1. Electronic Data Interchange (EDI)
TRANSACTION DATA
COMPANY A
COMPANY B
Simply termed as Paperless Trading 1

2. EDI Definition
EDI is the computer-to-computer exchange of routine business documents (data) in a standard format between companies.
EDI is the exchange of documents in standardized electronic form, between organizations, in an automated manner, directly from a computer application in one organization to an application in another organization
International Data Exchange Association (IDEA) formally define EDI as:
“The transfer of structured data, by agreed message standards, from one computer system to another, by electronic means”. 2

3. EDI definition Cont….
EDI is defined by International Data Exchange Association (IDEA) as:-
This definition has four elements-
1. Structured data- EDI transactions are composed of codes, values and short pieces of text if necessary; each element with a strictly defined purpose. For example, an order has codes for the customer and product and values such as quantity ordered.
2. Agreed message standards- The EDI transaction has to have a standard format. The standard is not just agreed between the trading partners but is a general standard agreed at national or international level. A purchase order will be one of a number of agreed message standards.
3. From one computer system to another- The EDI message sent is between two computer applications. There is no requirement for people to read the message or relay it in a computer system.
4. By Electronic Means- Usually this is by data communications but the Physical transfer of magnetic tape or floppy disc would be within the definition of EDI. Often networks specifically designed for EDI will be used. 3

4. PAPER DOCUMENT INTERCHANGEPO
Data Entry
Computer
Computer
Post Office
Old way of doing business involves paper document interchange
Problems with this process:
Time to process a paper document
Time to send paper document through mail
Mailing costs
Time to re-enter data several times
Increased opportunity for errors due to re-entry of data
Time to file and manage document storage
Space required for document storage
There are many disadvantages (and some advantages) to the traditional paper document interchange process.
______________________________________________________________
Purchaser
Invoice 4

5. ELECTRONIC DATA INTERCHANGEPO
Data Entry
Computer
Computer
Electronic interchange between the computer and an electronic post office eliminates these problems
Information is exchanged via electronic post office or VAN
______________________________________________________________
_______________________________________________________________
VAN
Purchaser
Invoice
Electronic interchange between the computer and an electronic post office eliminates these problems
Information is exchanged via electronic post office or VAN 5

6. EDI History
1948 – Berlin Airlift standardizes processes of airlifting of its consignments
1960 – electronic data transmissions commenced in rail and road transport industry
1968 – US Transportation Data Coordinating Committee (TDCC) formed to develop transport rules
ANSI announced X12 standards to replace TDCC standards
UK developed its own standards for documents used in international trade
UN Economic Commission adopts UK standards into General purpose TradeData Interchange (GTDI) standards
UN Joint Europian and North American Working Party develops EDIFACT to address incompatibilities between X12 and GTDI
1991 – most countries around the world adopt EDI 6

7. Four basic components of EDI:
EDI Components
EDI
Four basic components of EDI:
Hardware
Includes computers and modems
Software
Select one to fit your requirements
Communications
EDI standard
Hardware
Standards
EDI
Software
Communications
Four basic components of EDI:
Hardware
Includes computers and modems
Software
Select one to fit your requirements
Communications
EDI standard 7

8. EDI Standard
One of the most important EDI components is standards EDI Standard - “A set of rules, agreed upon, accepted, and voluntarily adhered to, by which the data is structured into message formats for exchange of business and operational information” (Beby, Daniel J., E-D-I or D-I-E)
Standards
Started in 1950s and 1960s
First developed for the transportation, warehouse, and grocery industries
Provide the commonality of format
Interpretation for communicated information intelligible to both the sender and receiver
American National Standards Institute (ANSI) developed the first national, cross-industry EDI standards
ANSI X12 is the standard for EDI transactions in the U.S.
United Nations/EDI For Administration Commerce and Trade
(UN/EDIFACT) is the standard for international EDI transactions 8

9. ELECTRONIC DATA INTERCHANGE STANDARDS
ANSI X12
UN/EDIFACT
Other Standards
Transportation Data Coordinating Committee (TDCC)
Uniform Communications Standard (UCS)
Warehouse Information Network (WINS)
Voluntary Inter-Industry Communication Standard (VICS)
EDI for Administration, Commerce, and Trade (EDIFACT) 9

10. EDI Software Database X12 10 1. Document Support
4. Translation Communications
2. Mapping
X12
3. Standards Support 10

11. Will help design and maintain an electronic form
Software Component:
Will help design and maintain an electronic form
Will replicate a routine paper business form
ASCII files can be used to exchange information between an application package and an EDI package
Translators take information and translate it into an ANSI X12 format
Application packages can be mapped to eliminate data entry.
EDI software does not have to match your trading partner’s software.
Software must use ANSI X12 standards.
Software will send, receive, translate and store the data to be used by other business applications.
Selecting the right software is a very important part of the process. 11

12. EDI USERS 12 Government Health care Retail Grocery Transportation
Policy
Insurance
Manufacturing
Automotive
Petroleum
Electronics
Chemical
Banks
Construction
Advertising 12

13. EDI Users:
Government - DOD, DOC, DOI, GSA, HHS, DOE Federal, state, and local governments
Health care - Hospitals, Pharmacies, Labs, Insurers
Retail - Used to support Vendor Managed Inventory (VMI)
Transportation - Motor, Air, Rail, Ocean
Insurance - Property and Casualty, Health care, Life/Annuity, Pensions, Reinsurance
Manufacturing industry uses EDI to support just-in-time material requirement (JIT)
Automotive industry uses EDI to support Evaluated Receipt Settlement(ERS)
Petroleum
Electronics
Chemical
Banks use financial EDI
Construction
Advertising 13

14. EDI Benefits ● Reduced cycle time – result of above
● No recapture of data. So faster transfers of data and fewer errors
● Reduced cycle time – result of above
● Better coordination with suppliers – no delays, missing documents in transit, no human errors in data entry
● Reduced redundancy – documents stored in boxes, available anywhere, anytime.
● Expands market reach – through value-added networks
● Increased revenue and sales – result of frictionless transactions and related errors, faster account settlements
Decrease mailing costs - Information exchanged electronically
Greater customer satisfaction -Customers receive products faster
-Suppliers get paid quicker
Reduction in order time -Reduced minimum 50%
Better cash management -Goods received faster Invoicing and payments occur faster and more accurately
Corporate balance sheets are up-to-date More accurate decision making information available.
Better scheduling of workloads within the receiving department 14

15. EDI Disadvantages
Trading Partners Involvement – Highly dependence on the participation of trading partners. You need to be confident that they will do their part. EDI will be meaningless if your trading partner didn't get involved using EDI system effectively
Costly for smaller companies – Many small companies are facing resources problems in getting starter with the initial implementation of EDI system. It is beyond the resources these companies to invest tens or hundreds of thousands of dollars in setting and implementation costs, as well as weeks of personnel training, to get an EDI system running
Difficult to agree on standard to be used –Even though there are widely-accepted and used standards, there are no ways to force trading partners to accept these standards. Cooperation between trading partners is needed in order to develop a common rules to avoid differences in interpretation. 15

16. Barriers to EDI Implementation
● Business process change – from traditional paper format to EDI format
● Cost in time and money for organizations to migrate to EDI
● Business perception of EDI as technical data format, not as document exchange system to be integrated with internal MIS 16

17. EDI Operation 1 – Transfer information electronically
● EDI implies
– Transfer information electronically
– Information transfer between two trading partners who agree upon data formats
– Transferable information complies with agreed upon formats
● EDI can happen in two ways
– Exchange data directly with each partner
– Interact with multiple partners through a central information clearing house. Relieves sender from compatibility and licensing issues 17

18. EDI operation 2
● Trading partners meet to specify the applications in the EDI standard they would implement.
● Each partner adds EDI programs to its computer to translate its data into EDI format for transmission and reception.
● As often as required, partners exchange data in standard format. 18

19. EDI Operation 3 19 ● Sender confirms authenticity of recipient
● Records in senders database generate data to transmit.
● Sender composes transmission in EDI format
● Receiver translates received data into its computer record for its internal processing
● All transmissions are checked both electronically and functionally for errors and corrected, if needed 19

20. EDI Building Blocks
Application / conversion Layer Standard Formats Layer
(EDIFACT, X12 etc)
Data Transport Layer
( , FTP etc)
Interconnection Layer
(network infrastructure) 20

21. Application / Conversion Layer
● Comprises application involved in EDI
● Applications may use their won record formats for storage, retrieval and processing information within internal system
● Applications convert internal information and documents to EDI format
● Conversion may be part of application if number of conversions are few
● Conversion may be separate program if number of conversions are many 21

22. Standard Formats Layer
● Specify the syntax and semantics of documents being exchanged
● Many document standards exist
– US grocers' Uniform Communication Standard
– U K's DISH
– Europe's GTDI
– TDCC and its replacement ANSI X12
– EDIFACT to merge X12 and GTDI 22

23. Data Transport Layer
● Group of services that automate e-transfer process
● Utilized any of the available network transport services, such as
● ITU-T adopted X.435 standards to support
message standards to ensure integrity and non-repudiation 23

24. Product Data Exchange Standard (PDES)
● Is a project in US to
– Develop an exchange standard for product daa in support of industrial automation
– Represent US position in ISO arena relative to the development of a single world-wide standard for exchange of product data
● Includes data relevant to the entire life cycle of a product, manufacturing, quality assurance, testing support etc.
● So far, mechanical, electrical plant design products have been included for standardization 24

25. Product Data Exchange Standard (PDX)
● Is in XML format
● Used to exchange BOM, change order, asbuilt
configuration and quality information of
products 25

26. Initial Graphics Exchange Specifications (IGES)
● CAD tools enable ease of revise and archive and manufacturing instructions to plants
● Drawing specifications of different CAD tools differ
● Standards needed for exchange of drawing between designer and manufacturers
● CAD vendors and users created IGES in 1979
● Specifies information structures to digitally represent and communicate product data
● Specifications concerned with data to describe engineering
characteristics of physical products, in terms of physical dimensions 26

27. Standard for Product Data Exchange (STEP)
● Also called ISO xxx, where xxx is part number
● Aims at standardizing product data between computer-based
product life cycle systems
● Intended to be used for all products
● Covers electronic, electromechanical, sheet-metal, fiber
composites etc
● Covers design, analysis, planning and manufacturing phases
of product life cycle
● Data entities are defined in schema in EXPRESS language
● Application protocols define models that define parts
● PDML designed to support PDE for commercial systems 27

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