Electronic data interchange (EDI) allows companies to exchange electronic data between organizations using standardized transactions. EDI is estimated to facilitate $500 billion worth of goods exchanged annually and usually operates over value-added networks. It streamlines business processes by enabling electronic proposals, contracts, shipping notices, invoices and payments between retailers, manufacturers and suppliers in a standardized, efficient manner. EDI requires organizations to agree on compatible hardware, software and format standards to ensure interoperability of electronic data exchange.

1. ELECTRONIC DATA INTERCHANGE
By
Dr. H.S. ABZAL BASHA, M.B.A., Ph.D., L.L.B.
Assistant Professor,
Department of Management Studies,
G. Pullaiah College of Engineering & Technology,
Kurnool.

2. Inter - Organization E - Business

3. EDI: Electronic Data Interchange
■ What is EDI?
■ Exchange of electronic data between companies using precisely defined
transactions
■ Set of hardware, software, and standards that accommodate the EDI
process
■ “EDI is the forefather / pre-cursor of B2B”
■ Estimated $500 billion worth of goods per year
■ EDI: usually over value-added networks (VANs)

4. Electronic Data Interchange

5. Relation Between Retailers, Manufacturers & Suppliers in EDM

6. How Does Electronic Data Exchange (EDI)Work ?
– Supplier’s proposal sent electronically to purchasing organization.
– Electronic contract approved over network.
– Supplier manufactures and packages goods, attaching shipping data
recorded on a bar code.
– Quantities shipped and prices entered in system and flowed to invoicing
program; invoices transmitted to purchasing organization

7. – Manufacturer ships order.
– Shipment notice EDI transaction sent (not shown)
– Purchasing organization receives packages, scans bar code, and compares
data to invoices actual items received.
– Payment approval transferred electronically.
– Bank transfers funds from purchaser to supplier’s account using electronic
fund transfer (EFT).
How Does EDI Work ? (Cont.)

9. Electronic Data Interchange Standards
■ EDI requires companies to agree on standards
– Compatible hardware and software
– Agreed upon electronic form format
■ Established EDI standards
– Automotive Industry Action Group (AIAG)
– X.12 de facto umbrella standard in U.S. and Canada
– EDI for Administration, Commerce, and Trade (EDIFACT) umbrella of
standards in Europe

10. HowTo SubscribeTo EDI ?
■ Larger companies purchase hardware and software
■ Medium and small companies seek third-party service
– Value-added networking (VAN)
– Managed network services available for a fee

11. Electronic Data Interchange OnTheWeb
■ Advantages of Web EDI
– Lower cost
– More familiar software
– Worldwide connectivity
■ Disadvantages of Web EDI
– Low speed
– Poor security

12. The Importance of Electronic Data Interchange
■ Need for timely, reliable data exchange in response to rapidly changing markets
■ Emergence of standards and guidelines
■ Spread of information into many organizational units
■ Greater reliability of information technology
■ Globalization of organizations

13. EDI Software
Database
1. DocumentSupport
2. Mapping
X12
3.Standards Support
4. Translation
Communications

14. Value Added Network (VAN)
o A Value Added Network (VAN) is a private network provider used to facilitate
electronic data interchange (EDI).
o In the 1980s, VANs emerged as a way to connect supply chain participants.
o They offered store-and-forward mailboxes and were deployed to help trading
and supply chain partners automate many business-to-business
communications and thereby reduce the number of paper transfers needed.

15. Point-to-Point: EDI Without aVAN
Buyer
1
2
3
4
A
B
C
D
Supplier

16. Value Added Network (VAN) EDI:
1
2
3
4
A
B
C
D
Buyer Supplier

17. Interconnect Strategy OfVAN EDI
GEVAN
AT&T
VAN

18. Percent
Customer/supplier
requirement
Cost savings
Data accuracy/error reduction
Quick access to data
In 2006, EDI grew substantially due to customer / major supplier requirements or requests. EDI
is an element used to streamline business processes.
Why do Companies use EDI?
0%
10%
20%
30%
40%
60%
50%
1990 1995 2000 2005 2006

19. EDI
USERS
Government Health care Retail Grocery Transportation
Policy
Insuranc
e
Manufacturing
Automotive
Petroleum
Electronics
Chemical
Banks
Construction
Advertising

20. Please write to abhishek0889@gmail.com for any queries or concerns.