Electronic Data

Interchange

LIPIKA BAUG
115
What is EDI ?

 Electronic data interchange (EDI) is the structured

transmission of data between organizations by electronic
means.

 It is used to transfer electronic documents or business data

from one computer system to another computer system, i.e.
from one trading partner to another trading partner without
human intervention.
How firms do business ?
The EDI process
 The National Institute of
Standards and Technology in
a 1996 publication defines
electronic data interchange
as "the computer-to-
computer interchange of
strictly formatted messages
that represent documents
other than monetary
instruments.
 EDI Software

 EDI software consists of computer instructions that translate the

information from company-specific format to the structured EDI
format, and then communicates the EDI message.

 EDI software also receives the message and translates from

standard format to company specific format. Thus the major
functions of the EDI software are data conversion, data formatting
and message communication.
 EDI solutions can be broadly configured into
four categories:

i) Stand-alone EDI converter software on PC which generate data with

the help of data entry forms or screens.

ii) Front-end of EDI gateway - connects EDI PC to the existing in-house

computer and helps import/export flat-files into/from the application
software.

iii) EDI software co-hosting on in-house mainframe - Application

program interface with EDI using API or FPI

iv) Value Added Networks (VANs)- Using the EDI conversion and
communication facility provided by third party called as Value Added
Networks (VANs).
EDI Gateway
Advantages of EDI

Operation
Tactical
Strategic
Operation

 Lowering Operating Cost - EDI replaces paper transactions with

electronic transmissions, saving time and reduced cost of business
transaction and enabling the automatic processing of documents.

 Reduced Error and Increases Business Information Accuracy -

With the implementation of EDI, there is no need for re-entering
data, thus reducing the risk for human error.

 Increase Productivity - Making person more efficient and it

improves business capabilities by speeding up throughout.

 Increase Security - Data security and control are maintained

through out the transmission process using passwords, user
identification and encryption.
 Tactical

 Inventory Control - EDI can directly and indirectly helps

organizations improve their inventory control. Fact and accuracy
permits better managing on stock balance, stock in-and-out, stock
handling etc.

 Distribution - Improving delivery of services and goods by

reducing order and delivery time and increase the reliability of
meeting targets.

 Accounting - EDI facilitated financial processes and potential in

providing faster reconciliation or elimination of tasks, auditing,
checking and improving cash flow.
 
 Strategic
 Faster Trading Cycle - EDI allows faster and streamlining trading cycle
between organizations  leading to improved relationships between trading
partners.

 Marketing Competitiveness - With the use of EDI, buyer and customer

can easily search for product description, specification, prices and
availability. The use of computers to obtains information is replacing the
use of telephone and catalogues.

 Better Quality Control - Quality control has becoming a key thrust for
progressive organizations. With EDI, customer have more accurate
information on the progress of their orders. Suppliers are given more
specification, inventories are better managed, wastage being minimized.
The Risks and Disadvantages involving
in the use Of EDI
 Trading Partners Involvement - Highly dependence on the
participation of trading partners. It is extremely difficult to get a
high level of supplier compliance. EDI will be a meaningless if your
trading partner didn't get involve using EDI system effectively.

 Costly for smaller companies - Many small companies are facing

resources problems in getting starter with the initial
implementation of EDI system. It is beyond the resources these
companies to invest tens or hundreds of thousands of dollars in
setting and implementation costs, as well as weeks of personnel
training, to get an EDI system running.
The Risks and Disadvantages involving
in the use Of EDI
 Difficult to agree on standard used - Even though there are
widely-accepted and widely-used standards, there are no
ways to force trading partners to accept these standards.
Cooperation between trading partners is needed in order to
develop a common rules to avoid differ in interpretation.