Unit 1c
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Unit 1c

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  • Lowering Operating Cost - EDI replaces paper transactions with electronic transmissions, saving time and reduced cost of business transaction and enabling the automatic processing of documents. Reduced Error and Increases Business Information Accuracy - With the implementation of EDI, there is no need for re-entering data, thus, reducing the risk for human error. Each re-entry of data is a potential source of error. Increase Productivity - Making personnel more efficient and it improves business capabilities by speeding up throughput.   Faster Trading Cycle - EDI allows faster and streamlining trading cycle between organizations  leading to improved relationships between trading partners.
  • 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. And now Laura will more about EDI models and the use of VAN’s in these models…

Unit 1c Unit 1c Presentation Transcript

  • What is EDI?What is EDI? Electronic Data Interchange (EDI) is theElectronic Data Interchange (EDI) is the computer-to-computer exchange of businesscomputer-to-computer exchange of business documents in a standard electronic formatdocuments in a standard electronic format between business partners.between business partners.
  •  Electronic data interchange (EDI) is theElectronic data interchange (EDI) is the structuredstructured transmission of data betweentransmission of data between organizations by electronic means, whichorganizations by electronic means, which is used to transfer electronic documents oris used to transfer electronic documents or business data from one computer systembusiness data from one computer system to another computer system, i.e. from oneto another computer system, i.e. from one trading partner to another trading partnertrading partner to another trading partner without human intervention.without human intervention.
  •  Computer-to-ComputerComputer-to-Computer–– EDI replacesEDI replaces postal mail, fax and email. While email ispostal mail, fax and email. While email is also an electronic approach, thealso an electronic approach, the documents exchanged via email must stilldocuments exchanged via email must still be handled by people rather thanbe handled by people rather than computers. Having people involved slowscomputers. Having people involved slows down the processing of the documentsdown the processing of the documents and also introduces errors. Instead, EDIand also introduces errors. Instead, EDI documents can flow straight through to thedocuments can flow straight through to the appropriate application on the receiver’sappropriate application on the receiver’s computer (e.g. the Order Managementcomputer (e.g. the Order Management System) and processing can beginSystem) and processing can begin immediately.immediately.
  •  Business DocumentsBusiness Documents –– These are any ofThese are any of the documents that are typicallythe documents that are typically exchanged between businesses. Theexchanged between businesses. The most common documents exchanged viamost common documents exchanged via EDI are purchase orders, invoices andEDI are purchase orders, invoices and Advance Ship Notices. But there areAdvance Ship Notices. But there are many, many others such as bill of lading,many, many others such as bill of lading, customs documents, inventorycustoms documents, inventory documents, shipping status documents.documents, shipping status documents.
  •  Standard FormatStandard Format– Because EDI documents must be– Because EDI documents must be processed by computers rather than humans, aprocessed by computers rather than humans, a standard format must be used so that the computerstandard format must be used so that the computer will be able to read and understand the documents.will be able to read and understand the documents. There are several EDI standards in use today,There are several EDI standards in use today, including ANSI, EDIFACT.including ANSI, EDIFACT. - When two businesses decide to exchange EDI- When two businesses decide to exchange EDI documents, they must agree on the specific EDIdocuments, they must agree on the specific EDI standard and version. Businesses typically use an EDIstandard and version. Businesses typically use an EDI translator – either as in-house software or via an EDItranslator – either as in-house software or via an EDI service provider – to translate the EDI format so theservice provider – to translate the EDI format so the data can be used by their internal applications anddata can be used by their internal applications and thus enable straight through processing of documents.thus enable straight through processing of documents.
  •  Business partnersBusiness partners –– The exchange ofThe exchange of EDI documents is typically between twoEDI documents is typically between two different companies, referred to asdifferent companies, referred to as business partners or trading partners. Forbusiness partners or trading partners. For example, Company A may buy goods fromexample, Company A may buy goods from Company B. Company A sends orders toCompany B. Company A sends orders to Company B. Company A and Company BCompany B. Company A and Company B are business partners.are business partners.
  • A typical manual process looks like this, withA typical manual process looks like this, with lots of paper and people involvement:lots of paper and people involvement:
  • The EDI process looks like this – no paper, noThe EDI process looks like this – no paper, no people involved:people involved:
  • Components of EDI SystemComponents of EDI System  The three main Components required to be able toThe three main Components required to be able to send or receive EDI messages are:send or receive EDI messages are: 1)1) EDI StandardsEDI Standards 2)2) EDI translation SoftwareEDI translation Software 3)3) Trading PartnersTrading Partners 4)4) Value Added NetworksValue Added Networks (VAN)(VAN) provides users with aprovides users with a single point interface to the trading community. Theresingle point interface to the trading community. There can be more than one VAN offering EDI services. Acan be more than one VAN offering EDI services. A VAN is a third party service provider that managesVAN is a third party service provider that manages data communication networks for Businesses thatdata communication networks for Businesses that exchange electronic data with other businesses.exchange electronic data with other businesses.
  •  EDI standardsEDI standards are basically data standards inare basically data standards in that they lay down the format of data beingthat they lay down the format of data being exchanged.exchanged.  Standards are the Key to EDI. They Provide aStandards are the Key to EDI. They Provide a simple and concise means of communicatingsimple and concise means of communicating Business Information to Trading Partners.Business Information to Trading Partners.  ProprietaryProprietary Standards- Standard used in a singleStandards- Standard used in a single systemsystem  National and IndustryNational and Industry Standards - standard used in aStandards - standard used in a single Country or Industrysingle Country or Industry  InternationalInternational Standards – Standard used world wideStandards – Standard used world wide
  •  UCS (Uniform Communication Standard)UCS (Uniform Communication Standard) devised by Grocery Segment and adopted bydevised by Grocery Segment and adopted by other retail sectors.other retail sectors.  TDI (Trade Data Interchange ) for warehousingTDI (Trade Data Interchange ) for warehousing  ODETTE (Organization for Data Exchange byODETTE (Organization for Data Exchange by Tele Transmission in Europe) for automobileTele Transmission in Europe) for automobile industryindustry  DISH( Data interchange for Shipping)DISH( Data interchange for Shipping)
  •  Industry wide EDI Standard given by US.Industry wide EDI Standard given by US.  Accredited Standards Committee (ASC)Accredited Standards Committee (ASC) X12.X12.  The X12 Committee of the AmericanThe X12 Committee of the American National Standards Institute (ANSI).National Standards Institute (ANSI).  UN/EDIFACT (EDI for Administration,UN/EDIFACT (EDI for Administration, Commerce and Transport) Standard wasCommerce and Transport) Standard was announced in 1987 by the Unitedannounced in 1987 by the United Nations. EDIFACT standard promoted byNations. EDIFACT standard promoted by the UN for international Trade.the UN for international Trade.
  • EDI standardsEDI standards 13 A B CD E A B CD E Standard Format
  •  EDI SoftwareEDI Software : It consists of computer: It consists of computer instructions that translate the informationinstructions that translate the information from unstructured, company specific formatfrom unstructured, company specific format to the structured EDI format, and thento the structured EDI format, and then communicate the EDI message.communicate the EDI message.  It also receives the message and translateIt also receives the message and translate from standard format to company specificfrom standard format to company specific format.format.  The major functions of the EDI software areThe major functions of the EDI software are data conversion, data formatting anddata conversion, data formatting and message communication.message communication.
  •  X400 MHS (message handling System)-X400 MHS (message handling System)- Store and forward nature, and generationStore and forward nature, and generation of delivery reports.of delivery reports.  X435s special upgrade standard forX435s special upgrade standard for handling EDI messages.handling EDI messages.  EDI TranslatorsEDI Translators perform the imp.perform the imp. Function of translating business data fromFunction of translating business data from company specific formats to standardcompany specific formats to standard formats and vice versa.formats and vice versa.
  • Value Added Network (VAN)Value Added Network (VAN)  A third party network performing servicesA third party network performing services beyond the transmission of data. For example,beyond the transmission of data. For example, VANs provide mailbox, data security, and dataVANs provide mailbox, data security, and data archiving services. Many also offer e-mailarchiving services. Many also offer e-mail services.services.  Value Added Networks provides users with aValue Added Networks provides users with a single point interface to the trading community.single point interface to the trading community. There can be more than one VAN offering EDIThere can be more than one VAN offering EDI services. A VAN is a third party service providerservices. A VAN is a third party service provider that manages data communication networks forthat manages data communication networks for Businesses that exchange electronic data withBusinesses that exchange electronic data with other businesses.other businesses.
  • Retailer A Retailer C Retailer B Retailer D Wholesaler A Wholesaler B Wholesaler C Wholesaler D Value-added Network VAN ModelVAN Model
  • Components of EDI SystemsComponents of EDI Systems Business Data Business DataBusiness Data Business Data UN/EDIFACT UN/ EDIFACTUN/EDIFACT UN/ EDIFACT Message MessageMessage Message X.400/X.435 X.400/X.435X.400/X.435 X.400/X.435 Business Application Translator Communication NETWORK Business Application Translator Communication EDI Message
  • Communication of EDI messageCommunication of EDI message EDI documents are electronically exchangedEDI documents are electronically exchanged over communication networks which connectover communication networks which connect trading partners to one another. Thesetrading partners to one another. These documents are stored in user mailboxes on thedocuments are stored in user mailboxes on the network’s EDI server from where they can benetwork’s EDI server from where they can be downloaded/ uploaded at the user’sdownloaded/ uploaded at the user’s convenience. These VANs provide user’s withconvenience. These VANs provide user’s with a single point interface to the tradinga single point interface to the trading community.community.
  • EDI ArchitectureEDI Architecture EDI architecture specifies 4 layers:EDI architecture specifies 4 layers: 1)Semantic (application layer)1)Semantic (application layer) 2)Standard transaction layer2)Standard transaction layer 3)Packing (transport) layer3)Packing (transport) layer 4)Physical n/w infrastructure layer.4)Physical n/w infrastructure layer.
  • 1)Semantic layer (Application Layer) :-1)Semantic layer (Application Layer) :- It describes the business application that isIt describes the business application that is driving EDI.driving EDI.  For a procurement application, this translatesFor a procurement application, this translates into requests for quotes, price quotes, purchaseinto requests for quotes, price quotes, purchase orders, acknowledgements & involves.orders, acknowledgements & involves.  The information seen at this layer must beThe information seen at this layer must be translated from a company specific from to atranslated from a company specific from to a more generic form so that it can be send tomore generic form so that it can be send to various trading partners, who could be using avarious trading partners, who could be using a variety of software applications at this end.variety of software applications at this end.
  • When a trading partner sends a document, theWhen a trading partner sends a document, the EDI translation software converts theEDI translation software converts the proprietary format into a standard mutuallyproprietary format into a standard mutually agreed on by the processing system. When aagreed on by the processing system. When a company receives the document, their EDIcompany receives the document, their EDI translation software automatically changes thetranslation software automatically changes the standard format into proprietary format of theirstandard format into proprietary format of their document processing software so thatdocument processing software so that company can manipulate the information incompany can manipulate the information in whatever way it chooses to.whatever way it chooses to.
  • 2.2. EDI Standard Transaction LayerEDI Standard Transaction Layer:- It specify:- It specify business form structure and it also influencebusiness form structure and it also influence the content at application layer.the content at application layer. The most two important standards are:-The most two important standards are:-  EDIFACTEDIFACT  ANSI X12ANSI X12 3. EDI Transport layer3. EDI Transport layer:- it corresponds closely:- it corresponds closely with the non-electronic activity of sending awith the non-electronic activity of sending a business form from one company A tobusiness form from one company A to company B.company B.
  •  The business form could be sent via regularThe business form could be sent via regular postal service, registered mail, certified mail orpostal service, registered mail, certified mail or private carrier such as united parcel serviceprivate carrier such as united parcel service (UPS) or simply faxed between the companies.(UPS) or simply faxed between the companies.  EDI transport layer e- mail X 435EDI transport layer e- mail X 435  Point2point FTPPoint2point FTP 4.Physical layer4.Physical layer :- Dial up lines:- Dial up lines
  • Advantages of EDIAdvantages of EDI  Lower operating costsLower operating costs  Saves time and moneySaves time and money  Less Errors = More AccuracyLess Errors = More Accuracy  No data entry, so less human errorNo data entry, so less human error  Increased ProductivityIncreased Productivity  More efficient personnel and fasterMore efficient personnel and faster throughputthroughput  Faster trading cycleFaster trading cycle  Streamlined processes for improvedStreamlined processes for improved trading relationshipstrading relationships
  •  EDI BenefitsEDI Benefits can generally be classified into:can generally be classified into: 1) Strategic,1) Strategic, 2) Operational,2) Operational, 3) Opportunity3) Opportunity 1) Strategic benefits include:1) Strategic benefits include:  Faster trading cycleFaster trading cycle  Ability to adopt new business processes suchAbility to adopt new business processes such as Just-in-Time manufacturing techniques.as Just-in-Time manufacturing techniques.  Ability to win new business or retain existingAbility to win new business or retain existing customers leading to improvements in businesscustomers leading to improvements in business efficiency.efficiency.  Ability to respond to highly competitive newAbility to respond to highly competitive new market entrants.market entrants.
  • 2) Operational benefits include:2) Operational benefits include:  Reduced costs - paper and postage bills cut -Reduced costs - paper and postage bills cut - reduction in money tied up in stock - manualreduction in money tied up in stock - manual processing costs (e.g. associated withprocessing costs (e.g. associated with verification, keying and re-keying of documentsverification, keying and re-keying of documents and the cost of manual filing systems).and the cost of manual filing systems).  Improved cash flowImproved cash flow  Security and error reductionSecurity and error reduction  Acknowledged receiptAcknowledged receipt 3) Opportunity benefits include:3) Opportunity benefits include:  Enhanced imageEnhanced image  Competitive edgeCompetitive edge  Improved corporate trading relationshipsImproved corporate trading relationships
  • Disadvantages of EDIDisadvantages of EDI  High Dependence on the participationHigh Dependence on the participation of trading partnersof trading partners  Costly for smaller companiesCostly for smaller companies  Difficult to agree on standard to beDifficult to agree on standard to be usedused
  • Electronic Fund Tranfers (EFTs)Electronic Fund Tranfers (EFTs)  For more than 30 years ,banks have beenFor more than 30 years ,banks have been using electronic fund transfers (also calledusing electronic fund transfers (also called wire transfers), which the electronicwire transfers), which the electronic transmission of account exchangetransmission of account exchange information over private communicationinformation over private communication networks.networks.