Electronic Data Interchange (EDI) and SCM zDefine Electronic Data Interchange zGive characteristics of EDI zDiscuss benefits of EDI, as well as barriers to its implementation zDescribe how EDIt works, and how it is moving to the Internet zContrast common (ANSI) EDI with Internet EDI zInternet improvements to supply chain management

Electronic Data Interchange (EDI) zStrategic Impact of EDI zDefinition of EDI zExample of EDI zHow EDI works zBenefits of EDI yDirect and Process zBarriers to EDI Adoption zAdvantages, Disadvantages and Characteristics of VANs zEDI Implementation Model zEDI migration to the internet

Strategic Impact of EDI zBusiness processes can become more efficient zCustomer-supplier relationships may change ymore trust and collaboration zMarket structure changes

Definition of EDI zThe direct computer-to-computer transfer of business information between two businesses that uses a standard format. zFocus on trade data interchange zOften use VANs (Value-added networks) zUse of standards

EDI Standards zCompanies speak precisely the same language zSame codes in same places zProprietary codes --> to standards (X12, EDIFACT,X400) zDifferent computers can communicate with one another

EDI Standards zIn 1968, the Transportation Data Coordination Committee was formed, charged with exploring ways to reduce the paperwork burden zAmerican National Standards Institute (ANSI): coordinating body for standards in the United States since 1918 zAccredited Standards Committee X12 (ASC X12) chartered by ANSI in 1979 to develop EDI standards zThe current ASC X12 standard includes specifications for several hundred transaction sets

Types of EDI Benefits zDirect zProcess yrequire reengineering ycan only be realized with all trading partners are on EDI ycan revolutionize the way business is done

Barriers to Adoption zTrading partners not knowing benefits zHardware costs zInterfacing translator, software costs zNeed for software modifications zNetwork (VAN) service charges zCosts and effort for trading partner conversion

Trading Partner Concerns in EDI Implementation Costs Trust Dependency Benefits EDI

Value Added Networks zTrading partners can implement the EDI network and EDI translation process in several ways, each using one of two basic approaches yDirect connection yIndirect connection

Direct Connection Between Trading Partners zRequires each business in the network to operate its own on-site EDI translator computer zEDI translator computers are connected to each other using modems or dedicated leased lines zTrading partners using different protocols can make direct connection options difficult to implement

Indirect Connection Between Trading Partners zCompanies use the services of a value-added network (VAN) zThe VAN provides communications equipment, software, and skills needed to receive, store, and forward electronic messages containing EDI transaction sets zThe VAN often supplies the software needed to connect to its services

Advantages of Using a Value Added Network zUsers support only one communications protocol zThe VAN records activity in an audit log, providing an independent record of transactions zThe VAN can provide translation between different transaction sets zThe VAN can perform automatic compliance checks to ensure the transaction set is in the specified EDI format

Disadvantages of Using a Value Added Network zMost VANs require an enrollment fee, a monthly maintenance fee, and a transaction fee zVANs can be cumbersome and expensive for companies with trading partners using different VANs zInter-VAN transfers do not always provide a clear audit trail

EDI on the Internet zViewed as a replacement for expensive leased lines and dial-up connections zSmall companies can get back in the game of selling to large customers the demanded EDI capabilities of their suppliers zConcerns about security and lack of audit logs continue to be a major roadblock zTakes advantage of open architecture

Comparison of EDI Standards z EDI STANDARDS (ASC/ANSI) Security provided by private networks EFT (Electronic Funds Transmission) - standard for wire payments between client and vendor Transactions sets (810- invoices;850, 855- POs) zINTERNET STANDARDS SSL (Secure Sockets Layer) SET (Secure Electroic Transactions) - protocol proposed by Visa/MC for Net No transaction standards

Current Internet EDI Usage zMuch EDI traffic carried over private networks yscalability yreliability yprocessing power zin 1996 EDI Group study y85% of respondents using some form of EDI yonly 3-4% were using Internet EDI

Changes on the Horizon zS/MIME protocol which enables applications to verify transmission and receipt of EDI messages zProducts to map Web EDI transactions sent in multiple formats to legacy EDI applications zNew (but potentially competing) technologies yXML yOBI

Products to Smooth EDI Wrinkles zGEIS’s TradeWeb - an entry-level forms- based service with which subscribers can send and receive four basic EDI documents over the Internet using a standard Web browser for flat fee ($50/mo) ypurchase order (PO), PO acknowledgement yinvoice, functional acknowledgement zGEIS’s Trading Process Network for posting EDI-based forms on the Web

zA trading partner’s bank is called a Financial EDI (FEDI) zMany trading partners are reluctant to send FEDI transfers for large sums of money over the Internet zCompanies may opt to establish an indirect connection through a VAN for the added security for FEDI transaction Financial EDI