BCA 6SEM ECOMMERCE

UNIT-4

4.1 BUSINESS TO BUSINESS E-COMMERCE:

READ FROM THE E-COMMERCE BOOK BY SUSHIL page no-138-156 (7.1 and 7.2)

4.1.1 INTER-ORGANIZATIONAL TRANSACTIONS

Also READ FROM ECOMM BOOK BY SUSHIL page no 156-161
Business-to-business transactions covers a variety of situations. They vary from the regular repeat
transactions. These transactions conform to differing trade cycles and are applicable to different e-
Commerce solutions:

 Electronic market
 Electronic data interchange
 Inter-organizational e-Commerce

INTER-ORGANIZATIONAL TRANSACTIONS:
Business organizations are constantly buying and selling goods and services. Shop buy
products in bulk from their suppliers and sell goods in small quantities to their customers. Manufacturers
buy raw materials or components from their suppliers, assemble them into new products and sell them,
in turn to their customers.

Components
supplier

Product
supplier
Manufactur
e/retailer
Product
supplier
Customer
Material
supplier
The Logistic Network

4.1.2 CREDIT TRADE TRANSACTIONS

THE CREDIT TRANSACTION TRADE CYCLE:

The trade cycle for inter-organizational transactions is generally a credit trade cycle.

 Pre-Sales:
Before trading starts, the two organizations need to make contact (search) and agree
trading terms (negotiate). The customer organization may go out to tender or simply contact
a firm it knows. The supplying firm may want to run credit checks on the customer. Both
organizations will need to agree the price of goods, conditions of delivery and terms of
payment.

 Execution:
Execution consists of requesting the goods (order) and then collecting or receiving them
(delivery). For most supplies, certainly those of significant value or purchased on a regular
basis, firms will have formal purchasing procedures- orders originate from a purchasing
department and often from a purchasing or stock replenishment computer application.
Goods come with a delivery note that is cross checked, manually or electronically, with the
original purchase order to complete execution stage.

 Settlement:
The supplier of the goods has to be paid and with inter-organizational transaction this
usually takes place after delivery. The supplier requests payment, say at the end of month,
(invoice) and the customer, at some stage, settles the account (payment).

 After-Sales:
In any transaction there can be problems, damaged or faulty goods, and these issues are
sorted out after phase. For items such as machinery there can be on-going process of
warrantee or maintenance (after sales).

SEARCH
PRE-SALE

NEGOTIATIE

ORDER
EXECUTION
DELIVER

INVOICE
SETTLEMENT
PAYMENT

AFTER SALES AFTER-SALE

The Credit Trade Cycle

TRADE CYCLE DOCUMENT EXCHANGE:

Each stage of the inter-organizational trade cycle is documented and both the customer and
the supplier have systems to trace the progress of the transaction. The customer will check for delivery
of the goods and will not want to pay before order entry system with stock control or production control
or production control and certainly needs to check payment against the invoices that are issued.

CUSTOMER TRANSACTION CUSTOMER

PRE-SALES CONTRACT PRE-SALES

ORDER
EXECUTION EXECUTION
DELIVERY- NOTE

INVOICE
SETTLEMENT SETTLEMENT
PAYMENT

AFTER-SALES MAINTENANCE AFTER-SALES

Trade Cycle Document Exchange

4.1.3 A VARIETY OF TRANSACTIONS:

The type of transaction that takes place and how it is executed depends on the size of the
business involved, the nature of the business, and the norms of the particular trade sector. This variety
of transactions can be typified by three classifications:

 Discrete transactions of commodity items.

 Repeat transactions for commodity items.
 Discrete transaction of non-commodity items.
These different transactions may be done electronically and can be mapped onto the three e-Commerce
technologies.

 Electronic market:
The electronic market provides an efficient search mechanism to compare commodity
product offerings and find a suitable supplier. E.g. - airline booking system.

 Electronic Data Interchange (EDI):

EDI comes into its own once the supplier has been located and terms of trade arranged. It
provides for the automation of regular repeat orders, and other standardized exchanges,
on a weekly, daily, or even hourly basis. e.g. - vehicle assembly, lab reports, and university
results.

 Internet Commerce:
In addition to the large and/ or regular purchases, organizations will be making once-off,
consumer-style purchases. e.g. - stationery purchase.

4.2 ELECTRONIC DATA INTERCHANGE(EDI)

ALSO READ FROM THE E-COMMERCE BOOK BY SUSHIL pg no 74-80(4.1 to 4.4)
Electronic data interchange is used by organizations for transactions that occur on a regular
basis in a pre-determined format. EDI is most commonly applied in the execution and settlement phases
of the trade cycle. In the execution of a simple trade exchange, the customer’s order can be sent by
EDI and the delivery notification from the supplier can also be electronic. For settlement the supplier
can use EDI to send the invoice and the customer can finish the cycle with an electronic funds transfer
via the bank and an EDI payment notification to the supplier.

The first attempt to produce a common data format was done in the 1960s by a cooperative
effort
between industry groups. The format, however, was only for purchasing, finance, and
transportation
data and it was used only for Intra industry transactions. The actual work for national Electronic
Data
Interchange (EDI) standards began in the late 1970s. The set of standard data formats was
created by
considering both users’ and vendors’ requirements. The features of the standard data formats
are:
1. It is hardware-independent.
2. It is unambiguous such that, they can be used by all trading partners.
3. It reduces the labour-intensive tasks of exchanging data.
4. It allows the sender of the data to control the exchange, including acknowledging if and
when the
receiver received the transaction

4.2.1 INTRODUCTION TO EDI

EDI definition:

“The transfer of structured data, by agreed message standards, from one computer system to
another, by electronic means”

Structured data: EDI transactions are composed of codes, values, and short pieces of text,
each element with a strictly defined purpose. For example, an order has codes for the customer and
product and values such as quantity ordered.

Agreed Message Standards: the EDI transactions have to have a standard format; the
standard is not just agreed upon between the trading partners but is a general standard agreed at the
national or international level. The purchase order will be one of a number of agreed message
standards.

From one computer system to another: the EDI message sent is between two computer
applications. There is no requirement for people to read the message or re-key it into a computer
system. For example, the message is directly between the customer’s purchasing system and the
supplier’s order processing system.

By Electronic Means: usually, this is by data communications but the physical transfer of
magnetic tape or floppy disc would be within the definition of EDI. Often networks specifically designed
for EDI will be used.
 “the INTER-COMPANY COMPUTER-TO-COMPUTER communication of STANDARD
BUSINESS TRANSACTIONS in a STANDARD FORMAT that permits the receiver to perform the
intended transaction.”

Today, a number of formats are available for EDI. The two most widely recognized and used
formats are X12 and EDIFACT.

Some of the essential elements of EDI are the use of an electronic transmission medium rather
than using physical storage systems such as magnetic tapes and disks. The EDI message is well
structured and formatted. EDI enables direct communication between applications and increases the
speed of document transfer from the sender to the receiver. It depends on a sophisticated information
technology infrastructure that includes data processing, data management, and networking
capabilities that provide efficient and reliable data transmission between remote sets.

An EDI message can be easily translated into various formats which are suitable for
application software right from controlling the production in a factory to giving future orders to the
retailers. The structure permits the trade-related operations to be automated with data, from serving
customers to the relevant department for automatic action.

The EDI process is initiated either by downloading a file or by an operator entering data into
a computer with the necessary instructions on the screen. The EDI system can send one or more orders
at a time and different companies can receive the order at the same time. Once a company sends a
message, it is transferred through a telephone line either to a Value-Added Network (VAN) or directly
to the E-Commerce and E-Business trading partner. VAN stores the received message in an electronic
mailbox and simultaneously registers the time and details in a computer. Then, the recipient checks
the received message. VAN can also be programmed to inform the recipient’s computer whenever a
new message is received.

The computer which receives the message translates it automatically to the required format.
Then, the computer transmits the message to the computer or applications software of the relevant
department. EDI automates the business communications between the trading partners.

The speed of creating invoices, purchasing orders, receiving tickets, and so on has drastically
increased with the advent of computers. Although these documents are produced by high-speed
printers, there still arises a need to burst, insert, distribute (usually mailed), and file copies of the
documents. In traditional systems, the original message had to be manually transported to the
receiver, opened, carried to the appropriate individual within the addressee organization, and
processed, which essentially means manually typing the data into a management information system.
The use of EDI removes many of these problems associated with traditional information flow.
 For example, Consider a purchase order between a buyer and a seller. By simply placing the
order or entering the information into the buyer’s computer, the data can be electronically
transmitted to the seller’s computer without re-typing the information. This process of data transfer
is called application to application EDI.

4.2.2 BENEFITS OF EDI

The Benefits of EDI:

IT SHOULD SAVE CONSIDERABLE TIME ON the exchange of business transactions and has
the potential for considerable savings in the costs. EDI can be simply used to replace paper transactions
with electronic transactions- this is the normal route taken in the initial installation of EDI. Just-in-time
(JIT) manufacture and quick response supply are prime examples of where EDI is used as an enabling
technology to gain a complete advantage

Direct Advantage of EDI:

 Shortened Ordering Time: paper orders have to be printed, enveloped, and sent out by the
customer’s post room, passed through the postal service, received by the customer’s post
room, and input into the supplier’s order processing system. To achieve all this, reliably, in less
than three days would be to do very well. EDI orders are sent straight into the network and the
only delay is how often the supplier retrieves messages from the system. Order can be in the
supplier’s system within a day or within an hour.
 Cost Cutting: the use of EDI can cut costs. These include the costs of stationery and postage
but these will probably be fully matched by the costs of running the EDI service. The principle
saving from the use of EDI is the potential to save staff costs. The obvious example is that if
the orders are direct to the input to the system there is no need for an order entry clerk.
 Elimination of Errors: keying any information into a computer system is a source of errors and
keying paper orders into the order processing system is no exception.
 Fast Response: with a paper order, it would be several days before the customer was informed
of any supply, such as the product being out of stock.
 Accurate Invoicing: just like orders, invoices can be sent electronically. EDI invoices have
similar advantages to EDI orders in saving time and avoiding errors. They can be automatically
matched against the original order and cleared for payment and cleared.
 EDI payment: payment can also be made by EDI. The EDI payment system can also generate
an EDI payment advice that can be electronically matched against the relevant invoices, again
avoiding query and delay.

Indirect Advantage of EDI:

 Reduced Stock Handling: the ability to order regularly and quickly reduces the number of
goods that need to be kept in a storeroom or warehouse at the shop or the factory. But quick
response supply systems avoid stockholding and goods being delivered only as they are
needed. Reduced cost holding cuts the cost of warehousing.
 Cash Flow: speeding up the trade cycle by getting invoices out quickly, and directly matched
to the corresponding orders and deliveries, can and should speed up payments and hence
improve cash flow.
 Business Opportunities: there is a steady increase in the number of customers, particularly
large, powerful customers that will only trade with suppliers that do business via EDI.
 Customer Lock-in: an established EDI system should be of considerable advantage to both
customer and supplier. Switching to a new supplier required that the electronic trading system
 and trading relationship be redeveloped, a problem to be avoided if a switch of supplier is not
essential.

To gain these advantages EDI has to be seen as an investment- the costs are the setup of the EDI
system (hardware, software, network) and the time required to establish agreements with trading
partners. The saving only starts when there is a significant volume of business transacted using EDI.

4.2.3 EDI TECHNOLOGY

EDI Technology:
Electronic data interchange (EDI) is the structured transmission of data between
organizations by electronic means. There are many types of EDI and approaches to enabling
EDI across a trading community. Whether looking at EDI for the first time or expanding an
existing EDI infrastructure to support business partners across the globe, there is a method of
utilizing EDI that will suit your business needs, technical capabilities, and budget. Many larger
companies adopt hybrid EDI solutions to connect with their business partners, dependent on
the size and frequency of their transactions.

Below is an outline of the different methods available:

 Direct EDI/Point-to-point
Brought to prominence by Walmart, direct EDI, sometimes called point-to-point EDI,
establishes a single connection between two business partners. In this approach, you
connect with each business partner individually. It offers control for the business partners
and is most commonly used between larger customers and suppliers with a lot of daily
transactions.
 EDI via VAN
Value Added Networks (VANs) are private networks where electronic business
documents are exchanged between partners. The VAN provider manages the network
and provides companies with mailboxes where they can send and receive EDI
documents.
 EDI via AS2
AS2 is an Internet communications protocol that enables data to be transmitted securely
over the Internet. EDI via AS2 delivers the functionality of EDI with the ubiquity of Internet
access.
 Web EDI
Unlike EDI via AS2, Web EDI conducts EDI using a standard Internet browser.
Organisations use different online forms to exchange information with business partners.
Web EDI makes EDI easy and affordable for small- and medium-sized organisations and
companies that have only occasional need to utilise such a service.
 Mobile EDI
Users have commonly accessed EDI either by a private network such as Value Added
Network or the Internet in order to send and receive EDI-related business documents.
Mobile EDI has had limited adoption, in part due to security concerns with mobile devices
across an EDI infrastructure, but mainly due to the mobile devices themselves. The
quality and size of the screen of most devices has been relatively poor until recently.
There is a growing industry for developing software applications or ‘apps’ for downloading
onto mobile devices and it will be only be a matter of time before you will be able to
download supply chain and EDI related apps from private or corporate app stores.
 EDI Outsourcing
 EDI Outsourcing (also referred to as Managed Services) is a fast-growing option that
enables companies to use external resources to manage their EDI environment on a day-
to-day basis. This is in part driven by companies wanting to integrate to back office
business systems such as Enterprise Resource Planning (ERP) platforms. Many
companies do not have the internal resources to undertake this type of work so they
outsource it instead.

EDI is also defined by its technology: the EDI standards, the EDI networks, and the EDI
software that interfaces these two elements and the business applications.
a) EDI Standards : write its contents from the notes just below on edi standards of 4.2.4
b) EDI Networks: An EDI network is simply a term that refers to a means of aggregating
your EDI communications in one readily identifiable group. This very specific definition
will become clear a bit later, the more broadly accepted definition of EDI network is
that it is an organization that enables the exchange of EDI data between parties. This
type of EDI networks is also known as an EDI VAN or EDI Service Bureau. The EDI
network in this definition is simply a business that acts as a gateway between
companies that exchange data with each other using EDI. In this model the network is
very similar in its scope to the role of the US postal service. Just like the USPS, an EDI
Network provides mailboxes where customers can pick up data and drop off data for
ultimate delivery to other companies. An EDI networks is often the easiest and most
cost effective means of getting started with EDI but quickly can become expensive if
your use of EDI increases.
c) EDI standards: Electronic Data Interchange (EDI) software creates a data exchange
between two or more computers. This software is typically used for the fast transfer of
business documents within companies and between business partners, such as
suppliers or customers. EDI software will typically translate common file types into a
unified format and/or provide templates for a standard format used in transfers. IT
teams within healthcare organizations and production businesses will typically
implement these networks to streamline and simplify daily communications and
document transfers. Companies will implement EDI tools to replace the need for email,
fax, and postal mail in many situations. These programs are often used in conjunction
with a data integration platform that collects data from multiple sources. Top EDI
softwares used in 2022 are SPS Commerce Fulfillment EDI, TrueCommerce EDI,
MuleSoft Anypoint Platform, Jitterbit, Cleo, PartnerLinQ, GoAnywhere MFT, DiCentral
EDI & Supply Chain Solutions, BizTalk360, and eZCom Software.

4.2.4 EDI STANDARDS

EDI standards:

The essence of the EDI is the coding and structuring of the data into a common and
generally accepted format- anything less is nothing more than a system of file-transfers.
The need for EDI standards: EDI provides an electronic linkage between two trading
partners. Business transaction are output from the sending computer system, transmitted or
transported in electronic format and input into the second, receiving computer system. The
computer systems that exchange data need a common format, without a common format the
data is meaningless.
 It is unlikely that each of these exchange would have its own format but it is perfectly
possible that each customer would have developed its own standards (giving each supplier
three separate standards to cope with). It is also possible that new exchange added to the
system will have requirements not envisaged when the data formats were originally agreed;
this would require a change to the existing standard or the introduction of an additional
standard. EDI standards provide a common language for the interchange of standard
transactions.

Different industries have developed their own EDI standards. One must first know the EDI
standards that their trading party is using before translating the EDI documents. The EDI standards
are designed to be independent of communication and software technology. The EDI standard
provides details about a particular document like, which piece of information is mandatory for that
document and which is optional. It also provides the rules for the structure of the document. Two
different EDI documents can follow the same standard and contain different sets of information.

EDI standards help EDI by:

(a) Providing rules of syntax

(b) Defining the data organization

(c) Providing editing rules and conventions

(d) Making available published public documentation

For example, Using the same standard, a food company may indicate a product's expiry date while
an apparel manufacturer can choose to display color and size information.

The four major types of EDI standards are:

(a) UN/EDIFACT standard is the only international standard. This standard is predominant outside of
North America.

(b) ANSI ASC×12 standard is predominant in North America.

(c) TRADACOMS standard is predominant in the UK retail industry.

(d) ODETTE standard is used in the European automotive industry.

4.2.5 EDI COMMUNICATIONS

The EDI standard specifies the syntax for the coding of the electronic document; it does not
specify the method of transmission. That can be a magnetic tape or diskette that is posted or
dispatched using a counter service, a direct data communication link, a value-added data
service (VADS), also known as a value-added network (VAN).

An EDI network is simply a term that refers to a means of aggregating your EDI communications in
one readily identifiable group. This very specific definition will become clear a bit later, the more
broadly accepted definition of EDI network is that it is an organization that enables the exchange of
EDI data between parties. This type of EDI networks is also known as an EDI VAN or EDI Service
Bureau. The EDI network in this definition is simply a business that acts as a gateway between
companies that exchange data with each other using EDI. In this model the network is very similar in
its scope to the role of the US postal service. Just like the USPS, an EDI Network provides mailboxes
where customers can pick up data and drop off data for ultimate delivery to other companies. An
EDI networks is often the easiest and most cost effective means of getting started with EDI but
quickly can become expensive if your use of EDI increases.

Benefits of the EDI Network

For a business that is just getting started with EDI, using the services of an EDI network can be a very
cost effective means of implementing EDI. With an EDI Network you will not need to worry about
implementation guidelines or about ensuring that your communications with your trading partners
are successful - that's because the responsibility of the EDI network is to ensure that your EDI data is
processed and sent as required. Most EDI networks also have services and tools available to make
use for first time EDI users more cost effective. As your use of EDI grows however you may find that
the EDI network becomes more expensive - often prohibitively so. Over time many businesses
realize that using an EDI network needs to be replaced with another solution.

Enabling your Own EDI Network

Can you become your own EDI VAN? The answer to that question is both yes and no. No in the sense
that you don't want to re-create the entire EDI network infrastructure, but yes in the sense that it
may make more sense for your business to exchange data directly with your trading partners
without involving an EDI VAN. With the right EDI and communications software you can create an
infrastructure that allows you to use new communications protocols like AS1 an AS2 to directly send
and receive EDI data without the use of a network. In the past creating this type of hub and spoke
model where your business is the hub and your trading partners are the spokes, was financially very
difficult because finding AS2 compatible software that allowed for the number of connections
necessary was difficult and expensive.

Leveraging your EDI Network Regardless of the structure you deploy, using your network efficiently
is a key aspect of implementing EDI in a way that will maximize revenue and minimize costs. Using
your network effectively can make a business significantly more profitable and viable in both good
and bad economic times.

EDI VALUE ADDED NETWORK

The vast majority of EDI still occurs via EDI VAN also known as Value Added Network. Despite the
emergence of some basic, low-cost approaches, such as Web EDI or EDI via AS2, the EDI VAN model
continues to be the preferred option due to the value- added service that EDI VAN providers can
deliver. Often companies look to implement a hybrid strategy in which different types of EDI are
implemented as appropriate to the business, but the EDI VAN remains the core to these
installations.

What is an EDI VAN?

Companies just starting off with their first EDI connections, may choose to set up direct EDI or point-
to-point connections to other EDI enabled businesses, which quickly turns into “integration
spaghetti”. Although this scenario provides great flexibility, the problem is that the cost scale is the
size of the trading community which becomes very expensive and very complex, very quickly.

To simplify the complexity of managing multiple EDI direct connections, a company can use a single
connection to an EDI VAN, which provides partner connections. The EDI VAN is simply a secure
network where EDI documents can be exchanged between a network of business partners. An
organization will be provided with a mailbox by the EDI VAN provider. Documents are sent and
received from there and the organization checks the mailbox periodically to retrieve its documents.
Most EDI VAN providers offer an alerting service that informs the sender when messages have been
sent successfully and also notifies the recipient that a new message is waiting.

Benefits of an EDI VAN

In addition to the many EDI benefits your company can realize by moving away from manual paper-
based document exchange, companies who enlist the services of an EDI VAN provider can take
advantage of additional value added services, such as:

• Secure communication channel. Electronic data transfers can be made securely using
encryption

• Full mailbox service. Messages are automatically routed to the correct mailbox. Business
partners connect to the EDI VAN to retrieve their messages
• Inspection and authentication of all EDI messages. The EDI VAN will verify the identity of the
business partner and validity of the message

• Expanded network connections. By connecting with a network of companies, a business can

quickly onboard and begin trading with new EDI-enabled partners.

• Support for a variety of protocols. Since a VAN sends data with a variety of protocols, it
creates a fast communication channel allowing each party to use the data format most suited for
their organization, which is critical for setting up a scalable business model

• Full audit trail. All EDI messages are tracked and recorded

• Message notification. Business partners are notified when message enters their mailbox

• Ancillary services. EDI VAN providers offer an extensive range of EDI VAN services including
data backup and recovery, document mapping and compliance

The Future of EDI and VAN

Each time new document exchange standards appear, discussions suggest this may be the end of
EDI. However, after over 50 years, EDI is still going strong due to its flexibility to absorb new
technologies into its networks. XML and APIs all have their place, but EDI volume continues to grow
as well. It turns out that new protocols and standards just add to the complexity requiring more
sophisticated EDI VAN services that can truly handle any-to-any connections.

The enduring appeal of the EDI VAN is based upon the value-added services that the EDI VAN
provider delivers:

• Robust, highly available infrastructure

• Real-time visibility and analytics

• Large pre-connected trading partner community

• Fast business partner on-boarding and enablement

• Back-office integration

• Management information and reporting

• Ability to upgrade to a fully managed service (EDI Outsourcing)

4.2.6 EDI IMPLEMENTATION

A Structured 10-Step Process for Successful EDI Implementation

Implementing EDI across your organization and network of business partners can be
complex. Taking a systematic approach will help you deliver an effective EDI program.

Step 1: Develop the Organizational Structure

EDI is a significant investment and developing the correct organizational structure

from the outset will pay dividends as the program evolves.
Key elements of the structure includes:

 The EDI Coordinator: An IT professional with in-depth experience in delivering EDI.

The Coordinator may come from in-house or be hired externally, depending on the
EDI experience the organization already has
 The Steering Committee: Headed by the EDI Coordinator, the committee typically
consists of department heads of affected business units, the head of IT and legal
representatives
 Senior Management Sponsor: As with any major IT program, there needs to be
senior management commitment if the EDI implementation is to be a success
 Dedicated EDI Team: The EDI team will be responsible for the actual implementation
of the system.
The EDI Coordinator, as an important part of his/her function, must stay in communication
with all sectors of the company that will be affected by the EDI program to ensure their
support and buy-in. This on-going communication is vital for educating all organizations as
to how the EDI program will benefit them and how it will impact their processes.

Step 2: Undertake a Strategic Review

This analysis identifies the most likely corporate applications for EDI deployment and
sets priorities for conversion to EDI. To this end, factors to be considered include the
number of suppliers, customers or other business partners, and the volume and type of
transactions to be exchanged. It includes a description of the present systems in each
functional area and an explanation of how EDI will improve them.

The issuance and receipt of each type of business document is based on a system of human
and machine procedures, all of which have to be documented and analyzed for EDI
efficiencies. For best results, the goal should be to improve the business cycle rather than
simply automate it.

Can EDI:

 Eliminate redundant steps from the business cycle?

 Eliminate redundant data entry?
 Reduce manual effort?
 Reduce the size of inventory?
 Improve customer service by speeding the delivery of goods?
 Improve the relationship with business partners?
 Facilitate larger business strategies, such as Just-in-Time manufacturing?
Fully answering these questions will highlight the business cycles that are likely to benefit
most from the implementation of EDI.

Step 3: Conduct In-depth Analysis

The strategic review highlights where in your organization EDI could have the most
benefit. However, there are other elements to consider before selecting which business
cycle to focus on initially.
These considerations include:

 Which part of the organization is most ready for EDI?

 Which cycle will cost the least to implement EDI?
 Which will deliver the greatest savings/increase in profitability?
Answers to these questions require a different type of analysis. Many companies use two
effective tools:

 Cost Benefits Analysis (CBA)

 The EDI Survey
The EDI survey of an organization’s customers and suppliers is to ensure that any EDI
system that is created can be supported across a wide business partner network or a
small group of high-volume, high-value business partners.

A final report can be produced covering following points need to be prepared:

 The scope of the project

 Description of strengths and weakness of existing systems
 Recommended system alternative and its capability to strengthen the company
 Required data integration and document customization
 Reference to alternatives considered but not selected
 Financial data on recommended and rejected approaches
 Timing of system development and funds needed
 List of personnel required to develop and implement the system
 Implementation schedule

Step 4: Develop a Business-Focused EDI Solution

The results of the analysis step provides an organization with the knowledge to develop
a comprehensive specification for the EDI system.

This includes:

 The volume of expected EDI traffic and the IT infrastructure needed to support it
 The capacity of internal network infrastructure to support EDI data
 The network connections needed to manage traffic with business partners
 The programming required to ensure that internal systems comply with the data
required by business partners and with EDI standards
 The amount of customization required to integrate internal and EDI systems
With this information, an EDI system can be designed. There are two particularly important
elements to an EDI system: the EDI translator and the communications model.

The EDI Translator

Usually a package licensed from an EDI software company or EDI Network provider, the
EDI Translator’s role is to interpret the EDI information it receives from the sender and
translate it into a format that the receiver can accommodate. In addition to its primary
function, an EDI Translator often has several sub-systems, including the handling of the EDI
envelopes, document management, audit trails, compliance checking and functional
acknowledgements.

The Communications Model

One of the decisions you need to make is the type of communications you will need to
connect to all your partners. There are four basic approaches:

1. Connect directly to each one — this works well for connecting to a small number of
business partners. Your organization is responsible for all mapping, translation,
technical support and reporting. As long as everyone agrees on a single connectivity
protocol, e.g., FTP over VPN, Rosetta Net, Odette FTP, AS2, a single document format
and the community size remains relatively small, this approach works well
2. Use an EDI Network provider — The EDI Network provider facilitates the exchange
of electronic documents via its “document mailbox” service. The sender connects to
the EDI Network and sends its EDI transactions to the recipient’s mailbox. The
receiver then connects to the network to receive documents in its mailbox. Use
Direct Connects for your high-volume business partners and use the EDI Network
for the rest — This approach saves the transaction fees charged by the EDI Networks
when trading with the high-volume business partners, while relying on the EDI
Network to support the high number of low-transaction volume partners.
3. Outsource the EDI program to a Managed Services provider that connects to your
entire community on your behalf — The Managed Services provider receives your
business documents directly from your ERP system (SAP, Oracle, etc.), assumes
responsibility for all the mapping, translation, technical support, data center
operations and reporting.
Step 5: Select the Correct EDI Network Provider (VAN)

Your selection of an EDI Network Provider should be focused on your business

requirements more than the provider’s technical capabilities. There are many
important issues to consider.
What do you want the EDI Network Provider to do?

What is the Provider’s reach?

What is the Provider’s pricing structure?

What is the Provider’s influence in your industry?

Will the EDI Network Provider be around tomorrow?

Step 6: Integrate EDI with the Business

For most EDI systems, the greatest development task is integrating EDI systems with
existing corporate applications. Data required by business partners and EDI standards
must be “mapped” onto data contained in existing systems.

After purchasing the necessary hardware and/or software to support your EDI solution, a
skilled EDI programming staff must next convert the requirements into reality. The staff must
be fully knowledgeable of EDI standards, in-house systems and communication protocols.
The basic tasks that need to be performed include: (1) integrating EDI with your in-house
(ERP) business systems, which means, extracting and loading data; (2) creating the EDI
documents by mapping (correlating) the extracted data to the proper segments and data
elements of the EDI transactions, as well as providing the enveloping and other necessary
data; and (3) installing and configuring the communication software for sending and
receiving documents. Each of these processes can be very complex, particularly when you
have many business partners, such as customers, each with its own requirements. That’s why
a good, technically-skilled staff is needed.

Integrating EDI with the business often highlights opportunities to re-engineer the business
process and reap further benefits.

Step 7: Integrate Data across the Business

Before integrating data across the business, you will have to undertake a good deal of
data analysis. It is wise to start this process at the ultimate destination for that data. For
example, if you wish to use EDI for your purchase orders, the first thing to do is
understand the data requirements of the order processing system.

An important reason to analyze each affected business system is to ensure its ability to share
data. Sometimes, obstacles need to be overcome, such as different business systems may
contain the same data, but in different formats.
Step 8: Undertake Data Mapping

Once the data analysis is complete and data structures understood, the ‘map’ is defined
to the EDI translation software. For most EDI software packages or VAN services, the
EDI Coordinator will be able to define the map.

The map defines how the data in the EDI transaction relates to the data in the internal system.
The EDI software stores the map, usually in tabular form. When a transaction enters the
system, the EDI Translator uses the map to determine where each incoming field goes and
whether the data needs to be reformatted.

The major goal within mapping is to avoid the need for custom interfaces as much as possible
– especially custom edits per individual business partner. The more standardized the data
formats, the better the system performance and the less need for specific programming.

Step 9: Establish a Pilot Project

Once an organization has developed and tested its EDI system to the best of its ability,
further system tests are conducted in pilot mode with selected business partners. The
EDI pilot is critical. It enables an organization to refine its own system, show the
benefits that can be achieved and ensure that it can integrate with business partners.

Organizations should set up a pilot project with a small number of business partners. The
organizations with the most EDI experience make the best pilot partners. To be successful,
the pilot must focus on one primary EDI application such as simple purchase orders.

Begin by transmitting documents to the pilot partners, who will confirm that the documents
can be processed accurately. Pilot partners then return data for testing. As each of these tests
is completed successfully, each pilot partner begins to send real orders, which tests the
capability of the system to handle daily business processing.

Paper transactions are not eliminated, however, until both business partners are completely
satisfied that the EDI system is performing well.

Pilot project results must then be analyzed from an internal perspective to answer the
following questions:

 Can the EDI system maintain adequate control?

 Does the system appear to provide the benefits projected in the original EDI study?
 Will the system handle anticipated EDI traffic?
 Are internal users satisfied with the result?

Step 10: Roll out EDI to Business Partners

If you are the initiator of the program with your business partners – for example, you
want all your suppliers to receive your purchase orders via EDI and return EDI
invoices – you must have the skilled resources to develop, manage and maintain an EDI
rollout program to your supplier community.

This includes:

 surveying your community to understand each supplier’s level of EDI readiness

 developing and implementing a community communication plan to convey your
program goals and provide education needed
 offering various EDI options, such as web-based forms or Excel-based options for
those suppliers that are not ready to integrate EDI with their back-end systems
 supporting each supplier through the start-up process
4.2.7 EDI AGREEMENT
EDI agreement is the abbreviation of Electronic Data Interchange agreement. It is an agreement that
regulates through computer the transfer or exchange of data, such as purchase order between
parties. Usually the electronic data transferred under an EDI agreement are arranged according to
an agreed standard, such as the American National Standards Institute ANSI X12 standard or U.N.
EDIFACT standard.

EDI Agreement means an Electronic Data Interchange ("EDI") agreement, that the Parties may elect
to enter into, in which the Parties agree and define the use of EDI in the purchase and sales of the
Parts under this Agreement.

EDI Agreement generally includes the following aspects:-

• Article 1: Object and Scope. This section includes the purpose of designing the EDI
agreement.

• Article 2: Definitions. This section includes definitions of terminologies to be used in the EDI
agreement.

• Article 3: Validity and formation of the contract. This section includes details regarding time
duration of contract and other protocols regarding formation of contract.

• Article 4: Processing and acknowledgement of receipt of EDI messages. This section contains
protocols for processing of EDI messages and acknowledgement format in response to EDI
messages.

• Article 5: Security of EDI messages. This section contains security procedures and measures
specifying the verification of origin, the verification of integrity, the non repudiation of origin and
receipt and the confidentiality of EDI messages.

EDI Documents

Following are the few important documents used in EDI −

• Invoices

• Purchase orders

• Shipping Requests

• Acknowledgement
• Business Correspondence letters

• Financial information letters

Steps in an EDI System

Following are the steps in an EDI System.

• A program generates a file that contains the processed document.

• The document is converted into an agreed standard format.

• The file containing the document is sent electronically on the network.

• The trading partner receives the file.

• An acknowledgement document is generated and sent to the originating organization.

4.2.8 EDI SECURITY

From book by sushil goel pg no 170-178(8.1 to 8.4)