Introduction to EDI Basics


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This presentation provides a high level introduction to the area of EDI before then giving a brief introduction to each area of the site. The website provides a wealth of resources and downloads including message standards, industry specific EDI standards, communication protocols and the many different ways in which EDI services can be deployed across the extended enterprise. – Updated April 2013

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  • Now before I go and introduce the content of EDI Basics, I thought it would be useful to take a few steps back and provide a brief overview of what EDI actually is and why so many companies today rely on this as the basis of their business to business communications.
  • In its simplest form, Electronic Data Interchange, (EDI), is the computer to computer exchange of standard business documents in electronic format between two companiesEDI has been in use for many years now and it is the backbone on which many companies have developed their B2B or e-Commerce strategies. EDI can take place primarily across private networks such as value added networks or across the internet, either way, customers demand that their documents are sent and received securely to their trading partners.EDI essentially operates under two principals, firstly electronic documents replace paper ones and secondly the exchange of documents takes place in a standardised format
  • Today’s supply chains rely on a number of different business documents to be exchanged between companies in order to keep business processes running smoothly. EDI has the ability to replace all major business documents used to order, deliver and receive goods. For example Purchase Orders, Customs Declaration forms, Invoices or delivery notes. Each type of EDI document has to be constructed to adhere to global EDI document standards. But before we discuss EDI in a little more detail, let us take a look at a typical manual ordering process so that you can see how complex the ordering process becomes and where possible errors can arise.
  • So why use EDI?, well to illustrate just how complex a paper based business process can become, let us just walk through this diagram which highlights the key information exchanges between a buyer and a supplier.First of all the buyer must query the procurement system in order to create an order, this is then printed, placed in an envelope and then mailed to the supplierThe paper based order is then received by the supplier who then enters the sales order into their own accounting systemFrom there the supplier needs to create an invoice, it has to be printed, and placed into an envelope where it is then mailed back to the buyer.The invoice is received by the buyer who will then get it processed by typing it into the accounts payable system. At the same time, the supplier will be contacting the buyer to arrange for a payment to be made. So as you can see there are plenty of opportunities for errors to be introduced into the ordering and invoicing process.
  • As you saw on the previous slide, paper based processes can become complex. An alternative to this would be for a company to implement EDI to automate these manual processes.Using EDI, the buyer raises the Purchase Order (PO), with EDI software which can be automatically transmitted to the seller in near real timeThe seller’s order entry system receives the PO and an acknowledgement is transmitted back to the buyer with delivery confirmation. I guess you could compare the acknowledgement as an equivalent to a delivery receipt on an email system, it provides confirmation that the document has been delivered OK.So, as you can see, what can take up to 5 days to complete with paper and manual processes can be achieved in a matter of minutes with EDI.
  • So what does an EDI message actually consist of ?, well, before the EDI message is created the content of the message needs to be generated. One way of achieving this for example is to use a simple web based form which precisely replicates the paper based document. Alternatively, a number of translators are available to convert the output from accounting packages and other business software into EDI documents.Paper based documents are posted in envelopes and it is possible to mail many documents in one envelope. The same scenario is possible with sending electronic documents via EDIAMessage envelope defines the start and end of an electronic documentFunctional Group envelopes contain all message envelopes of a specific type, eg POs, invoices etcInterchange envelopes enclose all functional group envelopes
  • This diagram helps to illustrate what happens to an EDI document as it passes from one user to another. As shown on the previous slide, the document is prepared in a suitable business application and it is then translated into an EDI based document format ready for transmission.The EDI document is then sent via a suitable communication protocol, to in this case a Value Added Network provider such as GXS. The EDI document would arrive in a specific mail box where the relevant trading partner would be able to retrieve it from.
  • EDI can be implemented in a number of different ways and delivered through a number of pricing models.The traditional pricing model for EDI uses the number of characters in an EDI document as the basis of working out a price for transmitting the document. The more characters in a document or the more documents that are sent across a network, then the higher the pricing will be on a monthly basis. Each customer is billed on a monthly basis to show how many KCs they transmitted for that month.For companies that do not wish to install their own EDI software, using subscription based delivery models can provide the easiest way for any company, of any size, to conduct EDI with their trading partners. With no software to install or maintain, it can provide the ideal way to send EDI documents for many companies. The pay as you go type payment model allows companies to pay for the rights to use EDI software typically on an annual or monthly basis.The final option would be for a company to implement their own EDI software, which will require buying the software outright and then paying a monthly or annual fee for maintenance and software updates. The only problem with this approach is that this will be proprietary software which will have to be installed with every trading partner that a company wishes to conduct business with.
  • So now that we understand what EDI is, what benefits can a company expect to obtain by deploying an EDI solution?
  • EDI provides many business benefits, and these can be broadly categorised into three main areas. EDI provides Speed, improved accuracy and reduced costs of doing business with a trading partner community.From a speed perspective, EDI allows electronic business documents to be transmitted around the world in a matter of secondsInformation that is sent via EDI can be immediately used by internal applications such as SAP or Oracle based ERP systems. When receiving paper based documents for example, companies would have to re-key in the information, adding valuable time to the business process.Finally, as documents such as invoices can be exchanged almost immediately it means that payment times are reduced considerably, providing a significant competitive advantage to any business.
  • One of the fundamental drawbacks of doing business with paper based documents is the amount of manual intervention that is required to process them. This leads to mistakes being made and reduces the accuracy of documents being exchanged with trading partners.Using EDI helps to eliminate the need for copying data between paper based documentsEDI helps to minimise errors caused by manual updates or intervention.In summary, EDI helps to reduce re-work of business documents, there is no re-keying of information, there is no copying of information between systems. As the information being transmitted is in electronic format already it can be readily used in different applications almost immediately.Improving the accuracy of business documents helps to improve the overall efficiency of a company’s supply chain.
  • In today’s tough economic environment, anything that can be done to reduce operational costs helps to improve overall profitability of a business.As EDI helps to automate manual processes, it not only shortens ordering processes and delivery cycles but more importantly it helps to reduce inventory levels and other associated costs.Automating the exchange of business documents through EDI helps companies to significantly reduce overhead costs through the elimination of manual handling in areas such as mailroom, sorting and circulation, clerical documentation and data entry
  • EDI is used across many industries and different geographical regions around the world. As you would expect a number of EDI related standards have emerged over the years.
  • Even though EDI provides a quick and efficient means to transfer business documents, EDI documents are often created by many different applications and business systemsFor this reason a number of document related EDI standards have been put in place to control the format of the EDI document as it is exchanged across an extended enterprise.As well as provide a standard format for how EDI documents are exchanged, standards help to ensure that EDI documents can be exchanged smoothly from one user to another. If no standards existed then companies all over the world would be forever translating EDI documents to allow them to be read by different business systems.In addition to document standards, each region around the world has established a number of industry based EDI standards which specify how companies exchange documents within an industry sectorSo let me now highlight some of the key document and industry based EDI standards in use around the world.....
  • Each industry sector has a number of standards and company led organisations associated with it. In the automotive industry, the Automotive Industry Action Group looks after the B2B and EDI standards for automotive companies in North America. Odette, Galia and VDA look after EDI standards within the European automotive industry. Finally JAMA looks after the needs of the automotive industry in Japan.VICS , Voluntary Inter-industry Commerce Standards is one of the main EDI related groups helping to define EDI standards within the retail sector.EDIFICE is the leading organisation responsible for developing B2B standards in the European high tech industry. The aerospace industry in Europe has BOOST supporting the major aerospace companies such as Airbus and EADS. Finally, SWIFT, Society for Worldwide Interbank Financial Telecommunication, looks after the development of global B2B standards within the financial industry.Even though there may appear to me many industry standards, they all have the same goal and that is to make it easier for companies to trade electronically within their respective industry sectors.In recent months there has been a number of examples of industry associations working together. For example due to the convergence of the high tech and automotive industries, ie more electronic systems and devices finding their way into cars, EDIFICE and ODETTE work closely on joint standards across these particular industry sectors.
  • In today’s business environment, companies need to be able to exchange business documents of any type with customers and suppliers. These documents can be created in a number of different business applications such as Microsoft Office, Sage, Quick-books and SAP for example.Document mapping is the process of creating a suitable EDI document for transmission and the EDI document can either be in ANSI format, for American business documents, UN/EDIFACT for the rest of the world or possibly in an open standard such as XML. XML has seen limited deployment in recent years with many companies preferring to use the more established EDI standards such as ANSI or UN/EDIFACT.Document mapping is a core requirement of any EDI project and will often require skilled personnel to generate the maps, this is often a key area that companies will look to outsource as part of an EDI related B2B project.
  • In addition to industry and document standards, another area where standards are deployed is communications. EDI has been in use for many years now and over this time a number of communication protocols have been developed. Not only are there legacy communication protocols such as X.25, X400 and IBM’s MQ series, but in recent years a number of new internet based communication standards have been introduced, for example, AS2, AS3, HTTPS and SFTP. One of the most recent communication standards to be introduced is OFTP2, a new internet based protocol that allows large files to be exchanged securely via both the use of digital signatures and file encryption.It is important for an EDI provider to support as many of these communication protocols as possible, this allows trading partners to have the choice of how they connect with their customers. Providing support for a broad range of communication protocols, means that trading partners can be on-boarded in a shorter period of time, irrespective of the communication protocol they may prefer to use.
  • Now many companies today simply do not have the internal resources to deploy an EDI platform, so one option is to choose an EDI vendor who offers an outsourcing service.
  • EDI is often seen as a complex area of IT and many companies do not have the internal skills necessary to implement and manage EDI or B2B infrastructuresWhether it is creating document maps for business documents, choosing the correct communication links to connect with Trading Partners or providing integration to an ERP system, Outsourcing offers an easy route for companies to be able to implement EDI for the first time. Outsourcing the management of an EDI infrastructure allows a company to improve and streamline business processes across their extended enterprise
  • Another major benefit of outsourcing is that it allows a community of trading partners to be managed more efficiently. Trading partner management is often a time consuming process, especially when trying to onboard new partners, in new countries around the world. Outsourcing the management of trading partners removes this problem. Outsourcing the management of an EDI infrastructure also helps to provide global support coverage, this is more important these days as companies look to leverage suppliers in low cost or emerging markets. Having an outsourced support model allows your company to offer 24 by 7 global support in multiple languages.Finally and more importantly, outsourcing helps companies to focus on what matters most, their core competency, manufacturing goods for sale or providing other services rather than managing their EDI infrastructure. Many companies should be more interested with increasing operational profits rather than managing trading partners or trying to understand how to implement the latest communication protocols.
  • So now that I have provided a brief introduction to EDI, let me now describe how the EDI Basics microsite can provide a valuable resource to improve the way in which you conduct business electronically with your trading partners and customers.
  • The What is EDI section provides an introduction to what EDI actually is and why there is a need for companies to automate manual paper based documents.This section discusses what an EDI message actually consists of, namely a data segment, element and EDI envelope and then goes on to discuss the steps involved with automating manual paper based processes
  • The Benefits of EDI section provides a summary of the key business benefits of implementingEDIThis section starts by highlighting some of the cost benefits that can be realised by automating manual paper based processes and offers some real life examples of the ROI obtained. This section then goes on to discuss how the electronic transfer of business documents can help to improve speed and accuracy of exchanging documents. Finally the section discusses some of the business related benefits at both an efficiency and strategic level.
  • The Costs of EDI section discusses some of the considerations that need to be taken into account relating to the cost of implementing EDI through either in house software or by working with a third party EDI provider sometimes referred to as a value added network or VAN.From an in house perspective companies need to take into account a number of areas, for example cost of the EDI software, communications software and the resources or software required to create document maps.If using an external EDI provider, companies need to be aware of the different pricing models depending on the functionality or level of service you might be looking for. For example EDI services can be delivered pay as you go , monthly or via an annual subscription. The exact type of cost model will depend on the volume and frequency of documents being exchanged.
  • The Things to Consider section describes all the various considerations that should be taken into account when planning for the implementation of an EDI platform. The more things that can be considered and planned for ahead of the implementation process, the more smoothly the implementation process should be. For example what business processes need to be automated, how will you connect with external trading partners and what questions to ask of your EDI service or VAN provider.
  • The Types of EDI section looks at the many different ways in which EDI can be enabled across a trading partner community. Whether you are looking to expand into new regions around the world or simply on-board really small suppliers with no EDI experience there will be an EDI format to support any business process.Whether you need to establish a point to point connection or implement EDI over an AS2 connection, this section of EDI Basics will also provide some background on the key ways to achieve different types of EDI connectivity.
  • The Implementing EDI section discusses the best approach to undertake an EDI implementation project. Undertaking an EDI project is not as easy as simply installing a piece of software, there are many considerations that have to be taken into account, both internal and external to the organisation.This section of the site discusses the ten key steps required to successfully implement an EDI system. From undertaking a strategic review of existing operations to selecting the right EDI network provider, from deciding which back end systems to integrate with to on-boarding new trading partners. This section provides a wealth of information to bring success to your EDI project.
  • The EDI by Industry Section discusses the many ways in which EDI is implemented across different industries. EDI is used to address many different business challenges across industries such as automotive, high tech, retail, CPG and financial services.This section of the website will discuss some of the more important EDI standards used across the afore mentioned industries and looks at some of the more regional standards and industry bodies that help to provide a common way to implement EDI in different countries around the world.
  • The EDI Resources section provides a valuable source of information relating to EDI and how it can be deployed within a companyWithin this section you can download numerous EDI related collateral including whitepapers, best practice documents and case studies.
  • The EDI Resources section also provides a more detailed overview of the various communication and messaging standards that are in use todayYou will also find a useful multi-media archive of videos, webinars and audio recordings. This area also has a sample EDI RFP and an online quiz so that you can test your knowledge of everything to do with EDI.
  • The FAQs section answers some of the more common EDI related questions that a visitor to the website may haveThis particular area of the website allows a new user of EDI to get up to speed very quickly with some of the key concepts and terminology
  • The Glossary section provides a useful list of the key words and acronyms used in the EDI industry today.
  • The Contact GXS section allows you to contact GXS directly.This section also provides a very brief introduction to GXS and the industry sectors that we serve.
  • GXS has recently made EDI Basics available as a mobile friendly website. Whether you have an Apple iPad, iPhone or other mobile device, the site has been modified to suit the screen size and download speed of today’s mobile devices.
  • The AS2 Basics link allows you to find out more detailed information about the AS2 communication protocol. AS2 Basics is very similar in nature to EDI Basics in that it is a learning resource to understand more about what AS2 is and how companies are deploying it today.AS2 is an internet based communications protocol which is widely used across the retail sector
  • Thank you for taking the time to watch this presentation. I hope you have found it informative and I would now like to provide the web addresses for the local language versions of the EDI Basics Microsite.EDI Basics is now available as a dedicated microsite in the UK, France, Germany, Hungary, Netherlands and China. Please follow one of the following links to visit the most appropriate site for you.UK – – www.edipourtous.frGermany – www.edileitfaden.deHungary – www.edibasics.huDutch – www.edibasics.nland China – www.edibasics.cnThanks again for listening to this video presentation, good bye.
  • Introduction to EDI Basics

    1. 1. © Copyright 2013, GXS Sponsored bySlide 1
    2. 2. © Copyright 2013, GXS Sponsored bySlide 2What Exactly is EDI?
    3. 3. © Copyright 2013, GXS Sponsored bySlide 3What is EDI?• Electronic Data Interchange (EDI), is the computer-to-computerexchange of standard business documents in electronic formatbetween two companies• EDI operates under two principles, firstly electronic documents replacepaper ones and secondly the exchange of documents takes place in astandardised format
    4. 4. © Copyright 2013, GXS Sponsored bySlide 4EDI Replaces Paper-BasedBusiness DocumentsPurchaseOrdersInvoicesASN/DeliveryNoticesCustomsDeclarationForms
    5. 5. © Copyright 2013, GXS Sponsored bySlide 5Why use EDI?
    6. 6. © Copyright 2013, GXS Sponsored bySlide 6The EDI Alternative• The buyer raises a Purchase Order (PO) with EDI software, which canbe automatically transmitted to the seller in near real-time• The seller’s order entry system receives the PO and anacknowledgement is transmitted to the buyer with delivery confirmation• What can take five days with paper takes minutes with EDI
    7. 7. © Copyright 2013, GXS Sponsored bySlide 7What Does an EDI MessageConsist of ?• Paper-based documents are posted in envelopes and it is possible tomail many documents in one envelope, EDI is just the same• A “message envelope” defines the start and end of a document• “Functional Group envelopes” contain all message envelopes of aspecific type, eg POs, invoices etc• “Interchange envelopes” enclose all functional group envelopes
    8. 8. © Copyright 2013, GXS Sponsored bySlide 8What are the Basic Steps for EDI?
    9. 9. © Copyright 2013, GXS Sponsored bySlide 9So How Much Does EDI Cost toImplement?• EDI can be provided viadifferent pricingmodels, namely:– priced by the number of kilo-characters (KC’s) contained within anEDI document– subscription models allow pay-as-you-go, monthly or annual contracts– EDI software can be purchased withongoing maintenance contracts
    10. 10. © Copyright 2013, GXS Sponsored bySlide 10What are the Benefits of Using EDI?
    11. 11. © Copyright 2013, GXS Sponsored bySlide 11Need for Speed• Sending an electronic messagelocally or globally takes seconds• Information sent by EDI is availableimmediately for use within internalapplications• Faster receipt of documents canprovide a competitive edge in anybusiness
    12. 12. © Copyright 2013, GXS Sponsored bySlide 12Need for Accuracy• Electronic transfer of businessdocuments– eliminates the need for copyingdata between paper-baseddocuments– eliminates errors caused bymanual updates or intervention– helps to reduce re-work
    13. 13. © Copyright 2013, GXS Sponsored bySlide 13Competitive Advantages of EDI• Reduces inventory costs through theshortening of order processing anddelivery cycles• Reduces overhead costs throughelimination of manual handling inareas such as mailroom, sorting andcirculation, clerical documentationand data entry
    14. 14. © Copyright 2013, GXS Sponsored bySlide 14What EDI Standards are in Use?
    15. 15. © Copyright 2013, GXS Sponsored bySlide 15EDI Standards• EDI standards help to ensure thatelectronic business documents canbe exchanged between companieswith ease• There are many different EDIstandards in use locally andaround the world
    16. 16. © Copyright 2013, GXS Sponsored bySlide 16EDI Industry Standards• Different industry sectors havetheir own set of standards forprocessing electronic documents• Industry groups such as EDIFICE(high-tech) and Odette(automotive) represent theirindustry groups but also worktogether to share standardsacross the automotive and high-tech sectors
    17. 17. © Copyright 2013, GXS Sponsored bySlide 17EDI Document Standards• Companies need to be able toexchange documents of any typewith customers and suppliers• Mapping is the process used toconvert business documents tothe required EDI format• Document mapping requiresskilled staff to generate the maps
    18. 18. © Copyright 2013, GXS Sponsored bySlide 18EDI Communication StandardsVAN / B2BServicesProviderCompanies can use a variety of communicationprotocols to connect with each other,OFTP2
    19. 19. © Copyright 2013, GXS Sponsored bySlide 19What is EDI Outsourcing?
    20. 20. © Copyright 2013, GXS Sponsored bySlide 20EDI Outsourcing• Many companies do not have theinternal skills necessary toimplement and manage EDI or B2Binfrastructures• Outsourcing can offer an easyroute for companies to implementEDI for the first time• Companies can streamline internaland external business processeswith EDI outsourcing
    21. 21. © Copyright 2013, GXS Sponsored bySlide 21EDI Outsourcing• EDI outsourcing helps companiesto manage their own internal EDIinfrastructure and also that of theirtrading partner community• Outsourcing can provide globalsupport capabilities• It enables companies to focus ontheir core competencies ratherthan on managing their EDIinfrastructure
    22. 22. © Copyright 2013, GXS Sponsored bySlide 22Let’s Take a Tour of theEDI Basics Website!
    23. 23. © Copyright 2013, GXS Sponsored bySlide 23What is EDI?• What is EDI section provides:– an introduction to EDI and whythere is a need for companiesto automate manual paperbased documents– an overview of how businessprocesses can be simplifiedthrough the introduction of EDI
    24. 24. © Copyright 2013, GXS Sponsored bySlide 24Benefits of EDI• Benefits of EDI sectiondiscusses:– cost savings that can berealised– benefits of increased speedand accuracy in sendingelectronic documents– improvement in businessefficiency– how EDI provides a strategiccompetitive advantage
    25. 25. © Copyright 2013, GXS Sponsored bySlide 25Costs of EDI• Costs of EDI sectiondiscusses the financialaspects of :– establishing an in house orbehind the firewall EDI basedsolution– using a third party EDIprovider and the various costmodels used to exchangebusiness documentselectronically
    26. 26. © Copyright 2013, GXS Sponsored bySlide 26Things to Consider• Things to Consider sectiondiscusses :– the considerations to be takenwhen implementing EDI– what type of transactionsneed to be automated?, howwill you connect to externaltrading partners? what type ofinternal resources will berequired to manage theimplementation?
    27. 27. © Copyright 2013, GXS Sponsored bySlide 27Types of EDI• Types of EDI sectiondiscusses:– the different ways in which EDIcan be enabled across atrading partner community– the differences between usingpoint to point versus internetbased EDI– whether to use a behind thefirewall software solution or anoutsourced EDI service
    28. 28. © Copyright 2013, GXS Sponsored bySlide 28Implementing EDI• Implementing EDI sectiondiscusses:– the best way to startimplementing an EDI platform– the ten key steps required toimplement an EDI platform.This area covers topics suchas undertaking a strategicreview, selecting the right EDInetwork provider and on-boarding trading partners
    29. 29. © Copyright 2013, GXS Sponsored bySlide 29EDI By Industry• EDI by Industry sectiondiscusses:– the many different ways inwhich EDI is implementedacross different industries– the different document orcommunications standards inuse today and the importanceof regional industry bodies tohelp drive a standardisedapproach to implementing EDI
    30. 30. © Copyright 2013, GXS Sponsored bySlide 30EDI Resources• EDI Resources sectionprovides:– a valuable source ofinformation relating to EDI andhow it can be deployed withina company– ability to download EDIwhitepapers, bestpractices, case studies andEDI standards relatedinformation
    31. 31. © Copyright 2013, GXS Sponsored bySlide 31EDI Resources• EDI Resources section alsoprovides:– more detailed overview of thevarious communication andmessaging standards that arein use today– useful multi-media archive ofvideos, webinars , audiorecordings and even an onlinequiz to test your knowledge ofEDI
    32. 32. © Copyright 2013, GXS Sponsored bySlide 32FAQs• FAQs section providesanswers on:– common EDI-related questionsthat a visitor to the websitemay have– how new users of EDI can getup-to-speed quickly with keyconcepts and terminology
    33. 33. © Copyright 2013, GXS Sponsored bySlide 33Glossary• Glossary section provides auseful list of the key wordsand acronyms used in the EDIindustry today
    34. 34. © Copyright 2013, GXS Sponsored bySlide 34Contact GXS• Contact GXS section allowsyou to contact GXS directly• This section also provides avery brief introduction to GXSand the industry sectors thatwe serve
    35. 35. © Copyright 2013, GXS Sponsored bySlide 35EDI Basics Mobile Site
    36. 36. © Copyright 2013, GXS Sponsored bySlide 36AS2 Basics• AS2 Basics link allows you tofind out more detailedinformation about the AS2communication protocol• AS2 is an internet basedcommunications protocolwhich is widely used acrossthe retail sector
    37. 37. © Copyright 2013, GXS Sponsored bySlide 37Thank You• UK English• French• German• Hungarian• Dutch• Chinese