ELECTRONIC DATA INTERCHANGE

Defining EDI. EDI Layered Architecture. EDI implementation. Financial EDI Benefits of EDI.

Definition
Electronic Data Interchange (EDI) is a set of standards for structuring information that is to be electronically exchanged between and within businesses, organizations, government entities and other groups, without human intervention. An inter-company, application-to-application communication of data in standard format for business transactions.

EDI Layered Architecture

EDI Semantic Layer EDI Standard Layer Application Level Services EDIFACT business form standards. ANSI X12 business form standards. E-mail-X.435,MIME P2P-FTP,TELNET WWW-HTTP Dial-up-lines, Internet, I-way.

EDI Transport Layer

Physical Layer

Working of EDI
EDI just seeks to take a form from a business application, translates that data into a standard electronic format, and transmit it. At the receiving end, the standard format is untranslated into a format that can be read by the recipients application. Hence output from one application becomes input to another through computer-to-computer exchange of information.

Implementation Of EDI
EDI implementation starts with the agreement between company and its trading partner. The two parties decide which standard will be used, the nature of information to be exchanged, the network carrier, and the mode of transmission. An efficient EDI system would take the input only once and will manage the rest without intervention of trading partners application and with no additional steps to slow the process. EDI relies on the use of standards for the structure and interpretation of electronic business transaction.

EDI Implementation includes:

Common EDI standards which dictates syntax and standardize on the business language. It basically specify transaction sets-complete sets of business transaction (invoice, a purchase order etc). Trading partners must use a common standard, to reduce errors and ensure accurate translation of data, regardless of the computer system involved. Translation software sends message between the trading partners, integrates data into and from existing computer applications, and translates among EDI message standards.

 Trading partners are a firms customer and suppliers with whom business is conducted. Banks to facilitate payment. EDI value added network services VAN is a third party service provider that manages data communications networks for businesses that exchange electronic data with other businesses.

EDI is different from Electronic Mail In EDI there is no human involvement in the processing of the information as the interface has software-tosoftware orientation. The data is structured in a softwareunderstandable way. Where as, In Electronic mail data is not necessarily structured and a human-to-software interface is involved at a minimum of one end of the interchange.

Financial EDI
Financial EDI comprises the electronic transmission of payments and remittance information between a payer, payee, and their respective banks. This deals with the B2B payment methods. It replaces the labor-intensive activities associated with finance through the automated banking system and eliminates the delays inherent in such processes (like issuing, mailing and collecting checks). Improves the certainty of the payment flows between the two involved parties.

Types Of Financial EDI

Wholesale or B2B payments is accomplished by using Checks, EFT and automated clearinghouses (ACH). Bank Checks: Checks are instrument for debit transfers where payees collect funds from payers. Electronic Funds Transfer: EFT are credit transfers between the banks where funds flows directly from the payers bank to the payees bank. These are instantaneous payments. Businesses use EFT when timeliness and certainty of payments are paramount. These on-line transactions are carried out on private network.

Automated Clearinghouse (ACH): ACH transfers are used to process high volumes of relatively small payments for settlement in one or two business days. It provides preauthorized credits, such as direct deposit of payrolls and preauthorized debits, such as repetitive bill payments. Business use ACH credit transfers to pay for goods or services and to make tax payment to government.

BENEFITS OF EDI
EDI saves a company money and time by providing an alternative to, or replacing information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc. Makes possible to business in Global Marketplace as it overcomes the problem of different time zones. Allows to cope up with growing avalanche of paperwork like purchase orders, invoices, confirmation notice, shipping receipts, and other documents by more work automation to occur.

 Introduced a highly competitive electronic commerce environment as many retailers and manufactures can now easily recognize and meet their customers need much faster than the past. EDI minimize the time companies spend to identify and resolve interbusiness problems. Many problems come from data-entry errors which could be eliminated by EDI. Improve customer services by enabling the quick transfer of documents and a marked decrease in errors.