E-Commerce ©David Whiteley/McGraw-Hill, Chapter 8: Electronic Data Interchange (EDI)

E-Commerce ©David Whiteley/McGraw-Hill, EDI trade cycle  Regular, repeat transactions between commercial trading partners  Examples:  Supermarkets replenishing stocks  Vehicle assemblers purchasing components

E-Commerce ©David Whiteley/McGraw-Hill, EDI definition  Summarised as: ‘Paperless Trading’  Defined as: ‘The transfer of structured data, by agreed message standards, from one computer system to another, by electronic means.’ International Data Exchange Association (IDEA)

E-Commerce ©David Whiteley/McGraw-Hill, EDI definition Structured data  Standardised Document  e.g. Order/Invoice  Codes  e.g. Product Code/Customer Code  (preferably using a common standard e.g. ANA/UPC)  Values  e.g. Quantity Ordered

E-Commerce ©David Whiteley/McGraw-Hill, EDI definition Structured data – an order ORDER From:Pens and Things 123 London Road Kendal Cumberland Address Code: To:J. Smiths and Sons Packaging Solutions 257 Manchester Road Blackburn Lancashire Address Code: Order Ref: AC6464 Order Date: QtyDescriptionProduct Code 1,600Case: Executive Elite – RedPT-1073-R 1,200Case: Executive Elite – SilverPT-1073-S end of order ORDER From:Pens and Things 123 London Road Kendal Cumberland Address Code: To:J. Smiths and Sons Packaging Solutions 257 Manchester Road Blackburn Lancashire Address Code: Order Ref: AC6464 Order Date: QtyDescriptionProduct Code 1,600Case: Executive Elite – RedPT-1073-R 1,200Case: Executive Elite – SilverPT-1073-S end of order

E-Commerce ©David Whiteley/McGraw-Hill, EDI definition Agreed message standards  Sectorial standards e.g. Odette  National standards e.g. ANSI X12, Tradercoms  International standards i.e. EDIFACT

E-Commerce ©David Whiteley/McGraw-Hill, EDI definition Agreed message standards – EDIFACT example UNH ORDERS:2:932:UN' BGM+220+AC6464' DTM+4: :102' NAD+BY ::91' NAD+SU ::91' UNS+D' LIN+1++PT-1073-R:VP' QTY+21:1600' LIN+2++PT-1073-S:VP' QTY+21:1200' UNT ' UNH ORDERS:2:932:UN' BGM+220+AC6464' DTM+4: :102' NAD+BY ::91' NAD+SU ::91' UNS+D' LIN+1++PT-1073-R:VP' QTY+21:1600' LIN+2++PT-1073-S:VP' QTY+21:1200' UNT ' … for the example order.

E-Commerce ©David Whiteley/McGraw-Hill, EDI definition From one computer system to another  EDI messages are (properly) sent:  From one computer’s application, e.g. the customer’s Purchasing System.  To a second computer’s application, e.g. the supplier's Order Processing System.  There is no need read or re-key the data into a computer system.

E-Commerce ©David Whiteley/McGraw-Hill, EDI definition By electronic means  Transmission by:  data communications network  or possibly physical transfer of: magnetic tape or floppy disc

E-Commerce ©David Whiteley/McGraw-Hill, Benefits of EDI Shortened ordering time a posted order … print  Customer envelope  post room   postal service  supplier  post room key-into order processing systemSupplier … say 7 days between two large organisations an EDI order … Customer  EDI transmission  Supplier … one day, one hour, as quick as you like

E-Commerce ©David Whiteley/McGraw-Hill, Benefits of EDI Cutting costs  Stationery  Postage  Staff:  order entry  invoice matching  payment checking  the principle saving is staff costs – staff savings can be very significant

E-Commerce ©David Whiteley/McGraw-Hill, Benefits of EDI Elimination of errors  no keying errors  (but no manual check for silly mistakes) Fast response  immediate acknowledgement and status report  (available but not always implemented)

E-Commerce ©David Whiteley/McGraw-Hill, Benefits of EDI Accurate invoicing  automatic matching to orders  elimination of queries and delays EDI payments  rapid settlement  automatic matching to invoices

E-Commerce ©David Whiteley/McGraw-Hill, Benefits of EDI Reduced stock holding  Just-in-time for manufacture  Quick response supply for retail  Less (or no) cost of stock in hand  Less (or no) warehousing costs  Elimination of double handling of goods  Less damage / deterioration of stock Cash flow  quicker settlement = improved cash flow

E-Commerce ©David Whiteley/McGraw-Hill, Benefits of EDI Business opportunities  Access to Customers that require EDI Customer lock-in  Switching costs – setting-up an EDI system with a new supplier

E-Commerce ©David Whiteley/McGraw-Hill, Chapter 8 – Exercise 1  List the four elements of an EDI system.

E-Commerce ©David Whiteley/McGraw-Hill, Chapter 8 – Exercise 2  List the transaction types that take place between trading partners that seem suitable for EDI implementation. Suggest some communications that would not be suitable for this technology.

E-Commerce ©David Whiteley/McGraw-Hill, Chapter 8 – Exercise 3  Review the advantages of EDI and evaluate how each applies to the EDI implementation proposed in the Pens and Things example.

E-Commerce ©David Whiteley/McGraw-Hill, Chapter 8 – Exercise 4  The advantages of EDI are typically given in comparison to paper orders; if the orders were sent by fax, which of the advantages would still apply?