1. E-Commerce ©David Whiteley/McGraw-Hill, 2000 1 Chapter 8: Electronic Data Interchange (EDI)

2. E-Commerce ©David Whiteley/McGraw-Hill, 2000 2 EDI trade cycle  Regular, repeat transactions between commercial trading partners  Examples:  Supermarkets replenishing stocks  Vehicle assemblers purchasing components

3. E-Commerce ©David Whiteley/McGraw-Hill, 2000 3 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)

4. E-Commerce ©David Whiteley/McGraw-Hill, 2000 4 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

5. E-Commerce ©David Whiteley/McGraw-Hill, 2000 5 EDI definition Structured data – an order ORDER From:Pens and Things 123 London Road Kendal Cumberland Address Code: 6464326 To:J. Smiths and Sons Packaging Solutions 257 Manchester Road Blackburn Lancashire Address Code: 1149646 Order Ref: AC6464 Order Date: 15.03.2000 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: 6464326 To:J. Smiths and Sons Packaging Solutions 257 Manchester Road Blackburn Lancashire Address Code: 1149646 Order Ref: AC6464 Order Date: 15.03.2000 QtyDescriptionProduct Code 1,600Case: Executive Elite – RedPT-1073-R 1,200Case: Executive Elite – SilverPT-1073-S end of order

6. E-Commerce ©David Whiteley/McGraw-Hill, 2000 6 EDI definition Agreed message standards  Sectorial standards e.g. Odette  National standards e.g. ANSI X12, Tradercoms  International standards i.e. EDIFACT

7. E-Commerce ©David Whiteley/McGraw-Hill, 2000 7 EDI definition Agreed message standards – EDIFACT example UNH+000001+ORDERS:2:932:UN' BGM+220+AC6464' DTM+4:20000305:102' NAD+BY+6464326::91' NAD+SU+1149646::91' UNS+D' LIN+1++PT-1073-R:VP' QTY+21:1600' LIN+2++PT-1073-S:VP' QTY+21:1200' UNT+11+000001' UNH+000001+ORDERS:2:932:UN' BGM+220+AC6464' DTM+4:20000305:102' NAD+BY+6464326::91' NAD+SU+1149646::91' UNS+D' LIN+1++PT-1073-R:VP' QTY+21:1600' LIN+2++PT-1073-S:VP' QTY+21:1200' UNT+11+000001' … for the example order.

8. E-Commerce ©David Whiteley/McGraw-Hill, 2000 8 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.

9. E-Commerce ©David Whiteley/McGraw-Hill, 2000 9 EDI definition By electronic means  Transmission by:  data communications network  or possibly physical transfer of: magnetic tape or floppy disc

10. E-Commerce ©David Whiteley/McGraw-Hill, 2000 10 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

11. E-Commerce ©David Whiteley/McGraw-Hill, 2000 11 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

12. E-Commerce ©David Whiteley/McGraw-Hill, 2000 12 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)

13. E-Commerce ©David Whiteley/McGraw-Hill, 2000 13 Benefits of EDI Accurate invoicing  automatic matching to orders  elimination of queries and delays EDI payments  rapid settlement  automatic matching to invoices

14. E-Commerce ©David Whiteley/McGraw-Hill, 2000 14 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

15. E-Commerce ©David Whiteley/McGraw-Hill, 2000 15 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

16. E-Commerce ©David Whiteley/McGraw-Hill, 2000 16 Chapter 8 – Exercise 1  List the four elements of an EDI system.

17. E-Commerce ©David Whiteley/McGraw-Hill, 2000 17 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.

18. E-Commerce ©David Whiteley/McGraw-Hill, 2000 18 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.

19. E-Commerce ©David Whiteley/McGraw-Hill, 2000 19 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?