data entry
●
● Reduced redundancy – documents stored in email boxes, available anywhere, anytime.
● Expands market reach – through value-added networks
● Increased revenue and sales – result of frictionless transactions and related errors, faster account
settlements
•Decrease mailing costs - Information exchanged electronically
•Greater customer satisfaction
-Customers receive products faster
-Suppliers get paid quicker
•Reduction in order time
-Reduced minimum 50%
•Better cash management
accurately
-Goods received faster Invoicing and payments occur faster and more
–Corporate balance sheets are up-to-date More accurate decision making information available.
–Better scheduling of workloads within the receiving department
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EDI Disadvantages
• Trading Partners Involvement – Highly 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
widely-accepted 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.
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Barriers to EDI Implementation
Business process change – from traditional paper format to EDI
format
●
●
Cost in time and money for organizations to migrate to EDI
Business perception of EDI as technical data format, not as
document exchange system to be integrated with internal MIS
●
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EDI Operation 1
●
EDI implies
Transfer information electronically
– Information transfer between two trading partners who agree upon
data formats
– Transferable information complies with agreed upon formats
–
●
EDI can happen in two ways
Exchange data directly with each partner
– Interact with multiple partners through a central information
clearing house. Relieves sender from compatibility and licensing issues
–
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EDI operation 2
Trading partners meet to specify the applications in the EDI
standard they would implement.
●
Each partner adds EDI programs to its computer to translate
its data into EDI format for transmission and reception.
●
As often as required, partners exchange data in standard
format.
●
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EDI Operation 3
●
Sender confirms authenticity of recipient
●
Records in senders database generate data to transmit.
●
Sender composes transmission in EDI format
●
Receiver translates received data into its computer record for its
internal processing
●
All transmissions are checked both electronically and
functionally for errors and corrected, if needed
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EDI Building Blocks
Application / conversion Layer Standard Formats Layer
(EDIFACT, X12 etc)
Data Transport Layer
(email, FTP etc)
Interconnection Layer
(network infrastructure)
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Application / Conversion Layer
●
●
Comprises application involved in EDI
Applications may use their won record formats for storage, retrieval
and processing information within internal system
●
Applications convert internal information and documents to EDI
format
●
Conversion may be part of application if number of conversions are
few
●
Conversion may be separate program if number of conversions are
many
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Standard Formats Layer
Specify the syntax and semantics of documents being exchanged
● Many document standards exist
●
– US grocers' Uniform Communication Standard
– U K's DISH
– Europe's GTDI
– TDCC and its replacement ANSI X12
– EDIFACT to merge X12 and GTDI
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Data Transport Layer
Group of services that automate e-transfer process
● Utilized any of the available network transport services, such as email
● ITU-T adopted X.435 standards to support
email message standards to ensure integrity and non-repudiation
●
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Product Data Exchange Standard (PDES)
●
Is a project in US to
– Develop
an exchange standard for product daa in support of industrial automation
– Represent US position in ISO arena relative to the development of a single world-wide standard for
exchange of product data
Includes data relevant to the entire life cycle of a product, manufacturing, quality
assurance, testing support etc.
● So far, mechanical, electrical plant design products have been included for standardization
●
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Product Data Exchange Standard (PDX)
Is in XML format
● Used to exchange BOM, change order, asbuilt
configuration and quality information of
products
●
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Initial Graphics Exchange Specifications
(IGES)
CAD tools enable ease of revise and archive and manufacturing instructions to plants
● Drawing specifications of different CAD tools differ
● Standards needed for exchange of drawing between designer and manufacturers
● CAD vendors and users created IGES in 1979
● Specifies information structures to digitally represent and communicate product data
● Specifications concerned with data to describe engineering
characteristics of physical products, in terms of physical dimensions
●
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Standard for Product Data Exchange (STEP)
Also called ISO 10303.xxx, where xxx is part number
● Aims at standardizing product data between computer-based
product life cycle systems
● Intended to be used for all products
● Covers electronic, electromechanical, sheet-metal, fiber
composites etc
● Covers design, analysis, planning and manufacturing phases
of product life cycle
● Data entities are defined in schema in EXPRESS language
● Application protocols define models that define parts
● PDML designed to support PDE for commercial systems
●
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