Explain in detail about EDI

What is EDI?

• Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format between business partners.
• Electronic data interchange can be used to electronically transmit document such as purchase orders, invoices, shipping bills, receiving advice and other standard business correspondence between trading partners.
• EDI can also be used to transmit financial information and payments carried out over EDI are usually referred to as electronic funds transfer (EFT).
• Electronic data interchange is a structured transmission of data between organizations by electronic means. It is more than mere E-mail; for instance, organization might replace bills of lading and even cheques with appropriate EDI message.
• It also refers specially to a family of standard, including the X12 series. EDI also exhibits its pre-internet roots, and the standard tend to focus on ASCII-formatted single messages rather than the whole sequence of condition and exchanges that make up an inter-organization business process.

Objective of EDI

The basic documents for transaction of business will be taken once by one agency, and other agencies will take the information from the agency, electronically, avoiding the need to either physically take the document from one office to another or keying in the data again and again involving the attendant problems of manual labor and errors creeping in at each stage of data entry.

Standards of EDI

EDI has been established within various industries as a reliable and efficient from of data transmission. It is a technical representation of a business conversation between two entities, either external or internal or internal. EDI was applied differently within these industries and therefore different standard were set up.

• 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, mmddyy).
• 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.
• 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.
• When two businesses decide to exchange EDI documents, they must agree on the specific EDI standard and version.
• Businesses typically use an EDI translator – either as in-house software or via an EDI service provider – to translate the EDI format so the data can be used by their internal applications and thus enable straight through processing of documents.

Benefits of EDI

• EDI’s benefits relate to environment impact, improved time efficiency, improved accuracy and increased flexibility, enhanced partnership, labor cost, shipping.
• EDI creates a system where by documents and data can easily be transported from one source to another, and is able to overcome incompatibility issues.

• EDI can speed up your business cycles by 61%. Exchange transactions in minutes instead of the days or weeks of wait time from the postal service
• Improves data quality, delivering at least a 30—40% reduction in transactions with errors—eliminating errors from illegible handwriting, lost faxes/mail and keying and re-keying errors
• Using EDI can reduce the order-to-cash cycle time by more than 20%, improving business partner transactions and relationships

Specifications of EDI

• Organizations that send or receive documents from each other are referred to as trading partners in EDI terminology.
• The trading partners agree on the specific information to be transmitted and how it should be used. This is done in human readable specification.
• While the standards are analogous to building codes, the specification are specification are analogous to blue prints. Larger trading hubs have existing message implementation guideline which mirror their business processes for processing for processing EDI and they are usually unwilling to modify their EDI business practices to meet the needs of their trading partners.

Transmission of EDI

• Trading partners are free to use any method for the transmission of documents.
• In the past one of the more popular methods was the usages of a bisync modem to communicate through a value added network (VAN).
• Some organization have used direct modem connection and bulletin board system (BBS), and recently there has been a move towards using some of the many internet protocols for transmission, but most EDI is still transmitted using a VAN.
• In the healthcare industry, a VAN is referred to as a clearing-house.

Electronic commerce with www/Internet

• Web EDI is simply conducting EDI through an Internet browser. It replicates paper-based documents as a web form. The form will contain fields where users can enter information. Once all the relevant information is added, it is automatically converted into an EDI message and sent via secure Internet protocols such as File Transfer Protocol Secure (FTPS), Hyper Text Transport Protocol Secure (HTTPS) or AS2.
• The ease of rolling out a Web EDI solution facilitates the participation of all your business partners. This can be especially beneficial when working with partners in countries where IT and EDI skills are limited. Companies are not required to install any EDI software or manage a complex EDI environment.
• In its simplest form, Web EDI enables small- and medium-sized businesses to create, receive, turn around and manage electronic documents using a browser. Simple pre-populated forms enable businesses to communicate and comply with their business partners’ requirements using built-in business rules. Business partners anywhere in the world can connect without dedicating IT resources to their EDI implementation.
• Web EDI is traditionally based around the ‘hub and spoke’ model, in which the major business partner acts as the hub and the smaller partners as the spokes. In this model:
• The hub organization implements EDI and develops a web forms option for use by its small- and medium-size business partners.
• These web forms may be hosted on the hub’s site or that of an EDI network service provider.
• Business partners connect to the web forms via web browser to exchange documents as forms that are converted to EDI documents behind the scenes for subsequent processing by the hub.