EDI is the electronic exchange of business documents in a
standard, computer processable, universally accepted format between
trading partners. In EDI, the computer application of both the
sender and the receiver, referred to as Trading Partners have to
agree upon the format of the business documents which is sent as a
data file over an electronic messaging service.
Slide 2
Conventional Trading Process: The typical process between two
organizations remained more or less similar to what has been in use
for over a century now. The relationship between a manufacturing
organization with the sub assembly, component, or other raw
material provider organizations in a conventional consists of the
following steps:
Slide 3
1.Either the inventory management system based on a re-order
policy following the examination of the stock levels raises the
purchase requisition for the item or a department raises the
requirement for some items. The information on the requisition
forms is entered into the purchase processing system. Many a time
there are transcription errors in the process. Thus, it is
necessary to edit and correct to the data.
Slide 4
2.Once the correct requisition information has been updated in
the computerized purchase system, the purchase management system
scans the suppliers databases for potential suppliers and prints
the purchase requisitions, requesting the price and delivery
quotation in the name of screened suppliers.
Slide 5
3. The purchase requests are transmitted to the suppliers,
either through phone / fax or through mail / courier service. 4.
The information printed on the purchase requests may be keyed in by
the suppliers in their computerized systems for processing, and a
quotation against the purchase request may be prepared and
printed.
Slide 6
5.The quotation from the supplier is transmitted using
traditional paper transmission mechanisms such as fax /courier /
mail service.
Slide 7
6. All quotations received from suppliers against a purchase
request, are entered into the manufacturer's automated system and
edited and corrected to remove any transcription errors. Based on
the quotations received, the system may process the quotations
using structured or semi - structured mechanisms and select the
most suitable candidate ordering.
Slide 8
7.The order is then printed on a standardized order form along
with the terms and conditions for delivery and payment. 8. The
printed order is mailed, couriered, or faxed to the supplier. 9.The
supplier, on receiving the order, enters it into the computer
system and matches the order with the quotation that has been
submitted.
Slide 9
10.If everything is found in order, it raises an internal sales
order. Since the raising of an internal sales-order requires data
entry / editing of the information from the received purchase
order, matching and processing of the order, and then printing of
the internal sales order, it often becomes a source of delay. In
extreme cases, if the prices / terms on quotation and the purchase
order do not match, it may be require repetition of some of the
earlier steps, or re-negotiation / clarifications, causing further
delays.
Slide 10
11.The internal sales order is used for generating several
documents and forms for locating and identifying the appropriate
stocks. In case where such stocks are not readily available, it may
lead to the raising of a work order or schedule to the production
shop. The appropriate stock thus picked and packed for sending it
to the buyer along with the packing list and advance shipping note
and advice. The process, at times, may lead to a partial
fulfillment of the order. In that case, the customer needs to be
informed of the short delivery and order status in writing..
Slide 11
12. With the goods, the internal sales order processing system
also prepares a delivery note. The goods packed in the previous
step are sent using an appropriate dispatch mechanism. 13.The
delivery / dispatch note is sent to the buyer using postal mail /
courier / fax services.
Slide 12
14.The buyer or receiving yard, on receiving the goods and
advices, compares and inspects the goods, and prepares a goods
receipt note containing the purchase order number against which the
goods are received, and marks the acceptance and rejection of the
items shipped. The information on the goods receipt note is
transcribed at the computer department, edited, and matched against
the outstanding purchase order. The information on the pending
quantity against a purchase - order and the stick levels in the
inventory management system are updated. In case of partial
delivery, steps 9 14 are repeated several times until the
quantities on the order are fulfilled.
Slide 13
15. The suppliers computer, on completion of the order
fulfillment, also generates an invoice by printing it, when, in
turn, is dispatched to the buyer / manufacture. 16.The suppliers
computer also generates a financial statement at the end of the
trading month for the payments. At times it also keeps sending
reminders for the payment till the complete payment have been
received from the buyer.
Slide 14
17.The buyers computer enters the information on the payment
statement, matches it against the purchase order, and also matches
it against the information provided by goods receipt note, or in
other words, ensures that the order has been fulfilled and has been
inspected and accepted. If everything is found to be in order, the
buyers computer processes the ordered payment.
Slide 15
Slide 16
If we look at the above process, we will notice that
computerization has helped only in managing and processing of
records of the traditional supply chain management. The whole
process remains more or less the same, and is burdened with
exhaustive paper work, repetitive entry of data, making it prone to
errors and, is still dependent on the postal communication of the
document. The advances in communication technologies have made it
possible to interconnect the computers of suppliers and buyers. As
a result, they can talk to each other directly, or exchange the
requisite information without printing on paper, dispatching it
through mail / fax, and then re entering it all at the other end.
If this model of transmitting information electronically between
the suppliers and buyers computer is put in practice, it will lead
to increased speeds, avoidance of errors due to re entry, accuracy
and cost reductions due to reduced cycle time. These improvements
dramatically influence the overall efficiency of business and
commerce. Electronic Data Interchange is a paperless mechanism that
addresses the problems of the traditional systems by electronic
interchange of documents.
Slide 17
In the EDI environment, buyers create purchase requisitions in
their computers and based on these purchase requisitions, and the
suppliers database at the buyers computers, the purchase system
creates calls for quotations to suppliers. The calls for quotations
are transferred electronically to the suppliers computers to the
push of a button. The suppliers computerized system receives the
requests and prepares a quotation record which, in turn, is
submitted to the buyers computer electronically. The buyers
purchase system collects, compiles and processes all quotations and
finally creates purchase orders in their own companys purchasing
software program. The electronically generated purchase order, on
pushing a button, is automatically transferred to a suppliers order
entry system. In other words, the transmission of the data between
two trading partners happens in electronic form.
Slide 18
What is EDI? Electronic Data Interchange (EDI) is the exchange
of business documents between any two trading partners in a
structured, machine readable form. It can be used to electronically
transmit documents such as purchase orders, invoices, shipping
bills, receiving advices, and other standard business
correspondence between trading partners. EDI can also be used in
exchanging financial information and payments in electronic form.
The Electronic Fund Transfer (EFT) systems used by financial
institutions are a prime example of the application of EDI in the
banking and financial sector. EDI should not be viewed as simply a
way of replacing paper documents and traditional methods of
transaction such as mail, phone, or in-person delivery with
electronic transmission. Rather, it should be seen not as an end,
but as a means to streamline procedures and improve efficiency and
productivity.
Slide 19
EDI covers wide and varied application areas and, depending
upon the perspective, has been defined in several ways. According
to the Data Interchange Standards Association. Electronic Data
Interchange (EDI) is the computer to Computer exchange of business
data in standard formats. In EDI, information is organized
according to a specified format set by both parties, allowing a
hands off computer transaction that requires no human intervention
or rekeying on either end. All information contained in an EDI
transaction set is, for the most part, the same as on a
conventionally printed document.
Slide 20
The Webopedia says that, Electronic data interchange, is the
transfer of data between different companies using networks, such
as the Internet. As more and more companies get connected to the
Internet, EDI is becoming increasingly important as an easy
mechanism to buy, sell, and trade information. ANSI has approved a
set of EDI standards known as the X12 standards.
Slide 21
According to the EDI University, a training provider in EDI,
EDI stands for Electronic Data Interchange, a method of
transporting all types of information, such as purchase orders,
invoices, payments and even graphics, to another party
electronically. EDI technology was introduced by Value Added
Networks (VANs), in the 1970s, as an alternative to modern banks,
and essentially replaces paper- based communications with
electronic equivalents. Since EDI is based on a standard developed
by the American National Standards Institute (ANSI), everyone can
use it, enabling all businesses to share a common language.
Slide 22
The national Institute of Standards and Technology says that,
Electronic Data Interchange (EDI) is the computer to Computer
interchange of strictly formatted messages that represent documents
other than monetary instruments. EDI implies a sequence of messages
between two parties, either of whom may serve as originator or
recipient. The formatted data representing the documents may be
transmitted from originator to recipient via telecommunications or
physically transported on electronic storage media.
Slide 23
According to the Electronic Commerce Technical Assistance
Group, Electronic Data Interchange (EDI) is the computer to
Computer exchange of business data in standard formats. In EDI,
information is organized according to a specified format set by
both parties, allowing a hands off computer transaction that
requires no human intervention or rekeying on either end. The
information contained in an EDI transaction set is, for the most
part, the same as on a conventionally printed document.
Slide 24
BUILDING BLOCKS OF EDI SYSTEMS: LAYERED ARCHITECTURE As
described above, two key concepts electronic document exchange and
electronic messages need to be addressed for an EDI system to
evolve. The real networking environment that is used for purpose of
electronic exchange of information / documents is heterogeneous in
nature. Similarly, electronic messages / documents that can be
interpreted and understood by various purchase and order processing
the systems deployed at different vendors are also heterogeneous in
nature. Thus, evolution a general purpose EDI system requires
addressing of the problem of heterogeneity at two levels exchanging
documents over heterogeneous networks and the heterogeneity of
document formats. The general architecture of the EDI system
consists of four layers: the application conversion layer, standard
message formats layer, the data transport layer and the
interconnection layer, as shown in figure.
Slide 25
Slide 26
Application / Conversion Layer The application layer consists
of the actual business applications that are going to be connected
through the EDI systems for exchange of electronic information.
These applications may use their own electronic record formats and
document formats for storing, retrieving, and processing the
information within each companys systems. Since each companys
system may have its own proprietary format, which would be used by
their system(s), for EDI to operate, they need to convert the
internal company document format to a format that can be understood
by the system by the trading partner. When the trading partners are
small in number, converters for various partner formats can be
built. But, as the number of partners with different internal
formats increase, the task of building converters for each
proprietary format to other formats becomes overwhelming. The fig.
below shows a number of converters for four trading partners with
four different proprietary message formats.
Slide 27
Slide 28
In case a need arises to handle a new proprietary format for an
additional partner, four new format conversion programs have to be
built. Thus, the approach is markedly unsuitable for the general
purpose EDI system. The problem of heterogeneity of formats can be
better addressed using a common standard format for documents /
messages transferred within the EDI system. The internal processing
systems continue to use the proprietary formats, but, for
transmission over the wire, they adopt a common document / message
format. In this case the conversion program learns to translate the
common message format to the proprietary message format used by a
system, and vice versa. The approach greatly simplifies the problem
posed by heterogeneity of proprietary message formats, as depicted
in the fig. below. Operational EDI systems follow the second
approach, in which all the documents that need to be transmitted to
the other systems are translated into the standard format. The
receiving systems accept the input in the standard format and
convert it into the native format used internally by the local
system.
Slide 29
Slide 30
The Standard Formats Layer The application layer of EDI systems
rely on common agreed formats for operation. Thus, the second
important and critical building block of the EDI system is
standards for business documents / forms. Since the sender and
receiver in the EDI systems have to exchange business documents
that can interpreted by all parties, it has necessitated the
development of form standards in EDI. EDI form standards are
basically data standards in that they lay down the syntax and
semantics of the data being exchanged. The grocery industry sector
created the Uniform Communication Standards (UCS) for addressing
the EDI standards requirement for their segment, which were later
adopted by several other retail sectors.
Slide 31
. In Europe on the other hand, the industry developed and
adopted yet another set of standards. The shipping industry devised
a set of standards called Data Interchange for Shipping (DISH), the
automobile sector came up with a standard under the umbrella of
Organization for Data Exchange by Tele Transmission in Europe
(ODETTE). The need for an industry-wide EDI standards was widely
felt and this lead to the formation of a Standard Committee X12
under the auspices of American National Standards Institute
(ANSI)
Slide 32
Document Standards The cross-industry standardization of
documents is at the core of smooth functioning of EDI systems. The
interconnection among trading partners only serve the purposing of
exchanging information, but a document exchanged between two
trading partners needs to be recognized and interpreted correctly
by the corresponding software systems running at various partners
computers. For example, a purchase order needs to be identified by
all the EDI applications running on trading partners computers as
being a purchase order from a particular organization. Over a
period of time, two major EDI standards have evolved. The first,
commonly known as X12, was developed by the Accredited Standards
X12 committee of the American National Standards Institute (ANSI)
and the second, the international standard, was developed by the
United Nations EDI for administration, Commerce and Trade
(EDIFACT)
Slide 33
ANSI X12 The Accredited Standards Committee (ASC) X12 was set
up by the American National Standards Institute (ANSI ) in 1979 to
develop cross-industry standards for exchanging electronic
documents for use by all businesses in the United States. The
committee developed ANSI ASC X12, commonly referred to as X12
standard. Today, EDI standards are firm but not static, because the
development of EDI is a continuing effort. Specific industry groups
are continuing to evolve new transaction sets that may be better
suited to standardization. The X12 standard sets the framework and
rules for electronic data interchange. It describes the format for
structuring the data. The types of documents that should be
transmitted electronically, and the content of each document. The
identification numbers for various forms, codes for a variety of
fields, and types of information is also defined in the standard.
The standard also defines the sequence of information flow.
Slide 34
The X12 devised the standards to deal with transactions such as
purchase order placement, order processing, shipping, invoicing,
and payments, to name a few. In the X12 standard, paper documents
related to particular business activities are mapped into a
transaction set. It assigns a numeric code to each of these
transaction sets, in a manner similar to the numbering of business
forms followed at many organizations. The X12 standard defines a
set of documents, referred to as transaction sets, for a wide range
of business transaction forms. Each transaction set is given a
numeric code, and each transaction set is used and for defining the
transfer of a single document (purchase order, manifest etc.)
between the computers of two trading artners. The ata embedded in a
transaction set conveys the same information that is contained in
the printed version of the document; usually, it is a subset of the
whole information on the printed version. The printed version of
the document can be thought of as containing three distinct types
of information header, detail, and summery.
Slide 35
1.The header contains the information that is common to the
whole document, such as date; from address; to address; terms and
conditions, tec. In the sample order form shown in Fig., the
following information is the header: Alpha ElectronicsDate 24/11/04
1025, Sector K Aliganj, Lucknow 226011 Purchase Order no. :
200401123
Slide 36
2. Detail refers to line items that describe the actual
business transaction. In case of a purchase order, it may contain
item number, description, quantity ordered, and price information.
In the sample order shown in Fig., the following information is the
detail:
Slide 37
3. Summery refers to the control information and other
components that refer to the complete transaction. In case of a
purchase-order, it may refer to order value. In the sample order
form example, the summery information refers to the following.
Slide 38
For each transaction set, extended specification is required.
Each of the transaction sets in the X12 standard has a further
specification. For example, The transaction set 850 is reserved for
the purchase order and X12.1 describes the transaction
specification for it, Transaction set 838 is used for vendor
registration and X12.7 contains the transaction specification for
each transaction set. For example, the specification for the
purchase order transaction set (850) can be found in X12.1
standard. For some commonly used documents, the transaction set
number along with the corresponding specification standards are
listed in the following table:
Slide 39
Slide 40
EDIFACT An International Standard In 1987, the United Nations
announced an international standard called EDI for Administration,
Commerce, and Transport (EDIFACT). The EDIFACT standard is promoted
by the United Nations Economic Commission, which is responsible for
the adoption and standardization of messages. The International
Standards Organization (ISO) has been entrusted with the
responsibility of developing the syntax and data dictionary for
EDIFACT. EDIFACT serves the purpose of trans-border standardization
of EDI messages. EDIFACT combines the efforts of American National
Standards Institutes ASC X12, Trade Data Interchange (TDI)
standards developed and deployed by much of Europe and the United
Kingdom.
Slide 41
The GE.1 group of UNEC / EDIFACT deals with data element and
rules and formats for automated data exchange. The GE.1 group also
coordinates the six EDIFACT boards set up for Western Europe,
Eastern Europe, Pan America, Australia/New Zealand, Asia, and
Africa. The Asia EDIFACT board (AEB) consists of members like
India, Japan, Korea, Hong Kong, China, Singapore, Taiwan, and
Malaysia. The basic unit of communication among EDI Trading
Partners, defined by EDIFACT, is an interchange.
Slide 42
Data Transport Layer The data transport layer consists of
services that automate the task of electronic transfer of messages.
In a typical purchase process, once a purchase order has been
prepared and printed in the standard format, it is placed in an
envelope and dispatched through postal or courier services to the
supplier. The content and structure of the purchase order is
defined in the standards layer and is separate from the transport/
carrier mechanism. The layer utilizes any of the available network
transport services such as electronic mail; file transfer protocol;
Telnet based remote connection and transfer; or even the Hyper Text
Transfer Protocol (HTTP) that drives the World Wide Web. Electronic
mail has emerged as the dominant means for transporting EDI
messages. EDI documents/ messages are exchanged through network
infrastructure as electronic mail messages. Electronic mail is used
only as a carrier for transporting formatted EDI messages by the
EDI Document Transport Layer. The structured message, delivered by
the electronic mail, is interpreted by the receiving software,
which is capable of comprehending the structure of the EDI standard
information.
Slide 43
Benefits of EDI Reduces Lead Time In the EDI environment, the
exchange of documents among trading partners happens electronically
through interconnected computers. The process of transferring the
documents is instantaneous, offering weeks of time savings compared
to the traditional environment that used postal / courier based
exchange of printed documents. Also, the direct electronic transfer
of documents between inter- organizational systems eliminates the
chance of error due to re-entry of data printed on paper from one
system to another system. As it streamlines the information flow,
the cycle time is reduced drastically. In the environment,
order-processing, shipping of goods, and invoice-preparation and
transmission can all be done within a matter of a few hours
compared to the days/ weeks it takes in a non-EDI environment.
Slide 44
Improves Coordination with Supplies Traditional trading
environments are often burdened with the problem of mismatched
invoices, un-matching terms in quotations and purchase-orders,
missing invoices even after the bill for payment is received and
many similar inter-business problems. On careful examination, it
will be evident that much of these problems are caused either by
delays in the transmission of printed documents, loss of documents
in transition, or due to errors in the transcription of the printed
information into the electronic form. The instantaneous transfer of
business documents over the network in electronic form and
confirmation of the same addresses the first problem, thereby
making nearly impossible for documents to arrive in wrong sequence.
Also, since the documents are received in electronic form, the need
to re-enter the same data is not there and, as a result,
transcription errors are totally eliminated.
Slide 45
Reduces Redundancy As all the documents exchanged between
trading partners are stores in an electronic mailbox, documents can
be accessed, retrieved, and examined at any point of time. Either
trading partner can access, examine, and make a copy of the
document from the electronic box instantly. Contrast it with the
non-EDI system; it may take hours, or even days, to locate and
retrieve a printed business document from the past. Many a time,
trading partners file copies of the same document at multiple
places. The EDI environment eliminates the need for multiple copies
and reduces redundancy without compromising the accessibility and
retrieval of old documents.
Slide 46
Expands the Market Reach Most large manufacturers like General
Motors deal with EDI- enabled suppliers only. In the process of
streamlining the purchase process they often institute a
value-added network. By being a part of their value-added network,
many opportunities open up for supplying the material to some other
larger supplies who are also a part of the network. Also, with the
growth of electronic commerce and further integration of EDI with
electronic commerce, the creation of an electronic marketplace by
large manufacturers who buy supplies from many large and small
suppliers, has become a reality. By participating in this large
market place you are likely to pick many orders from other
suppliers who are a part of the market/ place / network. The
General Electric initiated Trade Process Network (tpn.com) is a
prime example of such a marketplace.
Slide 47
Increases Revenue and Sales Many large organizations use EDI
and trade with other EDI-enabled suppliers. The efficiency brought
about by EDI reduces the total transaction friction by eliminating
paperwork and related errors that ensure. It also leads to quicker
settlement of accounts. The reduced transaction friction saves
money and the supplier is in a better position to offer the items
at cheaper costs, leading to improve revenue realizations and
sales.
Slide 48
Applications of EDI The ability to exchange documents
electronically has been found to facilitate coordination between
the partners, reduce the lead time and thus reduce inventory.
Although, large manufacturing and transportation companies were the
early birds who recognized the advantages, any of the other
industry segments also stand to benefit from electronic document
exchange. The health care, and financial sectors and cross-border
trade facilitated through electronic document exchanges including
customs service have been some other sectors that adopted and
derived the returns from EDI.
Slide 49
VALUE ADDED NETWORKS VALUE ADDED NETWORKS (VANs)are third-party
communication networks established for exchanging EDI traffic
amongst partners. Various business (trading partners) subscribe to
VAN services. For every subscriber, the VAN maintains an account,
which serves as an electronic post box for the subscriber, for
sending and receiving EDI messages. The subscribers account
receives and accumulates all incoming mail from other partners,
which can be viewed by the account owner as and when they connect
to the VAN account. There are a number of third-party value added
network providers in the market place. Many VANs today also offer
document exchange ability of EDI documents with other VANs.
Slide 50
Typically, a company subscribers to a VAN for smooth provision
of network services and to facilitate electronic data interchange
(EDI). These services include: EDI translation, encryption, secure
e-mail, management reporting, and other extra services for their
customers. The typical services provided by value added networks
are as follows: 1.Document conversion from one standard to another;
typically required when two trading partners use different
standards for EDI exchanges, ANSI ASC X 12 to EDIFACT or TDCC to
ANSI ASC X12.
Slide 51
Slide 52
2. Converting one ANSI ASC X12 document to another ANSI ASC X12
documents when the documents may need to be converted to another
type within the same system. For example, a motor carrier details
and invoice document may need to be converted to a generic freight
invoice 3. The sender may follow certain conventions that are
different from the receiver. VANs can also provide translation from
a senders conventions of a standard document to the receiver s
conventions; Translate field separators Discard unwanted characters
Format translation from EDI standard to or from flat file to
file,xml and other formats Data translation among the PDF, XLS,
MDB,or other web- based documents.
Slide 53
4. The appropriate customer data can be saved in the VAN
account and later appended on messages where required. For example,
the sender's bill of lading (BOL)number can be stored in the
account and upon receipt of the BOL acknowledgment, an
acknowledgment message including the BOL number can the created and
transmitted to the sender.
Slide 54
5.The VAN provider's computers also store data such as customer
profiles, repetitive waybill codes, etc. which can be used for
filling up the EDI transaction document with the help of the
customer profile code. The customer profile stored on the VAN can
be accessed using the customer profile code and the data from the
profile stored on the VAN can be used for completing the EDI
transaction. 6. subscribers can interactively enquire about the
status of any EDI transaction made by them. 7. subsribers can
receive verify acknowledgments in the mailbox even when they are
not online.
Slide 55
8.the VAN can alert the subscriber (receiver) that there is
data in their mailbox to be picked up, By sending a fax
notification By calling a pager or other alerting devices that
signal users about the waiting mail in the mailbox. 9. the VAN can
capture the specified data from transactions which,in turn,can be
used for generating customer specified reports. 10. the subscriber
may specify the editing requirements, which can be edited by the
VAN for completeness and correctness, as per requirements. For
example,it can verify that the line item charges on an invoice add
up to the total value shown on the EDI invoice.
Slide 56
11.In situations where such missing or mismatching data is
found during the edit process, the vans usually send messages to
the originator informing it about the missing or mismatched data
and the request re- transmission of the same. For example the ASC
X12, upon receipt of the shipment status message with missing data,
sends a status inquiry transaction to the carrier requesting
correction and re-transmission. 12. Validate and verify the
information stored in customers databases for missing data and send
messages to appropriate firms requesting correction of the missing
data.
Slide 57
many third party VAN providers the marketplace some of them are
listed here: GEIS- Operated by general electric's of USA,GEIS has
presence in over 50 countries. Cable & wireless highly reliable
with a subscriber base of over 2000 top companies of the world GNS-
it is one of the largest valve added network, and has presence in
around 36 countries. TRANSPAC- a France based EDI VAN provider.
Transpac owns the largest domestic VAN market share and has a
strong presence in Europe infonet- it is a VAN service jointly
owned and operated by World comm, Singapore Telecom and
transpac
Slide 58
Satyam infoway- Satyam is first private national internet
service provider to offer EDI VAN Services in india, in association
with the sterling software of USA. In addition to the standard VAN
services, it offers WEB EDI VAN services as well. NICNet- the
national informatics center an arm of indian ministry of
information technology has established connectivity through 600
points in india. The NICs network (NICNet) interconnects all the
state capitals and district headquarters through its network. The
NICNet in late 1999 also started offering value added network
services to facilitate and encourage EDI adoption in india. some of
the largest implementations of EDI in india, such as indian customs
port trust and apparel export promotion council use the NICNet
VAN.