Published on

Published in: Technology, Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide


  1. 1. Electronic Data Interchange INFORMATION TECHNOLOGY TRAINING 447 6.1 INTRODUCTION Processing and managing information is a tedious and time-consuming process. In a typical business environment, thousands of transactions happen in a day, managing this task is difficult and prone to human errors during data entry and it is also expensive. The solution to the above problem comes in the form of Electronic Data Interchange (EDI). 6.1.1 What is EDI? EDI refers to the electronic interchange of data between computer systems. More precisely EDI is defined as “The transfer of structured data for processing from computer to computer using agreed formats and protocols.” 6.1.2 Need of Networking Infrastructure EDI assumes availability of a wide area network to which organization can subscribe (Figure 1). All Organizations willing to join EDI services must subscribe to the common network. In addition, all organizations participating in a particular EDI services group should agree to a message format that they will use, and load appropriate EDI software on their computer systems. This software is responsible for providing translation services, EDI services and network services. When a sender’s computer system produces a message and passes it to the translation service software, this translates the message into the common agreed structure and passes it to EDI service software. EDI service software executes necessary functions and procedures to send the message, track it in the network, and ensure that it reaches its destination. LEARNING OBJECTIVES During this chapter, we will learn: What is EDI? EDI Software EDI Services EDI Standards ELECTRONIC DATA INTERCHANGE6 CHAPTER © The Institute of Chartered Accountants of India
  2. 2. Web Technology & System Security and Maintenance INFORMATION TECHNOLOGY TRAINING448 Fig. 6.1.1: EDI Business cycle EDI services, in addition, may include procedures to ensure security functions, building and accounting functions and generate necessary logs for auditing purposes. Network access services are responsible for actually controlling the interaction with the network that transports messages from one site to another. The transport network provides a powerful electronic messaging service to support EDI services. Transport network uses a “store and forward mechanism” and messages are sent to “mail boxes” that are managed by the network service provider. The organization can send his message at any time independent of the recipient’s system status, i.e. whether or not it is ready for receiving. The recipient systems periodically check their mail boxes and transfer messages from network mail boxes to their own memory. Fig. 6.1.2: Processing of EDI Messages © The Institute of Chartered Accountants of India
  3. 3. Electronic Data Interchange INFORMATION TECHNOLOGY TRAINING 449 Thus a transfer cycle is completed. The receiving computer applies necessary translator and convents the received message into a format understandable by its application software. The application software is programmed to recognize various messages and take necessary actions such as generating responses to receive messages and updating other databases. 6.1.3 Features of EDI Traditionally, data transfer from one company to another is done through the paper documents, which have to be manually forwarded and entered to the destination computer. EDI has helped in the electronic exchange of structured business information, in standard formats, between computers. It has reduced data entry link, eliminates the need for a paper bases system and Improved business cycle times by providing an electronic link between companies. EDI is the electronic transfer of structured business documents in an organization internally among groups of departments or externally with its supplies, customers and subsidiaries. In EDI, the information transferred over a network will not have to be read, retyped or printed but it must have a predefined structure agreed between the two company’s which send and receive data. The two companies or groups which exchanged information through EDI are called the Trading partners. The computers, which these trading partners use, need not be from the same manufacturers. Examples of current uses of EDI include information teller machines (ATMs) in banks where EDI is used for transferring and withdrawing funds between different bank accounts, airline reservation systems, stock exchange transactions and car reservation systems. 6.1.4 Working of EDI Companies using EDI communicate with their Trading Partners, in one of the two ways: Exchange of data with several trading partners directly. Interaction with multiple companies through a central information clearing-house. Supplier Supplier Supplier Supplier Supplier Supplier One-to Many Manufacture One-to Many Manufacture Manufacture Manufacture Third Part Vendor ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ Typical EDI Configuration In the latter case, all transactions take place through a third party’s computer system, which then sends them to the appropriate receiver’s computer. This enables the sender to communicate with an unlimited number of trading partners without worrying about proprietary system audit trails, variable transmission speeds, and general computer compatibility. Fig. 6.1.3: Showing Typical EDI Configuration © The Institute of Chartered Accountants of India
  4. 4. Web Technology & System Security and Maintenance INFORMATION TECHNOLOGY TRAINING450 6.1.5 EDI works in the following manner Prior to any computer work, representatives of two companies interested in exchanging data electronically meet to specify the application in the EDI standard which they will important. The two companies exchange date electronically in the standard formats. Each company adds EDI programs to its computer to translate the company data into standard formats for transmission, and for the reverse translation in the data it receives. The sender transmits the database formatted in EDI standards to the receiver who then translates the formatted message to a computer record to be processed and used internally. All transmission are checked both electronically and functionally and the protocol includes procedures for error detection and correction. Once a company has established standardized communications with another company, it is now in a position to communicate with any other company that is also using the EDI standards. The flow of information in EDI is as follows: Collection of data for its own operational or statistical requirements which is edited be added to its own database. Extraction of Pertinent information by the company from its database, summarized if necessary and constructed into EDI transaction sets, and finally it is transmitted to the company or organization requiring it for valid reasons. The frequency of preparing this information is determined by the operational requirements of each recipient. A communications link for transmission is established according to the standard communications protocol. The Receiver receives the information transmission, checks for its physical characteristics (parity check, character, transmission mode), requests for transmission if an error is detected in the physical characteristics of the transmission. Checking the functional characteristics of the data receiver and an acknowledgement sent to the original sender for receiving the transmission and to identify any errors detected. To process the information received by the receiver according to its own internal procedures and timing requirement. 6.1.6 Benefits of EDI The main advantage of EDI is that it has helped in reducing the traditional paper based document transfer system, which is highlighted below: The information transmission in a paper-based system takes place as follows: Generation of a paper document on a form by a software application. Delivery of a few copies of document to the internal departments to be filed and others sent to the trading partner via the postal service. Retyping the document received by the trading partner on the form into their computer which may offer introduce errors. Generation of a paper acknowledgement and sending it to the originating company. © The Institute of Chartered Accountants of India
  5. 5. Electronic Data Interchange INFORMATION TECHNOLOGY TRAINING 451 A considerable length of time may be taken for this transfer of document in a paper-based system. The same task of information transmission can take place through an EDI system in a different manner as follows: Generation of a file containing the processed document by the application program. Conversion of the document into an agreed standard format. Electronic transmission of the file containing the document over the network, which may link the originating company and its trading partner. Arrival of the file containing the documents at the trading partner, translation into the correct format and finally its transfer to the recipient’s application. Automatic generation of the receipt and its delivery over the network to the originating company. The advantage of EDI is now seen when the document is transmitted to the trading partner’s application in a very short period of time and with no human intervention. 6.1.7 EDI Components A typical EDI system converts generic EDI messages (in EDIFACT or any other EDI standard) format to RDBMS format and from RDBMS format to EDI format. RDBMS database contains the data to be translated into EDI format and where EDI data is to be converted (and written). EDI configuration programs do these translations. There are three main components of an EDI system: Application Service Translation Service Communication Service Fig. 6.1.4: Interaction between the three EDI components 6.1.8 File Types EDI creates the following files as a document passes through the system: Internal Format File (IFF) External Format File (EFF) Transmission File Each of these files is described in the following sections: Internal Format File © The Institute of Chartered Accountants of India
  6. 6. Web Technology & System Security and Maintenance INFORMATION TECHNOLOGY TRAINING452 An internal file (IFF) contains a single document for a single trading partner. Internal format file is principally for EDI’s own use. External Format File The external format file (EFF) contains the same date as the internal format file translated into the appropriate standard document format. Transmission File A transmission file contains one or more documents for the same trading partner. Documents of the same type are packaged together in functional groups. The functional groups going to one trading partner are packaged into an interchange set. An interchange set contains one or more functional groups of documents with the same sender and receiver. The following figure is a representation of a transmission file. Fig. 6.1.5: Transmission file 6.2 EDI SOFTWARE Translator Every EDI sender and the receiver should have an EDI translator. It varies based on the computer on which it is going to reside. The computer may be a Micro Computer or Mid Range or a Mainframe System. Translator reads the fixed length file and generates valid EDI standard file and maintains the control information. Application Link Software There are two components of software, which is generally used to link the existing business application to the EDI data. One is the Translator and another is the Application Link software. Application Link software is used to Collect Information from the Business application and then it formats it into a Fixed length computer file and passes it on to the translator. EDI business applications are used to Access Internal Application Accept Key Entered Data Collecting information, which will generate the outgoing document. Information Processing © The Institute of Chartered Accountants of India
  7. 7. Electronic Data Interchange INFORMATION TECHNOLOGY TRAINING 453 Business Application Document Document File Server Callable Routines Management-Interface Internal Format File Internal Format File Application Service 6.3 EDI SERVICES The three EDI services all perform different tasks. The following sections give an overview of what happens in each of three services. 6.3.1 Application Service The Application Service provides the link between a business application and EDI. It allows you to send document to, and receive documents from an EDI system. A set of callable routines is used to transfer documents from the business application into EDI Documents destinations can be either intra-company or to external companies i.e., trading partners. The EDI Application Service holds each incoming and outgoing document as a single internal format EDI converts the document to a standard format and sends it to the trading partner using the relevant communication protocol. A number of different standards and communication protocols are available. The following list describes what happens in the application Service: For outgoing documents: The business application uses the callable routines to send a document from the business application to the Application Service. The document is now in the EDI system and is called internal format file. The Application Service sends the document in the internal format file to the Translation Service. For incoming documents The Application Service receives an internal format file from the Translation Service. The Application Service makes the data in the internal format file available in the database so that the business can fetch the document from EDI. A callable interface is used to do this. 6.3.2 Translation Service Converts outgoing documents from an internal format file to an agreed external format. Translates incoming documents from an external format to the EDI internal format file. The external document standards that an EDI system supports are EDIFACT, X12, TDCC and ODETTE. The following lists describe what happens in the Translation Service: For outgoing documents: The Translation Service receives a document in the internal format file from the Application Fig. 6.3.1: Showing Application Service © The Institute of Chartered Accountants of India
  8. 8. Web Technology & System Security and Maintenance INFORMATION TECHNOLOGY TRAINING454 Internal Format File Internal Format File Transmission File Transmission File File Server External Format File External Format File C T TFB TFS Management-Interface C = Convertor T = Translator TFB = Transmission File Builder TFS = Transmission File Splitter Service. It converts the internal format file to the appropriate external standard (either EDITFACT, X12, TDCC, or ODETTE). The file is now an external format file. The Translation Service combines one or more external format file into a transmission file. The Translation Service now sends the transmission file to the Communication Service. For Incoming documents The Translation Service receives a document in the transmission file from Communication Service. Separates the transmission file to produce external format files. It translates each external from file, which may be in an external standard (either EDIFACT, X12, TDCC or ODETTE) to the internal format file. The file is now an internal format file. The Translation Service now sends the internal format file to the Application Service. Fig. 6.3.2: Translation Service 6.3.3 Communication Service The Communication Service sends and receives transmission files to and from the trading partners either directly or by using party service called a value Added Networks (VAN). The following list describes what happens in the Communication Service: For outgoing documents: The Communication Service receives a transmission file from the Translation Service. It checks the file to see which trading partner it has to be sent to. When it has identified the type of connection to be used for this trading partner it determines which gateway to use. The Communication Service sends the Transmission file to the trading partner. For incoming documents: The Communications Service receives a transmission file from the trading partner. The file arrives through one of the gateways that EDI support. The Communication Service sends the transmission file to the Translation Service. © The Institute of Chartered Accountants of India
  9. 9. Electronic Data Interchange INFORMATION TECHNOLOGY TRAINING 455 Fig. 6.3.3: Communication Service 6.4 EDI STANDARDS The development of new ways of doing business is often paralleled by the development of industry standards. EDI standards fall under the auspices of the American National Standards Institute (ANSI) which chartered the Accredited Standard Committee X12 (ASCX12) in 1979. The ASCX12 Committee’s objective is to develop uniform standards for inter-industry electronic interchange of business transactions. In 1987 UN published its standards and named it as UN/ EDIFACT (EDI For Administration, Commerce and Transport). Most of the UN/EDIFACT standard transaction sets are similar to ASC X12 Standard. Transaction Set Standards: These define the procedural format and data content requirements for specified business transactions, e.g., Purchase orders. Data Dictionary and Segment Dictionary: These define the precise content for data elements and data segments used in building transaction sets. Transaction Control Standards: These define the formats for the information required to control the data interchange. Data movement from one system to another may be initiated in several ways: Inquiry transaction set received from another system. Previously established schedule. Exceptions (management by Exception) Detection of errors in data received from another system Inquiry transaction set generated in response to management needs. The interface computer program and the structure of each type of transaction set are part of the EDI standards. EDI does not address a standard, which extends into a company’s internal system. EDI standards and documentation for transportation include: Information structure System rules and procedures Programming guide Transport set format: Transmission File Transmission File Transmission File Transmission File File Server CC Gateway 1 Gateway 2 Management-Interface CC = Communication Controller © The Institute of Chartered Accountants of India
  10. 10. Web Technology & System Security and Maintenance INFORMATION TECHNOLOGY TRAINING456 Air Motor Ocean Rail Segments, data elements and codes Communications specifications The standards were developed by industry work groups at the Transportation Data Coordinating Committee (TDCC). 6.4.1 VARIABLE-LENGTH EDI STANDARDS The discussion of standards in this section is applicable to all variable-length standards, such as: TDCC: The Transportation Data Coordinating Committee (TDCC) was formed to develop EDI formats for the transportation industry’s four primary segments: air, motor, ocean and rail. This same organization is called EDIA (The Electronic Data Interchange Association) today. UCS/WINS: The Uniform Code Council (UCC) was chosen to oversee the creation and ongoing maintenance of the Uniform Communication Standard (UCS) for the grocery Industry and the warehouse Information Network Standard (WINS). Exercise Questions 1. What are the drawbacks of EDI? 2. How is B2B e-commerce better than an EDI transaction? 3. Does ASC X12 make sense to you? 4. EDI implemented on Internet and EDI implemented on VAN – do they differ? 5. How is a FEDI implemented? Sources: www.Penguin.dcs.bbk.ac.uk www.Hazard.Com www.visual.merriam-webster.com © The Institute of Chartered Accountants of India