1. What are the standards of EDI?
Electronic data interchange, or EDI, is the computer-to-computer exchange of business documents in a standard electronic format between business partners, or trading partners.
3.What are the advantages of using EDI?
Before the days of wide-spread EDI use, communication of business processes between companies was slow and error prone. Instead of electronically exchanging invoices, shipping notices, purchase orders, sales reports and other important business documents, trading partners had to send each other paper documents in order to fulfill their requests. Slow processes, delays and errors were an obstacle for companies who wanted fast shipments, fast payments, and who valued accurate information exchange with their business partners.
Although EDI has been around for decades, finding a brief history of EDI in one place is surprisingly difficult. Here is a timeline of significant events.
Early 1960’s
Ed Guilbert develops an electronic message format for sending information about cargo between Du Pont and Chemical Leahman Tank Lines. Guilbert expanded on the standardized shipping manifests he developed with other U.S. Army officers during the Berlin airlift of 1948.
1965
The Holland- America steamship line begins sending trans-Atlantic shipping manifests using telex messages and converting the messages into tape that could be loaded into their computers. Previously, sending shipping manifests had been accomplished with paper. This helped begin the foundation of the EDI format. Telex is capable of sending a full page of information in about 2 minutes.
1968
Many oceanic shipping companies, airlines, railroads, trucking companies are using electronic messages for manifests but the many disparate formats are creating problems. The Transportation Data Coordinating Committee is created and begins work on developing standards.
1973
The FTP protocol is published. FTP stands for File Transfer Protocol and is a way to transfer files between computers. The transmission can be between any two computers that support the FTP protocol. File Transfer Protocol would emerge as one method for sending electronic messages between companies.
1975
The first Electronic Data Interchange standards are published by the Transportation Data Coordinating Committee that was created in 1968. Edward Guilbert is a major contributor to the standards and becomes known as the father of EDI. In the same year Telenet, the first VAN (Value Added Network) is established. Telenet provides a commercial data network and associated services.
1977
Several grocery companies begin an EDI pilot project with their business partners.
1978
The Transportation Data Coordinating Committee is renamed the Electronic Data Interchange Association. In the same year the association is chartered by the American National Standards Institute. The association will become known as the ANSI X12 committee and will evolve the publication of EDI standards
1981
ANSI X12 standards are published for the first time and encompass the transportation, food, drug, warehouse and banking industries
1982
Companies such as General Motors and Ford in the automotive industry begin to mandate EDI for their suppliers. Several large retailers, including Sears and Kmart, begin to demand EDI capability from their suppliers.
1985
The EDIFACT EDI standard is created by the United Nations to assist with the global use of the technology. EDIFACT will be adopted by the automotive industry, but other industries in the United States continue to use the ANSI X12 standard.
1991
About 12,000 businesses in the United States are using EDI.
1996
EDI is transmitted over the internet between companies who have the capability to manage the point-to-point communication requirements of each of their partners.
2001
The AS/2 communications standard is published by the Uniform Code Council. AS/2 provides encrypted transmissions of data over the internet.
2004
Wal-Mart begins using AS/2 communication with their suppliers. Some other major retailers will follow suit, but many retailers continue to use VAN communication to this day to outsource the management of their EDI connections.
Today
Well over 90% of the Fortune 500 use ANSI X12 or EDIFACT. Large companies in Europe have similar adoption levels. Over one hundred thousand companies in the United States use an EDI solution to communicate with their business partners.
8. ADVANTAGES AND DISADVANTAGES OF EDI:
Save Money
The cost of paper and paper processing is incredibly high compared to a properly implemented EDI program. RJR Nabisco estimates that processing a paper purchase order costs the company $70. Processing an EDI purchase order reduces the cost to a mere 93 cents.
End Repetition
If your trading partner wants a copy of a document, instead of calling you they simply check their mailbox. This results in a great time savings from not having to copy and fax/mail copies of business documents.
Save Time
EDI also saves time over paper processing since the transfer of information from computer to computer is automatic. There is no need to rekey information with EDI. And the chance for error drops to near zero, with no data entry.
Improve Customer Service
The quick transfer of business documents and marked decrease in errors allow you to do business faster and more efficient. KMart is an example of a retailer that implements a Vendor Stock Replenishment (VSR) program. With VSR, the KMart warehouse sends stock as their EDI system reports it and automatically bills the client. It can cut weeks from the order fulfillment cycle and ensures that product is always on the shelf.
Expand Your Customer Base
Thus with improved customer service, you can ultimately expand your customer base. Many large manufacturers and retailers are ordering their suppliers to institute an EDI program. So, when evaluating a new product to carry or a new supplier to use, the ability to do EDI is a big plus.
DRAWBACKS of EDI:
Too Many Standards
There are too many standards bodies developing standard documents formats for EDI. For example your company may be following the X12 standard format, while your trading partner follows the EDIFACT standard format.
Changing Standards
Each year, most standards bodies publish revisions to the standards. This poses a problem to EDI users. You may be using one version of the standard while your trading partners are still using older versions.
EDI is Too Expensive
Some companies are only doing business with others who use EDI. If a company wants to do business with these organizations, they have to implement an EDI program. This expense may be very costly for small companies.
Limit Your Trading Partners
Some large companies tend to stop doing business with companies who don't comply with EDI. For example Wal Mart is only doing business with other companies that use EDI. The result of this is a limited group of people you can do business with.
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- When two businesses decide to exchange EDI documents, they must agree on the specific EDI standard and version.
- There are several EDI standards in use today, including ANSI, EDIFACT, TRADACOMS and ebXML.
- And, for each standard there are many different versions, e.g., ANSI 5010 or EDIFACT version D12, Release A.
Electronic data interchange, or EDI, is the computer-to-computer exchange of business documents in a standard electronic format between business partners, or trading partners.
3.What are the advantages of using EDI?
- Customer service improvement by strengthening the link with your Trading Partner.
- Reduced errors, improved error detection, increased efficiency, and increased information integrity by reducing manual data-entry errors, discrepancies, and misinterpretations.
- Reduced clerical work by needing one-time only data entry (in most cases, no data entry!), and increased productivity with automatic reconciliation and faster management reporting.
- Faster response time by increasing speed of document transfer and thereby increasing response time.
- Increased competitiveness in the marketplace (some Trading Partners require faster response time or they will not do business with you).
- Decreased costs by reduced clerical effort and less paper usage.
- Improved delivery of goods and services as orders will be processed more quickly and accurately.
- Migration from paper to electronic transactions in order to realize savings and decrease lead times, fulfillment cycles, inventory levels, and paper use. One of the big benefits of EDI is that it's a “green” technology — good for the environment.
- Reduced inventory with more accurate and timely data that is critical for the implementation of “just-in-time” inventory and manufacturing.
- Better product planning and forecasting as your link with your Trading Partner is strengthened.
- To Translate the documents into EDI format EDI translator is needed
- Feed your electronic data through translator software to convert your internal data format into the EDI standard format using the appropriate segments and data elements
- Automotive industry-EDI has been in use across the automotive industry for over 40 years. The smooth running of today’s car production lines relies on the seamless exchange of business documents between the car manufacturers and their supply chain.
- financial services industry-The introduction of technologies such as EDI has enabled the financial services industry to automate many of the day-to-day processes between counter parties.
- The Retail industry-While the retail sector has been at the forefront of EDI adoption for more than 30 years and has replaced many paper-based processes with electronic documents, there is still a great deal of potential for EDI to deliver even more value.
- The high Tech industry-The high tech value chain has become very complex with many high tech companies relying on external partners to help design and manufacture their products.
- Financial Electronic Data Interchange (EDI) is the computerized exchange of payments between business and customers and vendors.
- We can receive electronic payments along with the accompanying information we need to post and track them.
Before the days of wide-spread EDI use, communication of business processes between companies was slow and error prone. Instead of electronically exchanging invoices, shipping notices, purchase orders, sales reports and other important business documents, trading partners had to send each other paper documents in order to fulfill their requests. Slow processes, delays and errors were an obstacle for companies who wanted fast shipments, fast payments, and who valued accurate information exchange with their business partners.
Although EDI has been around for decades, finding a brief history of EDI in one place is surprisingly difficult. Here is a timeline of significant events.
Early 1960’s
Ed Guilbert develops an electronic message format for sending information about cargo between Du Pont and Chemical Leahman Tank Lines. Guilbert expanded on the standardized shipping manifests he developed with other U.S. Army officers during the Berlin airlift of 1948.
1965
The Holland- America steamship line begins sending trans-Atlantic shipping manifests using telex messages and converting the messages into tape that could be loaded into their computers. Previously, sending shipping manifests had been accomplished with paper. This helped begin the foundation of the EDI format. Telex is capable of sending a full page of information in about 2 minutes.
1968
Many oceanic shipping companies, airlines, railroads, trucking companies are using electronic messages for manifests but the many disparate formats are creating problems. The Transportation Data Coordinating Committee is created and begins work on developing standards.
1973
The FTP protocol is published. FTP stands for File Transfer Protocol and is a way to transfer files between computers. The transmission can be between any two computers that support the FTP protocol. File Transfer Protocol would emerge as one method for sending electronic messages between companies.
1975
The first Electronic Data Interchange standards are published by the Transportation Data Coordinating Committee that was created in 1968. Edward Guilbert is a major contributor to the standards and becomes known as the father of EDI. In the same year Telenet, the first VAN (Value Added Network) is established. Telenet provides a commercial data network and associated services.
1977
Several grocery companies begin an EDI pilot project with their business partners.
1978
The Transportation Data Coordinating Committee is renamed the Electronic Data Interchange Association. In the same year the association is chartered by the American National Standards Institute. The association will become known as the ANSI X12 committee and will evolve the publication of EDI standards
1981
ANSI X12 standards are published for the first time and encompass the transportation, food, drug, warehouse and banking industries
1982
Companies such as General Motors and Ford in the automotive industry begin to mandate EDI for their suppliers. Several large retailers, including Sears and Kmart, begin to demand EDI capability from their suppliers.
1985
The EDIFACT EDI standard is created by the United Nations to assist with the global use of the technology. EDIFACT will be adopted by the automotive industry, but other industries in the United States continue to use the ANSI X12 standard.
1991
About 12,000 businesses in the United States are using EDI.
1996
EDI is transmitted over the internet between companies who have the capability to manage the point-to-point communication requirements of each of their partners.
2001
The AS/2 communications standard is published by the Uniform Code Council. AS/2 provides encrypted transmissions of data over the internet.
2004
Wal-Mart begins using AS/2 communication with their suppliers. Some other major retailers will follow suit, but many retailers continue to use VAN communication to this day to outsource the management of their EDI connections.
Today
Well over 90% of the Fortune 500 use ANSI X12 or EDIFACT. Large companies in Europe have similar adoption levels. Over one hundred thousand companies in the United States use an EDI solution to communicate with their business partners.
8. ADVANTAGES AND DISADVANTAGES OF EDI:
Save Money
The cost of paper and paper processing is incredibly high compared to a properly implemented EDI program. RJR Nabisco estimates that processing a paper purchase order costs the company $70. Processing an EDI purchase order reduces the cost to a mere 93 cents.
End Repetition
If your trading partner wants a copy of a document, instead of calling you they simply check their mailbox. This results in a great time savings from not having to copy and fax/mail copies of business documents.
Save Time
EDI also saves time over paper processing since the transfer of information from computer to computer is automatic. There is no need to rekey information with EDI. And the chance for error drops to near zero, with no data entry.
Improve Customer Service
The quick transfer of business documents and marked decrease in errors allow you to do business faster and more efficient. KMart is an example of a retailer that implements a Vendor Stock Replenishment (VSR) program. With VSR, the KMart warehouse sends stock as their EDI system reports it and automatically bills the client. It can cut weeks from the order fulfillment cycle and ensures that product is always on the shelf.
Expand Your Customer Base
Thus with improved customer service, you can ultimately expand your customer base. Many large manufacturers and retailers are ordering their suppliers to institute an EDI program. So, when evaluating a new product to carry or a new supplier to use, the ability to do EDI is a big plus.
DRAWBACKS of EDI:
Too Many Standards
There are too many standards bodies developing standard documents formats for EDI. For example your company may be following the X12 standard format, while your trading partner follows the EDIFACT standard format.
Changing Standards
Each year, most standards bodies publish revisions to the standards. This poses a problem to EDI users. You may be using one version of the standard while your trading partners are still using older versions.
EDI is Too Expensive
Some companies are only doing business with others who use EDI. If a company wants to do business with these organizations, they have to implement an EDI program. This expense may be very costly for small companies.
Limit Your Trading Partners
Some large companies tend to stop doing business with companies who don't comply with EDI. For example Wal Mart is only doing business with other companies that use EDI. The result of this is a limited group of people you can do business with.
(POST YOUR COMMENTS)
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