Electronic Data Interchange

Electronic Data Interchange (EDI) is the electronic

interchange of business information using a standardized
format; a process which allows one company to send
information to another company electronically rather than
with paper. Business entities conducting business
electronically are called trading partners.
 Features of EDI
• Robust, proven integration with your business system.
• A simple, seamless user experience
• Scalability and configurability for your specific needs
• Lowest total cost of ownership
• Easy onboarding of new trading partners
• Web-based and managed services options
Importance of EDI
 Benefits of EDI
• It saves time and money
• Improves efficiency and productivity
• Reduces the chances of error
• Improves traceability and reporting
• Automation of EDI supports positive consumer experience
 Risks of EDI
• Unauthorized disclosure of data
• Unauthorized modification of data
• Sender repudiation of transactions
• Receiver repudiation of transactions
• Unauthorized system access, and
• Lack of system availability
How it
works?
 EDI in E-commerce 
• EDI standardization of computer-to-computer documents exchange
and business information between trading partners is used in B2B e-
commerce for ordering and invoicing. E-commerce EDI is also called
retail EDI.  Retailers like Walmart have been using electronic data
interchange / EDI software for purchase orders, advance ship notices,
and invoices for many decades. 
• Other parts of an e-commerce solution may include API and flat-file
integration. 
INFRASTRUCTURE FOR EDI
• Several elements of infrastructure must exist in order to introduce an
EDI system, including: 

1. Format Standards
2. Translation Software
3. Value-Added Networks (VANs)
4. Inexpensive Computers
5. Procedures for Complying with Legal Rules
1. Format Standards

• To permit the efficient use of computers, information must be highly

organized into a consistent data format.
• A format defines how information in a message is organized: what
data go where, what data are mandatory, what is optional, how many
characters are permitted for each data field, how data fields are
ordered, and what codes or abbreviations are permitted.
2. Translation software
• Translation software makes EDI work by translating data from the
sending firm's internal format into a generic EDI format.
• Translation software also receives a sender's EDI message and
translates it from the generic standard into the receiver's internal
format.
• There are currently translation software packages for almost all types
of computers and operating systems.
3. Value-Added Networks (VANs)
• When firms first began using EDI, most communications of EDI
documents were internal or directly between trading partners.
Unfortunately, direct computer-to-computer communication requires
that both firms
• use similar communication protocols
• have the same transmission speed
• have a common proprietary network
• have compatible computer hardware.
4. Inexpensive Computers
• The fourth building block of EDI is inexpensive computers that permit
even small firms to implement EDI.
• Since microcomputers are now so prevalent, it is possible for firms of
all sizes to deal with each other using EDI.
• Internet protocols, including standard formats such as HTML, have
created a standard understood by computers of all makes running
different operating systems—all of which are fully enabled to
communicate across the Web.
5. Procedures for Complying with Legal
Rules
• Legal rules apply to the documents that accompany a wide variety of
business transactions.
• For example, some contracts must include a signature or must be an
original in order to be legal. If documents are to be transmitted via
EDI, companies must establish procedures to verify that messages are
authentic and that they comply with the agreed-upon protocol.
• In addition, EDI requires companies to institute error-checking
procedures as well as security measures to prevent unauthorized use of
their computer systems. 
Functions of EDI
 4 Major Components of EDI
• Standard document format
• Translation and mapping
• Preferred communication method
• Communication network to send and receive documents
 Types of EDI

• Direct EDI (point-to-point EDI)

• EDI via VAN (value-added networks)
• EDI via AS2 (using the Internet)
• Web EDI (using a standard Internet browser)
• Mobile EDI (using mobile devices)
• EDI Outsourcing (managed services)