Electronic Data interchange:

Concept, Components &

Communication Process

B2B Tool - EDI

Communication Tool used handle B2B
traffic.
It allows one computer system to
communicate with another computer
system using a standardized electronic
form.
Information exchange can be: Transaction data.
Request for quotes.
Order acknowledgement.

Components of EDI
Interbusiness:
Transmission of data between businesses.
Most companies using EDI, use third part
service provider or Value Added Network
(VAN).

Computer-to-Computer
Providing online links between buyers and
sellers business application.
Delivery of information is done using
electronic transactions.

Components of EDI
Standard Transaction:
Electronic version of standard business form
EDI handles standard business transaction in
machine readable form.

Standard Format:
Transaction must be transmitted in predefined
form.

Traditional Commerce flow

between buyer and seller
Initiate purchase
request

Finance

Finance

Purchasing

Mailroom

Mailroom

Inventory/
Warehousing

Receiving

Buyers Side

Shipping

Sales

Production
Sellers Side

Information flow between buyer and

seller
with EDI
Internal
Files

Initiate purchase
request
1

Finance

Purchasing
Application

Finance

Payment

Internal
Files

Invoice

Application
Files

EDI

EDI

Application
Files

Order
Processing
Application

4
Inventory/
Warehousing

Receiving

Buyers Side

Shipping

Production

Delivery

Sellers Side

Advantages of EDI
Cost reduction and time savings
Improved B2B problem resolution
Accuracy with Integrity

Drawbacks
It is expensive and requires huge
investment to launch and maintain
technology.
It is point to point. Every contact requires
special hardware and software
It requires expensive VAN networking.
It is not easy to use, learn or implement.

Justify EDI
Volume of data.
Frequency of document transmission and
reception.
Content sensitivity.
Time sensitivity.