Unit II

E-Business and Applications

 What is E-Business?
• E Business is known as Electronic Business.
• E-Business is the conduct of business on the Internet.
• It has broader implications because it refers to not only buying and selling
but also servicing customers and collaborating with business partners.
• E-Business means connecting critical business systems directly to
customers, vendors and suppliers- via the Internet, Extranet and
Intranets.
• One of IBM’s most important inventions wasn’t an invention at all. It was
a game changing insight, which company famously coined “E-
BUSINESS” in October 1997.

There are two types of e-business, which are:

● Pure-Play: The business which is having an electronic existence only. Example: Hotels.com
● Brick and Click: The business model, in which the business exists both in online i.e. electronic
and offline i.e. physical mode.
⮚It includes wide spectrum of
activities like processing
payments, supply chain
management, customer
relationship
management ,sharing
information, etc.
 Key Differences Between e-commerce and e-business

The points presented below are substantial so far as the difference between e-commerce and
e-business is concerned:

1. Buying and Selling of goods and services through the internet is known as e-commerce.
Unlike e-business, which is an electronic presence of business, by which all the
business activities are conducted through the internet.
2. e-commerce is a major component of e-business.
3. e-commerce includes transactions which are related to money, but e-business includes
monetary as well as allied activities.
4. e-commerce has an extroverted approach that covers customers, suppliers,
distributors, etc. On the other hand, e-business has an ambivert approach that covers
internal as well as external processes.
5. e-commerce requires a website that can represent the business. Conversely, e-business
requires a website, Customer Relationship Management and Enterprise Resource
Planning for running the business over the internet.
6. e-commerce uses the internet to connect with the rest of the world. In contrast to e-
business, the internet, intranet and extranet are used for connecting with the parties.
 Significance of E-Business
• Lower cost
• Convenience
• Speed
• Global Access
• Expansion of market
• Greater business visibility
• Elimination Of Middlemen
• Maximize customer relation and improve
responsiveness.
 Launching an E-Business
1.Identification of a product or service to sell
2.Evaluate idea
3.Obtain product
4.Prepare business plan
5.Naming business, creating logo
6.Registration of business
7.Setting up business
8.Understanding SEO
9.Building the store
10.Preparing the launch
11.Post Launch- Customer, marketing store
1. Identification of a product or service to sell

There are several things you need to consider when deciding what your product offering will be.
You will want to find something that has a large global demand, high margins and can be easily
warehoused and fulfilled.

Pick something that you will be interested in, because you’re going to have to invest a lot of time
and energy if you plan on launching a successful e-commerce website. The more enthusiastic you
are, the easier it will be.

2. Evaluate idea

The first step in evaluating a business idea is to evaluate the overall need for the service or
product.

Evaluating an idea involves careful examination of the feasibility, the uniqueness, market
analytics, and costs involved in launching and maintaining the business.
3. Obtain Product

Ideas are of no use if they are not put into practice.

You might have a great idea and an endless source of website traffic, but if your
manufacturer can’t keep up with demand, you are dead in the water.

Feasibility and sustainability are the key parameters for choosing the manufacturer or a
service provider.

Balancing demand and capacity are also the deciding factors for the success of several e-
business.
4.Prepare business plan

Your business plan is the foundation of your business. It’s a roadmap for how to structure, run, and
grow your new business.

You’ll use it to convince people that working with you — or investing in your company — is a smart
choice.

A business model is a plan for the successful operation of a business , identifying sources of revenue,
the intended customer base , products and details of financing.

A business model is a description of the how company creates ,delivers and captures value for itself
as well as customer.

A business model for anew enterprise should cover projected start-up costs and sources of
financing ,the target customer base for business, marketing strategy ,expenses ,revenue ,etc.

5.Naming Business and creating a logo


If you want to start a successful business, you need a brand that connects with your persona.

It’s not easy to pick the perfect name.

You’ll want one that reflects your brand and captures your spirit. You’ll also want to make sure your
business name isn’t already being used by someone else.

Your brand name needs to be not only memorable and appealing to your target audience, but it also
needs to be available in the form of a domain name and social media handles.
 6. Registration of your business

Choose a business name and register your company. There are legal protections and tax benefits for
incorporating, so don’t skip it.

Get Your Business Licenses

Operating an online store does not exclude you from needing certain business licenses and
permits. Check with your city, country, and state to see what sorts of sales tax licenses you need,
and get those approved before you start operating.

7.Setting up business
•
Here setup business means to set up the website for business.
•
To get your website up and running, you’ll need to purchase web hosting, which is typically
offered by the same companies that provide domain registration. Hosting gives your website a
place to live on the Internet.
8. Understanding SEO (Search Engine Optimization)
• Before you jump into building store, you should understand the basics of search engine
optimization so that you can properly structure your site and pages for Google and other
search engines.
• Ranking in the first search results for targeted commercial search queries is the
outcome of a detailed Ecommerce SEO strategy.
• Efficient Ecommerce SEO process requires performing periodical site audits
“weekly or twice a month” to uncover and to handle technical SEO issues to
avoid losing achieved higher ranking on search results or providing poor user
experience.
• Ecommerce link building is a tough challenge as not many websites or blogs are
willing to refer to a website consists of products rather than valuable related
content.
• Despite how challenging it is, link building is essential for your Ecommerce SEO
strategy as it increases and demonstrates your e-commerce website authority to
search engines to improve ranking in targeted search result and to earn referral
traffic.
9. Building the store

• There are many crucial elements to consider.

• Whatever design you chose needs to be compatible with your
ecommerce software, too.
• There are literally hundreds of ecommerce shopping cart platforms.
• Choosing the right ecommerce software is not easy.
• You need to carefully evaluate things like loading speed, features,
compatibility with different payment gateways, compatibility with
your business structure, your web developer skills, SEO-friendly
features, and more.
• Setting up your online store is much more than adding your
products and content.
10. Preparing the launch
• As you prepare for the launch of your new business, there are several shipping and
fulfillment elements you need to prepare for.
• Do not wait until you think it is perfect to launch. You are going to need to constantly
split-test and make changes -- it’s never going to be perfect.
• To prepare a launch of the website you need to be prepared with some things prior
like the products to be loaded, some reviews of the product or service , then the
notifications, FAQs , etc.

11. Post Launch- Customer, marketing store

• Once you launch your site, you’ll want to make sure people know about it. The best
way to do that is with a marketing plan.
• Now that you’ve launched, the hard work of marketing your products begins.
• While many new store owners should consider selling their physical products in
person, the rest of digital marketing rests on doing one thing well: driving targeted
traffic.
• Now this is the time for marketing the store , driving the traffic and converting the
traffic to sales.
Phases of Launching an E
business
Identification of
product or
service to sell

Screening a
manufacturer
or a service
provider

Business Model

Brand decisions

Developing and
launching the
website
 DATA WAREHOUSE
• The concept of data warehousing was introduced in 1988 by IBM
researchers Barry Devlin and Paul Murphy.
• The need to warehouse data evolved as computer systems became
more complex and handled increasing amounts of data.
• Data warehousing is the electronic storage of a large amount of
information by a business or organization.
• Data warehousing is used to provide greater insight into the
performance of a company by comparing data consolidated from
multiple heterogeneous sources.
• A data warehouse is designed to run query and analysis on historical
data derived from transactional sources.
• Once the data has been incorporated into the warehouse, it does not
change and cannot be altered since a data warehouse runs analytics on
events that have already occurred by focusing on the changes in data
over time.
• Warehoused data must be stored in a manner that is secure, reliable,
easy to retrieve and easy to manage.
• There are certain steps that are taken to create a data
warehouse. 
• The first step is data extraction, which involves gathering
large amounts of data from multiple source points.
• After the data has been compiled, it goes through data
cleaning, the process of combing through the data for errors
and correcting or excluding any errors found.
• The cleaned-up data is then converted from a database
format to a warehouse format.
• Once it’s stored in the warehouse, the data goes through
sorting, consolidating, summarizing, etc. so that it’s more
coordinated and easier to use.
• Over time, more data is added to the warehouse as the
multiple data sources are updated.
 CRM
• CRM stands for customer relationship management.
• It's a category of integrated, data-driven software solutions that
improve how you interact and do business with your customers.
• CRM systems help you manage and maintain customer
relationships, track sales leads, marketing, and deliver
actionable data.
• One important aspect of the CRM approach is the systems of
CRM that compile data from a range of different communication
channels, including a company's website, telephone, email, live
chat, marketing materials and more recently, social media.
• Through the CRM approach and the systems used to facilitate it,
businesses learn more about their target audiences and how to
best cater to their needs.
 ECRM
• The ECRM or electronic customer relationship management coined
by Oscar Gomes encompasses all standard CRM functions with the
use of the net environment i.e., intranet, extranet and internet.
• Electronic CRM concerns all forms of managing relationships with
customers through the use of information technology (IT).
• Electronic customer relationship management (E-CRM) is the
application of Internet-based technologies such as emails, websites,
chat rooms, forums and other channels to achieve CRM objectives.
• It is a well-structured and coordinated process of CRM that
automates the processes in marketing, sales and customer service.
• An effective E-CRM increases the efficiency of the processes as well
as improves the interactions with customers and enables businesses
to customize products and services that meet the customers’
individual needs.
• Electronic customer relationship management provides an avenue for
interactions between a business, its customers and its employees through Web-
based technologies.
• The process combines software, hardware, processes and management’s
commitments geared toward supporting enterprise-wide CRM business
strategies.
• Electronic customer relationship management is motivated by easy Internet
access through various platforms and devices such as laptops, mobile devices,
desktop PCs and TV sets.
• It is not software, however, but rather the utilization of Web-based technologies
to interact, understand and ensure customer satisfaction.
• A typical E-CRM strategy involves collecting customer information, transaction
history and product information, click stream and contents information.
• The benefits of E-CRM include the following:
 Improved customer relations, service and support
 Matching the customers' behavior with suitable offers
 Increased customer satisfaction and loyalty
 Greater efficiency and cost reduction
 Increased business revenue
SUPPLY CHAIN
MANAGEMENT
 SUPPLY CHAIN MANAGEMENT
• Supply chain management is the management of the flow of goods
and services and includes all processes that transform raw materials
into final products.
• SCM represents an effort by suppliers to develop and implement
supply chains that are as efficient and economical as possible. 
• Supply chains cover everything from production to product
development to the information systems needed to direct these
undertakings.
• A supply chain is the connected network of individuals,
organizations, resources, activities, and technologies involved in the
manufacture and sale of a product or service.
• A supply chain starts with the delivery of raw materials from a
supplier to a manufacturer and ends with the delivery of the
finished product or service to the end consumer.
• IT systems play a crucial role in SCM as a key enabler of supply chain
integration(SCI).
• SCM can utilize e business concepts and web technologies to bring the
organization upstream and downstream.
• In SCM, the supply chain manager coordinates the logistics of all aspects
of the supply chain which consists of five parts:
 The plan or strategy
 The source (of raw materials or services)
 Manufacturing (focused on productivity and efficiency)
 Delivery and logistics
 The return system (for defective or unwanted products)
• Benefits of SCM:
 Improvement of delivery dependability and customer orientation
 Reduction of stocks
 Decrease of processing time
 Avoidance of bullwhip effect
Enterprise Resource Planning(ERP)
• ERP stands for Enterprise Resource Planning and refers to software and
systems used to plan and manage all the core supply chain,
manufacturing, services, financial and other processes of an
organization.
• ERP stands for Enterprise Resource Planning and refers to software and
systems used to plan and manage all the core supply chain,
manufacturing, services, financial and other processes of an
organization.
• ERPs connect every aspect of an enterprise. An ERP software system
allows for better performance and project management that helps plan,
budget, predict and accurately report on an organization’s financial
health and processes.
• The main purpose of an ERP system is to increase organizational
efficiency of an organization by managing and improving how company
resources are utilized.
• Improving and/or reducing the number of resources necessary without
sacrificing quality and performance are keys to effectively improving
business growth and profitability.
• Instead of standalone databases with an endless
inventory of disconnected spreadsheets, ERP
system bring order to the chaos.
• With a secure and centralized data repository,
everyone in the organization can be confident that
data is correct, up to date and complete.
• Other common ERP features include a portal or
dashboard to enable employees to quickly
understand the business performance on key
metrics.
Business Models
 Brick and Mortar Model

• "Brick and mortar” refers to a business that has at least one

physical location that customers can visit. 
• A brick-and-mortar is any physical storefront that sells goods
and services directly to customers.
• It involves face to face customer employee interaction and is
called as high contract service.
• Customers are able to experience the joys of shopping on real
time basis as they get to try and sample the product before
purchase.
• Coffee shops, bank branches, grocery stores, clothing outlets at
the mall—these are all examples of brick-and-mortar stores.
 Benefits of Brick and Mortar Business
• Touch & feel experience
• Customer Information
• Customer Service
• Local in Nature
• Trust
• Suitability
• Low barriers to entry and exit
Challenges of Brick & mortar
• Limited Reach
• High Investments
• Changing consumer trends
• Unorganized
• Pricing
 Brick and Click Model
• It's a business model used by merchants to operate both an online store and a physical
retail outlet.
• In other terms, the retailers give their customers both an online and offline channel to do
their shopping.
• If we look that the current trends, it's justifiable to say that the e-commerce industry is
tremendously gaining traction.
• On the other hand, it has been a must priority for most retailers to have physical
premises. 
• The bricks-and-clicks business model helps appeal to customers who prefer the experience
of shopping at physical locations near them. At the same time, it offers your business the
potential to boost sales and expand globally through your company's website or mobile
app.
• Some examples:
• Nykaa
• Lenskart
• Pepperfry
 Benefits of Brick and Click
• Improving Sales
• Higher margins
• Improvement in Consumer’s satisfaction
• Better Data collection
• Enhanced Productivity
 Pure Online
• Business model that works exclusively through the Internet.
• Companies that only operate online can sell products at a
greater discount to customers because they have fewer
operational costs.
• Pure-play companies have to invest more money, time and
effort in marketing than a hybrid businesses. 
• Some Examples:
• BookMyShow
• Firstcry
• Myntra
• Snapdeal
• Flipkart
 E Business Applications
• E Procurement
• E Communication
• E Auction
• E delivery
• E Trading
 E Procurement
• E-Procurement or electronic procurement refers to the process of
purchase and sale of goods or services through electronic
methods, primarily the Internet.
• Organizations are increasingly opting for e-Procurement platforms,
realizing its potential to curb irregularities and unnecessary costs.
•  Organizations invest a lot of resources in the process of procuring
goods, services and raw materials. So, an efficient and stream lined
procurement process is a huge advantage for businesses.
• An e-Procurement solution can automate the whole process, thus
saving the organizations from the hassle and irregularities involved
in manual procurement. e-Procurement portals are designed for
users to register as a buyer or supplier, submit all the relevant
documents online and take part in the tendering process that
follows.
Components of E Procurement

• The e-Procurement suites may differ on the basis of what they offer
to the user. The main components of a typical e-Procurement suite
are the follows-

1.Indent Management
2.RFX Creation
3.Bid Submission
4.Bid Opening and Evaluation
5.E-Auction
6.Vendor Selection and Finalization
7. Vendor and Contract Management
1. Indent Management:
• This process is basically the first step involved in e-tendering. Indent creation or
the creation of requisition is undertaken, followed by its evaluation and approval.
• It is also considered as the workflow involved in the preparation of tenders
and procuring departments defining their indenting process.
• In e-procurement, the complete works are submitted and acquired by means
of internet.

2. RFX Creation
• RFX is a catch-all term for terms like Request For Proposal (RFP), Request
For Information (RFI), Request For Bids (RFB) and Request For Quotes
(RFQ).
• This step involves the creation of RFX and formulation of technical and
commercial qualification criteria. The RFX is then published and the
prospective bidders are invited.
3. Bid Submission
• The interested bidders then register themselves on the e-
Procurement portal where they submit their bids which contain all
detailed account of their technical as well as commercial
qualifications.

4. Bid Opening and Evaluation

• The practice of e-auction happens at this stage where, once the bids
are successfully submitted, they are evaluated and the vendors are
scrutinized for their authenticity.
• All the submitted details are checked for their authenticity and
compatibility.
• Thereafter, the shortlisted vendors are invited for e-Auction.
5. E Auction
• The e-Auction is then carried out for procuring the goods
or services under consideration.
• E-Auction too can be of several types depending on the
specific requirements.

6. Vendor Selection and Finalization

• After the e-Auction, according to the requirement, one or
more vendors are finalized and the Purchase Order issued.
• This step concludes the procurement process.

7. Vendor and Contract Management

• This additional module is included to manage and catalog
the vendors and to evaluate their services.
 How e-Procurement helps?
• The salient benefits of e-Procurement have been listed below:

1. e-Procurement leads to considerable reduction in the time involved in the

procurement process.
2. A great deal of transparency results due to a successful implementation of
such platform.
3. An e-Procurement platform can drastically increase the market reach for
both buyers as well as suppliers.
4. e-Procurement can tackle the malpractice of cartel formation to a great
extent.
5. It ensure safety of all the information being provided by users. This data
safety is at times compromised in the manual procurement process.
6. Lastly, as e-Procurement platform reduces and simplifies the steps
involved, it also leads to a significant cost cutting.
 E Communication

• Communication using electronic media known as electronic communication. Such

communication allows transmission of message or information using computer systems,
fax machine, e-mail, telephone or video conferencing and satellite network.
• People can easily share conversation, picture, image, sound, graphics, maps, interactive
software and thousands of things for the development of electronic communication.
• Due to electronic technology, jobs, working locations and cultures are changing and
therefore people can easily access worldwide communication without any physical
movement.
• Electronic communication can be classified into different types like messaging, voice call,
e-mail, social media, etc. We know that e-communication has changed due to the way
public interact and communicate with each other for different purposes like personal or
business. By using this, it is very simple to communicate with the world
• Types of Electronic Communication
E mail
Messaging
Blogging
Video chat
Social Networking
 Advantages of E Communication
1. Speedy transmission: 
It requires only a few seconds to communicate through electronic media because it
supports quick transmission.
2. Wide coverage:
 World has become a global village and communication around the globe requires a
second only.
3. Low cost: 
Electronic communication saves time and money. For example, Text SMS is cheaper
than the traditional letter.
4. Exchange of feedback: 
Electronic communication allows the instant exchange of feedback. So
communication becomes perfect using electronic media.
5.  Managing global operation: 
Due to the advancement of electronic media, business managers can easily control
operation across the globe. Video or teleconferencing e-mail and mobile
communication are helping managers in this regard.
 Disadvantages of E Communication

1. The volume of data:

The volume of telecommunication information is increasing at such a fast rate that
business people are unable to absorb it within the relevant time limit.
2. The cost of development:
Electronic communication requires huge investment for infrastructural development.
Frequent change in technology also demands further investment.
3. Legal status:
Data or information, if faxed, may be distorted and will cause zero value in the eye of
law.
4. Undelivered data:
Data may not be retrieved due to system error or fault with the technology. Hence
required service will be delayed.
5. Dependency:
Technology is changing every day and therefore poor countries face the problem as
they cannot afford the new or advanced technology. Therefore poor countries need to
be dependent towards developed countries for sharing global network.
 E AUCTION
• An online Auction is a service in which auction users or
participants sell or bid for products or services via the Internet.
• Virtual auctions facilitate online activities between buyers and
sellers in different locations or geographical areas.
• Online Auctions mirror traditional auctions and usually involve
multiple bidder participation.
• Online Auctions include B2B,B2C and C2C auctions.
• eBay is the best example of an auction site.
• Types of Auction
• Forward Auction/Regular
• Reverse Auction
• English
• Dutch
• Japanese Auction
• Multi-lot Auction
• Forward Auction
 Forward auctions allow you to create your own marketplace for your goods to
increase sales.
 Bidders compete in real-time until the auction is complete, guaranteeing good
value for the Supplier. The item is awarded to the highest Bidder.

• Reverse Auction
 Buyers make requests for goods or services and suppliers then place bids that
reflect the amount they are willing to be paid for providing the goods or
services.
 Once the auction is complete the Supplier with the lowest bid wins.

• English Auction
 It is the most preferable format of an auction. In the whole process, the seller
will set a minimum bidding amount and buyers start bidding.
 The price increases with every new bid by a fixed increment set by the seller.
 Every bidder knows about the price being bid and the highest bid amount
accepted by the seller will be the winner.
• Dutch Auction
 In this auction process, buyers will set the lowest bidding amount. Once
a supplier accepts the first bid, the amount keeps on increasing at a pre-
defined interval.
 This auction is a bit private as there is less transparency. Suppliers will
not see all the activities done by the bidders until the first bid is placed
and the auction result is finalized.
 If there is a need to set-up an auction for a small period with a limited
number of suppliers then Dutch Auction can be a good option.
• Japanese Auction
 This is a variant of the English auction.
 With this type of auction, once bidding commences, no new bidders are
permitted to take part.
 When the price of the item increases, bidders must bid in response, or
else drop out of the auction.
 The auction ends either at a set time, or when all but one bidder has
dropped out.
 The winner is the highest bidder, who pays the amount of their final bid.
• Multi Lot Auction
 During a Multi-lot Auction the Supplier will list multiple identical
items, or lots, to multiple Buyers.
 Winners are determined by sorting all the bids from highest to lowest.
 The winners’ then pay the lowest amount they bid over the Reserve.
 Bidders’ are entitled to refuse lots if they aren’t given the quantities
they requested.
 Bidders’ with higher bids are given priority when allocating lots.
 If there are more successful Bidders than lots the Bidders who
submitted first will be awarded the items.
 E Delivery

 The E-delivery is your secure and central mailbox for electronic

documents.
 Once you have registered with an electronic delivery service, you can
securely receive documents from different authorities and companies
(purchase contracts, policies etc.) through your free electronic mailbox.
 When an electronic document for you reaches your delivery service, you
will be notified by e-mail or SMS.
 You can then download, view, forward, print or archive the document.
 Benefits of E delivery

• Free electronic mailbox

• Guaranteed SPAM-free
• Secure and confidential
• 24 hours a day, 7 days a week available
• No "yellow notes"
• Worldwide reachable
• Documents can be stored electronically
• Shortened process times
 E Trading

• Online trading in securities refers to the facility of

investor being able to place his own orders using the
internet trading platforms offered by the trading
members viz., the broker.
• The orders so placed by the investor using internet
would be routed through the trading member.
• It is continuously growing and has a huge market
potential.
• Online trading started in India in February 2000 when
a couple of brokers started offering an online trading
platform for their customers.
 Advantages of E trading

•  Lower Fees
 One of the clearest advantages of online trading is the reduction in transaction costs
and high fees associated with traditional brick-and-mortar brokerage firms.
• More control and Flexibility
• Time is often of the essence when you trade stocks, so the speed of using online
trading portals is a benefit to many investors.
• With online trading, you can execute a trade almost immediately.
• Ability to Avoid Brokerage Bias
• By taking trading into your own hands, you can eliminate brokerage bias. Bias
sometimes occurs when a broker gives financial advice that benefits the broker — such
as in the form of a commission for selling specific mutual funds and other products.
• This kind of biased advice can be troublesome for any investor and might even lead to
investment decisions that are good for the broker but bad for you.
• Access to Online Tools
• In the world of online trading, a lower cost does not necessarily mean
a shoddy product.
• Many of today’s online trading companies offer customers an
impressive suite of tools to help optimize trades.
• For example, sites such as Trade King, Interactive Brokers and Motif
offer a robust selection of tools designed to give customers immediate
access to valuable information, including interactive investment
performance charts 
• Option to Monitor Investment in Real Time
• Many online trading sites offer stock quotes and trade information that
make it easy for people to see how their investments are doing in real
time.
• Companies such as Scot trade and Trade King, for example, offer
customers access to streaming data.
• You get real-time quotes, stock market news and more.
 DIS-Advantages of E trading

• Easier to Invest Too Much Too Fast

• Because online trading is so easy — you basically push a button — there is the risk of
making poor investment choices or overinvesting.
• The Securities and Exchange Commission warns investors that although it takes just a
nanosecond to make a trade, real investment decisions require time.
• Investors who are not used to fast-moving markets can get caught up in the excitement.
Before they know what hit them, they can end up losing a lot of money.

  No Personal Relationship With Brokers

• By and large, online traders are on their own.
• They don’t have a broker to help them navigate the uncertain waters of the stock market.
• From getting help on how to create an investment strategy to understanding how the results
of feedback mechanisms affect the market, online traders are left to their own devices.
• For some, this kind of autonomy can be unsettling.
• Addictive Nature
• Trading stocks can be like gambling for some people.
• The trader speculates on the result of something — such as a company’s
performance — and then bets money that the speculation will be correct.
• Online traders can experience a certain high when trading that is similar to what
people experience when gambling, according to a recent study on excessive
trading published in the journal Addictive Behaviors.

 Internet- Dependent
• The nature of online trading means that, ultimately, you’re at the mercy of your
internet connection.
• If the internet connection is too slow or is interrupted, you can lose out on a
potentially important or lucrative trade.
 Electronic Data
INTERCHANGE(EDI
)
 EDI
• Electronic Data Interchange (EDI) is the computer-to-computer exchange of business
documents between trading partners.
• EDI allows one company to send and receive information from another company
electronically and in a standardized format, thereby enabling paperless
communication.
• EDI replaces postal mail, fax, and email to connect directly to business systems.
• Business documents –
• These are any of the documents that are typically exchanged between businesses.
The most common documents exchanged via EDI are purchase orders, invoices
and advance ship notices. But there are many, many others such as bill of
lading, customs documents, inventory documents, shipping status documents
and payment documents.
• Standard format–
• Because EDI documents must be processed by computers rather than humans, a
standard format must be used so that the computer will be able to read and
understand the documents.
• A standard format describes what each piece of information is and in what format
(e.g., integer, decimal, mmddyy).
• Without a standard format, each company would send documents using its
company-specific format and, much as an English-speaking person probably
doesn’t understand Japanese, the receiver’s computer system doesn’t understand
the company-specific format of the sender’s format.
Here is an example of what a typical manual business transaction & EDI would look like:
What is an EDI Transaction?

• Essentially, an EDI transaction is just another term for a standardized business document.
• Companies and trading partners exchange these documents using EDI standards to
automate and streamline purchase orders, invoices, acknowledgments, payments,
tracking, and other reports.
• Any EDI transaction document must contain a certain minimum amount of vital data.
Without these requirements, an EDI document becomes useless.
• Adhering to strict EDI formatting rules helps define precisely how and where each part of
data on the document will be found and used.
• Each document is assigned one of dozens of transaction numbers from the EDI public
format.
• For example, a purchase order (PO) is given the EDI transaction number 850 and the
invoice transaction number is 810. So, when an EDI translator receives an EDI 850 PO
document, it instantly recognizes the order number, the company name of the buyer,
items in the order, and the price per item.
 EDI Standards
• Data interchange works depending on which EDI standards are required to format a message.
• Ultimately, since EDI documents managed and interpreted by computers, transferred data
must be formatted in a way that computers of both parties can understand.
• The main purpose of EDI standard formats is to minimize communication complication and
costs of redundancies or fines, often called chargebacks.
• Some of the popular EDI standards:
• UN/EDIFACT - United Nations rules for Electronic Data Interchange for Administration, Commerce, and
Transport
• ANSI ASC X12 - ANSI (American National Standards) ASC (Accredited Standards Committee) X12 goes by
more than one pseudonym. This standard is also sometimes called ANSI X12 Standard or just simply X12.
But regardless of the terminology, ANSI ASC X12 includes EDI standards used to communicate digital B2B
transactions for various global business processes.
• ODETTE - ODETTE stands for Organization of Data Exchange by Tele Transmission in Europe and creates
data exchange and communications standards for the European automotive industry.
• SWIFT – Data interchange between cross border money transactions.
• ELSTER – German Electronic Income Tax Statement
 Benefits of EDI
• Lower operating costs
• EDI lowers your operating expenditure by at least 35% by eliminating the costs of paper, printing,
reproduction, storage, filing, postage, and document retrieval. It drastically reduces administrative,
resource and maintenance costs.
• Improve business cycle speeds
• Time is of the essence when it comes to order processing. EDI speeds up business cycles by
61% because it allows for process automation that significantly reduce, if not eliminate, time delays
associated with manual processing that requires you to enter, file, and compare data. Inventories
management is streamlined and made more efficient with real-time data updates.
• Reduce human error and improve record accuracy
• Aside from their inefficiency, manual processes are also highly prone to error, often resulting from illegible
handwriting, keying and re-keying errors, and incorrect document handling. EDI drastically improves an
organization’s data quality and eliminates the need to re-work orders by delivering at least a 30% to 40%
reduction in transactions with errors.
• Increase business efficiency
• Because human error is minimized, organizations can benefit from increased levels of efficiency. Rather
than focusing on menial and tedious activities, employees can devote their attention to more important
value-adding tasks. EDI can also improve an organization’s customer and trading partner relationship
management because of faster delivery of goods and services, as well as
• Enhance transaction security
• EDI enhances the security of transactions by
securely sharing data across a wide variety of
communications protocols and security standards.
• Paperless and environmentally friendly
• The migration from paper-based to electronic
transactions reduces CO2 emissions, promoting
corporate social responsibility.
 Drawbacks of EDI
• Perceived high upfront costs
• It is true that EDI used to require substantial upfront investment has been a barrier in the
past, especially for smaller businesses.
• However, like most technologies, EDI has become less expensive over time.
• EDI systems have also become more mature with features that automate and accelerate
internal business processes that can quickly cover more than the investment with time
and money saved.
• Initial setup is time consuming
• Not only has EDI become less expensive, it has also become faster to deploy and
integrate into existing applications and easier to use with Web EDI options that even non-
technical users can operate.
• Too many standards
• Many organizations also consider EDI to have too many standards and versions.
• This could limit smaller businesses in trading with larger organizations that use an
updated version of a document standard.
• It is therefore imperative that a provider is chosen that supports a wide range of standards
and who commits to keeping up with new protocols in the future.
 Investing in system protection
• EDI may also require a heavy investment in computer networks. It will need protection from viruses,
hacking, malware and other cyber security threats if an on-premises system is chosen. However, many
providers offer a cloud solution which includes system protection.
• Robust data backups of systems
• EDI needs constant maintenance since the business depends on it. Robust data backups must be in place
in the event of a system crash. But again, if a cloud solution is chosen then this responsibility lies mostly
with the provider.
 Applications OF EDI
• International Marketing
• Financial Transactions
• Health care and Insurance
• Manufacturing
• Retail Procurement
International Marketing
•  EDI has always been very closely linked with international trade.
• Trade efficiency, which allows faster, simpler, broader & less costly
transactions.
• Role of EDI in international trade
• EDI facilitates the smooth flow of information.
• It reduces paper work.
• EDI benefits for international trade are
1. Reduced transaction expenditures
2. Quicker movement of imported & exported goods
3. Improved customer service through “track & trace” programs
4. Faster customs clearance & reduced opportunities for corruption, a huge
problem in trade
 Financial Transactions

• Financial transactions can be processed speedily with the help of EDI.

• Financial EDI is the electronic transfer of payments, payment-related
information, or other financial documents in a standardized, machine-
readable format.
How Does Financial EDI Work?
• To send a payment through financial EDI, there are a few steps that a company or institution undertakes.
• The buyer electronically extracts payment information from the organization’s accounts payable system.
• That data is formatted into an EDI standard. Then, the transaction set is transmitted to the organization’s
bank.
• Next, the bank formats that information into the format necessary for its transmission through the
Automated Clearing House (ACH) Network as an ACH transaction.
• The ACH network delivers the payment and its associated data to the seller’s bank, with the bank
crediting the seller.
• It automatically transmits the payment information to the seller’s accounts receivable system, where the
seller can see the funds have been posted.
 Health care and Insurance
• How does healthcare EDI work?
• EDI messages can be transmitted in more than one way.
• There are peer-to-peer EDI messages, in which partners exchange messages directly.
• Value-added networks (VANs) are third-party routing services for messages; when the
VAN receives the message, it examines the delivery data and then sends the
message to the recipient.
• Mobile EDI and cloud EDI are becoming more popular, too.
• EDI relies upon standard messaging formats so organizations can communicate with
one another.
• Healthcare EDI utilizes specific standards designed just for the healthcare industry.
• There are standard transaction sets for claims, payments, enrollment, eligibility
inquiries, and claim status requests.

• What does healthcare EDI look like in action?

• Healthcare EDI software converts documents into computer language, then it assigns
transaction codes to each document.
• Each transaction contains its own name, number, and usage information.
• The recipient’s EDI software converts the information back into documents when it
reaches the recipient.
 Manufacturing
• Many manufacturers today face pressure to adapt to the latest technologies.

• B2B EDI involves replacing traditional communication methods with a computer-to-

computer approach.
• This means communication previously completed on the phone or through email is
now completely automated, improving accuracy and efficiency.
• Many manufacturers need to communicate with customers and distributors across
the globe. However, coordinating phone calls and emails over multiple time zones
can be challenging. Often, manufacturers need 24/7 staff or a waiting period while
the orders are in limbo until they are fulfilled.
• Manufacturing EDI eliminates these concerns. Orders are automatically
communicated from the sender and imported into the manufacturing process
without human intervention. This reduces costs while cutting down on wasted time.
• Manufacturers, especially for just-in-time manufacturing, need orders to be
delivered quickly and correctly. Although some companies can use traditional
communication effectively, any human intervention increases the risk of error.
Manufacturing EDI reduces these potential risks.
• In today’s economy, many manufactures face a
common problem: Sales are growing to the point where
they can’t hire and train personnel fast enough. Even
with a fully-staffed operation it can be difficult to keep
things moving.  
• Manufacturers who want to expand should integrate
EDI. It removes struggles often faced by growing
manufacturers. While other parts of the process may
need to be changed to adapt to the growing leads, B2B
EDI can handle any amount of orders processed
through the channel.
 Retail
• What is Retail EDI?
• Retail Electronic Data Interchange, or EDI, is a method that retailers use to send electronic
communications from business to business.
• It replaces manual processes that originally took place via emails, postal mail, paper based
purchase orders, faxing and other types of communication.
• Orders, invoices, shipping notices and other business documents are transmitted
automatically and securely to improve operational efficiency and reduce purchase order
processing turnaround time.

• How does Retail EDI work?

• All parties involved in the inventory management process have internal servers that communicate vital
information electronically.
• For example, when a retailer has an purchase order, this information is sent to the vendor's EDI
solution automatically and a shipping label is generated for each carton or pallet shipped.
• The EDI system sends the vendor's shipment details and invoice to the retailer.
• Minimal human interaction is required for these transactions, which speeds up the entire process.
• Other benefits of retail EDI include improving inventory management and increasing order accuracy.