E business- EDI

Presentation on : E-businessInter-organizations Management

Submitted to : Prof. Bhavna Submitted by: Richa gangwani Sharma M.B.A (Marketing Management) 2nd Sem “B”

EDI

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents(bill of lading, customs documents, inventory documents, shipping status documents and payment documents) in a standard electronic format between business partners.

• Computer-to-computer– EDI replaces postal mail, fax and email. While email is also an electronic approach, the documents exchanged via email must still be handled by people rather than computers. Having people involved slows down the processing of the documents and also introduces errors. Instead, EDI documents can flow straight through to the appropriate application on the receiver’s computer (e.g., the Order Management System) and processing can begin immediately.

• Business documents – These are any of the documents that are typically exchanged between businesses. The most common documents exchanged via EDI are purchase orders, invoices and advance ship notices. But there are many, many others such as bill of lading, customs documents, inventory documents, shipping status documents and payment documents.

• Standard format– Because EDI documents must be processed by computers rather than humans, a standard format must be used so that the computer will be able to read and understand the documents. A standard format describes what each piece of information is and in what format (e.g., integer, decimal) . Without a standard format, each company would send documents using its company-specific format and, much as an English-speaking person probably doesn’t understand Japanese, the receiver’s computer system doesn’t understand the company-specific format of the sender’s format.

• Business partners – The exchange of EDI documents is typically between two different companies, referred to as business partners or trading partners. For example, Company A may buy goods from Company B. Company A sends orders to Company B. Company A and Company B are business partners.

EDI Application in business

• Supplying and receiving goods for the company and allows more stream

lined and efficient operations for the administration.• For the integration of business documents into your ERP or Internal

management System. • EDI helps in the reduction of costs as compared with the processes such as

post, fax or mails

Benefits of EDI

• Time delays : Delays are caused primarily by two factors. Paper documents may take days to transport from one location to another. In addition, manual processing delays are caused by the need to key, file, retrieve, and compare data.

• Labour costs : In general, labour-based processes are much more expensive than non-labour-intensive operations involving computers and telecommunications.

• Errors : Because information is keyed multiple times and documents are transported, stored, and retrieved by people, non-EDI systems tend to be error prone.

• Uncertainty : Uncertainty exists in two areas. First, paper transportation and other manual processing delays mean that the time the document is received is uncertain. Once a transaction is sent, the sender does not know when the transaction will be received nor when it will be processed. Second, the sender does not even know whether the transaction has been received at all nor whether the receiver agrees with what was sent in the transaction

• High Inventories : Because of time delays and uncertainties in non EDI processing, inventories are often higher than necessary. Lead times with paper processing are long. In a manufacturing firm, it may be virtually impossible to achieve a just-in-time inventory system with the time delays inherent in non-EDI processing systems.

• Information Access : EDI permits user access to a vast amount of detailed transaction data—in a non-EDI environment this is possible only with great effort and time delay. Because EDI data is already in computer-retrievable form, it is subject to automated processing and analysis. Such information helps one retailer, for example, monitor sales of toys by model, colour, and customer zip code. This enables the retailer to respond very quickly to changes in consumer taste

Standardization And EDI

All software , hardware and networks must work together so that information flows from one source to another. Today two major EDI Standards exist:

• The American National Standards Institute (ANSI) X.12 Committee and the United Nations

• EDI for Administration, Commerce and Trade (EDIFACT) standards for international usage.

ANSI X.12

The ANSI Chartered the Accredited Standards Committee in 1979 to research and develop standards for business documents. The X.12 committee develops standards to facilitates EDI relating to such business transaction as order placement and processing; shipping and receiving invoicing, payment , and cash application processing for products and services.

The X.12 transaction sets generally map a traditional paper document to an electronic format that can move easily over telecommunication networks. Each transaction format includes many data segments needed for the business function as well as instructive information to ensure that the telecommunication system routes the data correctly

EDIFACT

Developed by united Nations , EDIFACT is a family of standards similar to ANSI X.12. EDIFACT is becoming widely accepted as the foremost international EDI standard. Today EDIFACT and ANSI are working toward compatibility.

EDI Standard Selection

The diversity among electronic standards leads to confusion. To understand the situation , lets briefly trace the history of EDI.

1960 : Rail and transport industries begun to think about standardizing documents and replacing paper-based methods of communication. TDCC (Transportation data coordination committee) was developed.

VICS for pharmaceuticals , UCS for food and groceries, and WINS for ware housing.

Because most EDI information exchanges domestic and X.12 is more widely used then EDIFACT in united states , U.S. Companies doing business overseas must subscribe to EDIFACT.

Structure of EDI transaction

EDI structure are very broad and general because they have to meet the needs of business. EDI messages, however share a common structure:

1. Transaction set is equivalent to a business document, such as a purchase order. Each transaction set is mad up of data segments

2. Data segments are logical groups of data elements that together convey information, such as invoice terms, shipping information, or purchase order line

3. Data elements are individual fields. Such as purchase order number , quantity on order ,unit price.

EDI Software Implementation

EDI software has four layers :

1. Business application

2. Internal format conversion

3. EDI translator and

4. EDI envelop for document messaging

These four layers package the information and send it over the value-added network to the target business, which then reverses the process to obtain the original information.

1. EDI business application layer It creates a document- in this case, an invoice- in a software application. This software Application then send the document to an EDI translator, which automatically reformates The invoice into the agreed-on EDI standards

Enter the information in the EDI form specified for that particular business transaction

EDI translator software changes the EDI form to fit the EDI standard that the target application can understand

The translator wraps the document in an electronic envelope “EDI package "that has an ID for your trading partner

2. EDI translator LayerTranslator describes the relationship between the data elements in the business application and the EDI standards. The translator ensures that the data are converted into a format that the trading partner can use

3. EDI communication LayerThe communication portion- which could be part of the translation software or a separate application- dials the phone number for the value added network service provider or other type of access method being used

VANs (Value added networks)

VAN is a communication network that typically exchanges EDI messages among trading partners. It also provides other services including holding messages in “electronic mailboxes” interfacing with other VANSs, and supporting many telecommunications modem and transfer protocols.

Third party Value Added Network (VAN)

Company

Financial Institution

Manufacturing Company

Transport Company

Internet based EDI

The Internet appears to be a cheap, efficient, and ubiquitous channel for transmitting Electronic Data Interchange (EDI) transactions. This paper contrasts two strategies for implementing Internet-EDI systems.

For example : • McKesson, Corp. treated its Internet-EDI system as a traditional

information systems development project while.• Bank of America built its Internet-EDI system with a prototyping

approach. • Wall mart

Internet-EDI applications could transform trading partners relationships by reducing the import of EDI-capability as a competitive asset. This Internet based EDI has begun to grow at significant rates over the past few years, spurred in large part by the adoption of key Internet based EDI technologies by companies.

Benefits of Internet Based EDI Internet based EDI can have a number of benefits over using VANs. The reason is simple - VAN based EDI and other "aggregators" of EDI data charge based on the amount of data that is used and transmitted over their lines. By employing Internet based EDI you establish a direct link to your trading partners bypassing third parties and sending and receiving data directly. It was this benefit, coupled with the low cost of using the Internet, that convinced Wal-Mart to switch their entire supplier network to Internet based EDI. While they are the only one to require use of Internet based EDI other retailers have also made this option available. For businesses that rely on EDI for their operations using Internet based EDI can save a great deal of money and provide significant return on investment.

References

1. www.google.com

2. Book : Ravi Kalakota & Andrew B. Whinston

Question & Answers

Q1. what is the full form of EDI ?

a. Electronic data b. Electrical data

interchange interface

c. Electrical dial up d. None of the above

internet

Ans. (a)

Q2. which is the EDI Standard ?

a. ANSI X.12 b. EDIFACT

c. TDCC d. All of the above

Ans. (d)

Q3. which is the third layer of EDI implementation?

a. Business application b. EDI Translator

c. Internal Format d.EDI Envelop for

Conversion Document messaging

Ans. (b)

Q4. what is the full form of EDIFACT ?

a. EDI for admin, commercialization b. EDI for acquire ,communicate

& trade & taxation

c. EDI for administration, commerce d. None of the above.

& trade

Ans. (c)

Q5. what is not the application of EDI ?

a. Supplying & b. Maximizes Cost

receiving goods

c. Internal management d. None of the above

System

Ans. (b)

Q6. EDI is a computer to computer exchange of business document ?

a. True b. False

Ans. (a)

Thank you