E D I

a new business paradigm

Meherji Duvvuri
M.Com.,M.B.A.,L.L.B.,N.E.T.,

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Components
 Definitions
 Strategic Importance Initial
 Benefits of EDI
 Technical Aspects of EDI
 Standardisation
 Legal Aspects of EDI
 Implementation
 Summary
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Definitions
 Electronic Commerce (EC)
is the paperless exchange of business
information, using Electronic Data Interchange
(EDI), electronic mail, electronic bulletin
boards, electronic funds transfer and other
similar technologies

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Definitions

 Electronic Data Interchange (EDI)

a major part of Electronic Commerce (EC),
is the computer-to-computer exchange of
business data in a standard, machine-
processable format. The information is
generally patterned after a conventional
paper document, such as a purchase order or
invoice. It is a “paperless trading”

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Definitions

 Trading Partner
A trading partner is any company, government
department, or commercial or non-commercial
entity with whom an organization regularly
exchanges documents of formatted data (not
just letters or memos).

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Definitions
 Trading Partner Agreement
A signed document between trading partners
outlining all the conditions that will allow
electronic communication. The agreement
states that the parties intend to be legally bound
in the same manner as though they were
exchanging paper documents. The signature on
the agreement serves as a substitute for
signatures on paper documents.

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Definitions
 Mapping
The process of taking data from a company-
specific format and fitting it into the EDI
standard electronic format (as defined by a
particular transaction set).
 Transaction Set
An EDI standard electronic format for a
business document.

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Definitions
 Translation Software
Software used to take information from a flat
data file and convert it into an EDI standard
electronic format.

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Definitions
 Value Added Network (VAN)
A third party network performing services
beyond the transmission of data. For example,
VANs provide mailbox, data security, and data
archiving services. Many also offer e-mail
services.

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Definitions
 VAN Interconnection
The connection between
two VANS that allows
messages from one
VAN’s customers to be
communicated to the
customers on the other.

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Strategic Importance Initial
 Time
Through the use of EDI, companies able to
improve their response time and decrease their
time to market by accelerating the Purchase
Order-to-Invoice-to-Payment process from
weeks or days to hours, or even minutes. Not
only were they shorter, but they were also more
accurate and reliable.

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Strategic Importance Initial
 Service
Another benefit of these changes was the
improvement in customer service levels.
 Market
Companies could then use these advantages to
respond more quickly to new entrants in the
market.

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 Strategic Importance Initial
 Costs benefits
Through the use of EDI, innovative business
programs such as Just-In-Time inventory
management were possible. EDI and JIT
allowed companies to have more control over
their inventory levels and reduce their costs by
increasing inventory turns and decreasing
safety stocks.

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Benefits of EDI
 Transactions speed
has greatly increased with the creation of EDI.
EDI drastically reduces this problem by
sending transactions electronically where they
can be sent and received almost simultaneously.

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Benefits of EDI
 Direct transmission
EDI includes the direct transmission of data
between organizations VAN. EDI is not
facsimile transmission (fax) of information nor
is it electronic mail (e-mail). Both of these
transmission types are in “free format” (not
standard format) and, therefore, generally
require rekeying of data into the receiver’s
computer system.

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Benefits of EDI
 Cut down the possibility of human error
EDI would also cut down on the tendency for
"human error”. EDI eliminates this possibility
because the receiving end is a computer that
simply translates the message that has already
been keyed into the system.

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Benefits of EDI
 Reduces the risk of lost data
whether that means the data is physically
unable to be located, or if only part of the data
has been lost through the numerous steps
require to conduct business through the use of
paper.

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Benefits of EDI
 The benefits of EDI include:
Time savings and associated financial savings
accrued,
Improved accuracy,
Improved trading partner relationships and
client interactions,
Improved reconciliation of transactions
exchanged.

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Technical Aspects of EDI
 EDI messages
EDI messages are passed through a Value
Added Network or "VAN." In principle a VAN
is an electronic mail station for holding and
passing messages.

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Technical Aspects of EDI
 Services for a VAN would include:
Storing and forwarding messages
Communications between standard data formats
Detecting and correcting errors
Message decryption and encryption

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Technical Aspects of EDI
 EDI Hardware
EDI transactions can be passed from many
types of computers (i.e. PC, Mac, UNIX,
and mainframe). Trading partners do not
need to use the same type of equipment.
EDI messages are hardware independent,
due in part to the X12 standard. The
transactions are sent via dedicated links,
ISDN or phone lines.

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Technical Aspects of EDI
 EDI software
Translation software takes raw data and arranges it
into the X12 format or the United Nations
EDIFACT standard on the sender's end.
Mapping software is used to exchange information
between the company's EDI transactions and its
other internal applications such as inventory,
accounts receivable, and accounting and ordering.

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Technical Aspects of EDI
 Communicating EDI transactions
can be done in several ways. The data can be
transmitted and received via a dedicated
computer system using async, bi-sync, X25,
X.400, Internet or other telecommunication
standards and networks. Depending on the size
of the company and number of trading partners,
these methods can occur in combination with
one another or by themselves.

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 Standards
Standards
Standards
Standards
Standardisation T

 ANSI ASC X12

EDI standard in North America is the ANSI
ASC X12 standard. The X12 committee is
charged with developing "standards to facilitate
electronic interchange relating to order
placement and processing, shipment and
receiving information, invoicing, payment, and
cash application data

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Standardisation
 UN/EDIFACT
the ANSI X12 standards and the European
standards, known as "Guidelines for Trade Data
Interchange" (GTDI). Immediately prior to the
formulation of EDIFACT, European EDI
standards had undergone a process of
reconstruction by the United Nations Economic
Commission for Europe (UNECE)

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Legal Aspects of EDI
 Authenticity
Determining the authenticity of information
transmitted electronically (genuine; true; real;
pure; reliable; trustworthy; having the character
and authority of an original;...competent,
credible, and reliable as evidence).

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Legal Aspects of EDI
 Written Requirement
A number of laws require that certain legal
documents, such as contracts, wills, and
commercial paper be written on paper and
signed.

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Legal Aspects of EDI
 Existing Laws
it is clear that something needs to be done to
clarify the laws with regard to EDI at this time
and especially in the near future.

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Legal Aspects of EDI
 Privacy
Privacy and security issues must be determined
at the outset of an EDI relationship, preferably
in the trade agreement.

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Implementation
 It’s a general idea if EDI can and should
be implemented into your processes.
1. Identify EDI Opportunities
2. Cost-Effectiveness Analysis & Approval
 2.1. Estimate Benefits.
 2.2. Estimate Investment Costs.
 2.3. Estimating Operating Costs.
 2.4. Estimate Net Benefits, net costs.
 2.5. Establishing EDI Priorities.

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Summary
Eventually more and more business transactions
will migrate to the World Wide Web due to the
ease of access to this medium. Deciding which
transactions are best suited for EDI over the
Internet will be a function of accessibility, data
security/privacy, and the means of
communication. These three areas should be
studied carefully when proceeding with large-
scale EDI or E-Commerce initiatives.

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