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discrepancies. This system works well for smaller no. margin of error also increases because of a lot of paperwork. an invoice had to be prepared upon the completion of the order. Then came the in-house systems. mistakes were made in transcription. and then posted to the customer for payment. but produced paper output. . which served the purpose of data entry and online enquiries. The system is plagued with errors due to re-keying of data at the manufacturer’s end. computation and matching of suppliers for the required parts. decision-making in organization was delayed. and costs added up due to the rising use of paper and its transmission. the streamlining of SCM has assumed great importance. Automation of inventory management in 70s and 80s speeded up the processing. Still immense amount of paper was used. Technical innovations of the past decades have tried to curtail the cycle time of inventory fulfillments so that the engaged WC be used in a proficient manner. SUPPLIER’S END: The order received had to be manually entered into the system. of transactions but when the transaction size increases. With the Japanese concept of JIT.
These PRs are then transmitted to the suppliers. enters it into the computer system and matches with the quotation that has been submitted. and a quotation against the PR may be printed. The printed order is then mailed. It consists of the following steps: Requirement of items is raised. on receiving the order. requesting the price and delivery quotation in the name of screened suppliers. All quotations received are then entered into the manufacturer's automated system and most suitable candidate is selected. . The supplier. The information on PRs are then keyed in by the suppliers in their computerized systems for processing. The Purchase Management System scans the suppliers’ databases for potential suppliers and prints the purchase requisitions. The order is then printed on a standardized order form along with the terms and conditions for delivery and payment. either through phone/fax or through mail/courier service. couriered. The quotation from the supplier is then transmitted using traditional paper mechanisms. The information on the requisition forms is entered into the purchase processing system. or faxed to the supplier.CONVENTIONAL TRADING PROCESS The typical trading process b/w two organizations remained more or less similar to what has been in use for over a century now.
The buyer compares and inspects the goods. it may require repetition of some of the earlier steps. The supplier’s computer. and marks the acceptance and rejection of the items shipped. the buyer’s computer processes the ordered payment. in turn. The supplier’s computer also generates a financial statement at the end of the trading month for the payments. If everything is found in order. also generates an invoice by printing it. In extremes cases. and prepares a goods receipt note containing the purchase order no. 13. 17. The buyer’s computer checks all the details on his computer and if everything is found to be in order. or re-negotiation / clarifications. . The delivery/dispatch note is sent to the buyer using postal mail/courier/fax services. 15. The appropriate stock is thus picked and packed for sending it to the buyer along with the packing list and advance shipping note and advice. the internal sales-order processing system also prepares a delivery note. With the goods. on completion of the order fulfillment. The internal sales order is used for generating several documents and forms for locating and identifying the appropriate stocks. 12.10. it raises an internal sales-order requires data entry / editing of the information from the received purchase order. it often becomes a source of delay. and then printing of the internal sales order. if the prices do not match. 14. is dispatched to the buyer/manufacturer. 16. which. causing further delays. 11. They also sends reminder for payments.
Here. repetitive entry of data. Now. The whole process remains burdened with exhaustive paperwork. . computerization has helped only in managing and processing of records of the traditional supply chain management. in the process. Accuracy. requisite information is interchanged without paper. making it prone to errors. through Internet. It has led to Increased speeds Avoidance of errors due to re-entry. Cost reductions due to reduced cycle time. and is still dependent on the postal communication of the document.
the purchase system creates calls for quotations to suppliers. Buyers create purchase requisitions in their computers. Now. the transmission of the data b/w two trading partners happens in electronic form. The calls for quotations are transferred electronically. EDI is a paperless mechanism that addresses the problems of the traditional systems by electronic interchange of documents. The supplier’s computerized system prepare the quotation record which is submitted to the buyer’s computer electronically.EDI So. In the EDI envt. So. the electronically generated PO is automatically transferred to the buyer with the push of a button. With the help of supplier’s database. .
receiving advices. to the Data Interchange Standards Association. formats. “EDI is the computer-to-computer exchange of business data in std. allowing a “hands-off” computer transaction that requires no intervention or re-keying on the other end. It can be used to electronically transmit documents such as Pos. All information contained in an EDI transaction set is. and other standard business correspondence b/w trading partners. for the most part. In EDI. EFT used by financial institutions are a prime example of the application of EDI in the banking & financial sector. to specified format set by both the parties. the same as on a conventionally printed document. Acc.DEFINING EDI EDI is the exchange of business documents b/w any two trading partners in a structured. shipping bills. machine-readable form. information is organized acc.” . Invoices.
either of whom may serve as originator or recipient. to the International Data Exchange Association. EDI implies a sequence of messages b/w two parties. “Electronic Data Interchange is the electronic transfer from one computer to another of computer processable data using an agreed standard to structure the data.DEFINING EDI The National Institute of standards and Technology says that. “EDI is the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. The formatted data representing the documents may be transmitted from originator to recipient via telecommunications or physically transported on electronic storage media.” Acc.” .
Information Flow without EDI BUYER Purchase request initiated in the organization SELLER Finance Department Payment Bill Finance Department Purchase Department Order delivery Paper-based mailroom Paper-based mailroom Order Confirmation Sales Department Inventory and Warehousing Receiving Department Shipping Department Manufacturing Department Product delivery .
Information Flow with EDI BUYER Purchase request initiated in the organization SELLER Finance Department Payment details Finance Department Purchaseorder delivery Purchase Department EDI-capable computer EDI-capable computer Sales Department Automated-order confirmation Inventory and Warehousing Receiving Department Shipping Department Manufacturing Department Product delivery .
I-way .Layered Architecture Of EDI (Building Blocks of EDI Systems) EDI Semantic Layer Application Level Services EDIFACT Business Form Standards EDI Standard Layer ANSI X12 Business Form Standards Electronic Mail X. Internet.435. MIME EDI Transport Layer Point-to-Point World Wide Web FTP. TELNET HTTP Physical Layer Dial-up Lines.
In other words. acknowledgements. mutually agreed on by the processing systems. price quotes. For a procurement application. To facilitate the transfer of computer files between two “trading partners” requires that the computer applications of both sender and receiver use a compatible format for EDI. this translates into requests for quotes. It is not mandatory that both have identical processing systems. the user interface and content visible on the screen are tailored or customized to local environs. . The sender must use software application that creates an EDI file format similar to what the recipient’s computer application can read.The EDI Semantic Layer It describes the business application that is driving EDI. purchase orders. the EDI translation software converts the proprietary format into a std. and invoices. This layer is specific to a company and the software it uses. When the trading partner sends a document.
The X12 Standard. order processing. This layer specifies the business form structure and to some extent influence content seen at the application layer. 2. developed by American National Standards Institute (ANSI) in 1979 to develop cross-industry standards for exchanging electronic documents for use by all businesses. etc.The EDI Standards Translation Layer Two competing standards that define the content and structure of EDI forms: 1. and payments. EDIFACT (EDI For Administration. Working party for the facilitation of International Trade Procedures. . shipping. invoicing. It devised the standards to deal with transactions such as PO placement. Commerce and Trade) developed by United Nations Economic Commission for Europe.
or private courier service or simply faxed b/w the companies.The EDI Transport Layer It corresponds closely with non-electronic activity of sending a business form from one company A to company B. certified mail. EDI documents are exchanged rapidly over electronic networks using the existing e-mail programs and infrastructure. . Here. registered mail. The business form could be sent via regular postal service.
The EDI Physical Network Infrastructure Layer It includes the dial-up lines. I-way. . Internet.
a purchase order can move with CAD/CAM drawing attached to it in the same envelope. with the PO sent to the EDI system and the CAD/CAM drawing to the design application. Non-repudiation of delivery (ability to prove the delivery of documents) Purchase orders.EDI Layered Architecture X. 2. Integrity (proof documents have not been altered) 3. It has following features: 1. Data Encryption.400 capabilities.all could be sent with end-to-end acknowledgement of message receipt. For example. e-mail. . Invoices. Notification of message delivery and non-delivery 4.435: It eliminates duplication and therefore allows EDI transactions to take advantage of all X. Drawings.
MIME allows users to create and read e-mail messages containing the following: 1. Binary Files 6. Mandarin. Other not-yet-invented data or information types. . 2. Audio Files or Sounds 5. Kanji. can be sent as enveloped messages using the Internet Simple Mail Transfer Protocol (SMTP). word processing documents. etc. SMTP provides the common specification for the exchange of e-mail messages b/w systems and networks.EDI Layered Architecture Multipurpose Internet Mail Extensions (MIME) It dictates how multimedia message attachments such as spreadsheets. Enriched text with special symbols such as mathematics 3. Graphics Images 4. Character sets other than ASCII such as Arabic.
offering weeks of time savings compared to the traditional environment.BENEFITS OF edi 1. REDUCED PAPER-BASED SYSTEMS. The process of transferring the documents/information is instantaneous. EXPANDED CUSTOMER/SUPPLIER BASE. EDI can also reduce postage bills because of the amounts of paper that no longer need to be sent. The direct electronic transfer of documents b/w inter-organizational systems eliminates the chances of error due to re-keying of data printed on paper from one system to another. Many large manufacturers and retailers are ordering their suppliers to institute an EDI program. the cycle time is reduced drastically. Electronic transactions take over most of the functions of paper forms and through automation drastically reduce the time spent to process them. 3. . REDUCES LEAD TIME. As it streamlines the information flow. 2.
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