Electronic Data
Interchange (EDI) and SCM
Define Electronic Data Interchange
Give characteristics of EDI
Discuss benefits of EDI, as well as barriers to its
implementation
Describe how EDIt works, and how it is moving
to the Internet
Contrast common (ANSI) EDI with Internet EDI
Internet improvements to supply chain
management
Electronic Data
Interchange (EDI)
Strategic Impact of EDI
Definition of EDI
Example of EDI
How EDI works
Benefits of EDI
Direct and Process
Barriers to EDI Adoption
Advantages, Disadvantages and Characteristics
of VANs
EDI Implementation Model
Strategic Impact of EDI
Business processes can become
more efficient
Customer-supplier relationships may
change
more trust and collaboration
Market structure changes
Definition of EDI
The direct computer-to-computer
transfer of business information
between two businesses that uses a
standard format.
Focus on trade data interchange
Often use VANs (Value-added
networks)
Use of standards
EDI Standards
Companies speak precisely the same
language
Same codes in same places
Proprietary codes --> to standards
(X12, EDIFACT,X400)
Different computers can
communicate with one another
EDI Standards
In 1968, the Transportation Data Coordination
Committee was formed, charged with exploring
ways to reduce the paperwork burden
American National Standards Institute (ANSI):
coordinating body for standards in the United
States since 1918
Accredited Standards Committee X12 (ASC X12)
chartered by ANSI in 1979 to develop EDI
standards
The current ASC X12 standard includes
specifications for several hundred transaction
sets
Types of EDI Benefits
Direct
Process
require reengineering
can only be realized with all
trading partners are on EDI
can revolutionize the way business
is done
Barriers to Adoption
Trading partners not knowing
benefits
Hardware costs
Interfacing translator, software costs
Need for software modifications
Network (VAN) service charges
Costs and effort for trading partner
conversion
Trading Partner Concerns
in EDI Implementation
Benefits
Costs
EDI
Trust
Dependency
Value Added Networks
Trading partners can implement
the EDI network and EDI
translation process in several ways,
each using one of two basic
approaches
Direct connection
Indirect connection
Direct Connection Between
Trading Partners
Requires each business in the
network to operate its own on-site
EDI translator computer
EDI translator computers are
connected to each other using
modems or dedicated leased lines
Trading partners using different
protocols can make direct connection
options difficult to implement
Indirect Connection Between
Trading Partners
Companies use the services of a
value-added network (VAN)
The VAN provides communications
equipment, software, and skills
needed to receive, store, and forward
electronic messages containing EDI
transaction sets
The VAN often supplies the software
needed to connect to its services
Advantages of Using a
Value Added Network
Users support only one communications
protocol
The VAN records activity in an audit log,
providing an independent record of
transactions
The VAN can provide translation between
different transaction sets
The VAN can perform automatic compliance
checks to ensure the transaction set is in
the specified EDI format
Disadvantages of Using a
Value Added Network
Most VANs require an enrollment fee,
a monthly maintenance fee, and a
transaction fee
VANs can be cumbersome and
expensive for companies with trading
partners using different VANs
Inter-VAN transfers do not always
provide a clear audit trail
EDI on the Internet
Viewed as a replacement for expensive
leased lines and dial-up connections
Small companies can get back in the
game of selling to large customers the
demanded EDI capabilities of their
suppliers
Concerns about security and lack of audit
logs continue to be a major roadblock
Takes advantage of open architecture
Comparison of EDI
Standards
 EDI STANDARDS
(ASC/ANSI)
Security provided by
private networks
EFT (Electronic Funds
Transmission) standard for wire
payments between
client and vendor
Transactions sets (810invoices;850, 855POs)
 INTERNET STANDARDS
SSL (Secure Sockets
Layer)
SET (Secure Electroic
Transactions) protocol proposed by
Visa/MC for Net
No transaction
standards
Current Internet EDI
Usage
Much EDI traffic carried over private
networks
scalability
reliability
processing power
in 1996 EDI Group study
85% of respondents using some form of EDI
only 3-4% were using Internet EDI
Changes on the Horizon
S/MIME protocol which enables e-mail
applications to verify transmission and
receipt of EDI messages
Products to map Web EDI transactions
sent in multiple formats to legacy EDI
applications
New (but potentially competing)
technologies
XML
OBI
Products to Smooth EDI
Wrinkles
GEIS’s TradeWeb - an entry-level formsbased service with which subscribers can
send and receive four basic EDI
documents over the Internet using a
standard Web browser for flat fee
($50/mo)
purchase order (PO), PO acknowledgement
invoice, functional acknowledgement
GEIS’s Trading Process Network for
posting EDI-based forms on the Web
Financial EDI
A trading partner’s bank is called a
Financial EDI (FEDI)
Many trading partners are reluctant to
send FEDI transfers for large sums of
money over the Internet
Companies may opt to establish an
indirect connection through a VAN for the
added security for FEDI transaction