EDI on technology

1. 1
INTRODUCTION
• Technology continually offers new and innovative
techniques that affect companies and individuals:
1. Cordless telephone
2. Video games
3. fax machines
4. Answering machines
5. Notebook computers
6. Electronic mail (e-mail)
7. ATM card
• We are in the midst of the e-communications era
• One innovation is electronic data interchange
– causing major changes in how companies conduct business

2. EDI IN ACTION
• In a traditional system, the pervasive practice
of converting digital data into hard copy data
that is reconverted into electronic information
again on the receiving end generates
unnecessary costs. The use EDI carriers save
substantial administration costs by eliminating
the bulk of circulating paperwork. Further,
the accessibility of information is improved
manifold, which enables a more efficient audit
of the operation.

3. EDI IN ACTION
The EDI transactions for a purchase, shipment and
corresponding payment are as follow:
• Buyer’s computer sends Purchase Order to seller’s computer
• Seller’s computer sends Purchase Order Confirmation to
buyer’s computer
• Seller’s computer sends Booking Request to transport
company’s computer
• Transport company’s computer sends Booking Confirmation
to seller’s computer
• Seller’s computer sends Advance Ship notice to buyer’s
computer
• Transport company’s computer sends status seller’s computer
• Buyer’s computer sends Receipt Advice to seller’s computer
• Seller’s computer sends Invoice to buyer’s computer
• Buyer’s computer sends Payment to seller’s computer.

4. 4
WHAT IS ELECTRONIC
DATA INTERCHANGE
(EDI)?

5. EDI is defined as an application-to-application
transfer of business documents between
computers using industry-defined standards

6. 6
WHAT IS ELECTRONIC DATA
INTERCHANGE?
• A Definition From Book:
– EDI is computer-to-computer communication
using a standard data format to exchange business
information between companies.
• Ex:
– Consider the Postal System

7. EDI is a comprehensive set of standards and protocols for the
exchange of business transactions in a computer-
understandable format. This may cover applications
such as the following:
• Acknowledgment of business transactions
• Financial reporting
• Inquiries
• Invoices Order status
• Payments
• Pricing
• Purchasing
• Receiving
• Scheduling

11. 11
EDI Example

12. 12
EDI USERS AND TYPES OF
ACTIVITIES

13. 13
EDI USERS AND TYPES OF
ACTIVITIES
SECTION OUTLINE:
– Who Uses EDI?
– Where is uses EDI?
– Types of EDI Activity
– Business Processing Considerations

14. 14
EDI USERS AND TYPES OF
ACTIVITIES
Who Uses EDI? (From Book)
• Companies of all types and sizes are able to utilize EDI.
• Ex. Some large corporations specify EDI :
– Use as the communication method of choice
– Automakers
•suppliers to send all purchase orders and invoices electronically
– Industry
– banking
– healthcare
– retailing
– travel
– Manufacturing
– insurance
– Government

15. 15
EDI USERS AND TYPES OF
ACTIVITIES
Who Uses EDI? (From Net)
• Any company that (buys, sells goods, services) can
potentially use EDI.
• Because it supports the entire business cycle
• EDI can streamline the relationship that any company has
with its (customers, distributors, suppliers)

16. 16
EDI USERS AND TYPES OF
ACTIVITIES
Where Is Uses EDI?
– Sample EDI application areas
– EX:
• Inventory
• Billing
• Distribution
• Price notification
• Financial
• Freight rate notifications
• Sales & cash management
• Purchasing

17. 17
EDI USERS AND TYPES OF
ACTIVITIES
Types of EDI Activity
• Currently EDI is primarily used for:
• Purchase orders
• Bills of lading
• Invoices
• Healthcare claims
• Financial exchanges

18. 18
EDI USERS AND TYPES OF
ACTIVITIES
Types of EDI Activity
Difference between EDI & electronic funds transfer (EFT)
• EFT is also used to exchange information electronically.
• Financial EDI is the exchange of payment and bank balance information
between a company and its bank or another company.
• EFT is the exchange of information between two banks that results in value
being transferred.
• It is possible for financial EDI to be bank to bank, but EFT does no bank-
to-company exchanges.

19. 19
EDI USERS AND TYPES OF
ACTIVITIES
Business Processing Considerations
• EDI is changing the way companies do business
• shifting the ordering process from a snail-like
• paper-intensive system to a computerized one
• The nature of business relationships, both internal and
external, is changing

20. 20
EDI USERS AND TYPES OF
ACTIVITIES
Business Processing Considerations
• Ex:
– A salesperson who used to receive and write orders has
become a product advisor
– Customers conducting business with firms that have
multiple divisions now request centralized electronic
transmission

35. COMPONENTS OF EDI
 Trade agreement
 Standard document format
 EDI translation management Software
 Communication software
 Modem
 VAN
 Point-to-Point

36. Benefits of EDI to Industry
The benefits and advantages are shared by both the
trading partner submitting EDI
information. Some of the benefits derived by industry
by using EDI are:
• Improved reporting performance
• Time savings
• Eliminates manual preparation and transfer of paper
documents.
• Cost savings Reduces paper costs, storage
requirements and handling overhead.
• Improved accuracy
• Improves customer service.
• Enhanced flexibility

37. Improves quality of products and services.
Improves relationships with suppliers and
customers.
Reduces order lead times.
Improves cash flow
Creates better procedures
The elimination of data re-entry, resulting in
reduced errors
Reducing days in accounts receivable
Increasing staff productivity

38. The major factors that have limited the use of traditional EDI are:
◗ Significant initial investment is needed, and ongoing operating
costs are high.
◗ Business processes must be restructured to fit EDI requirements.
◗ A long start-up time is needed.
◗ Use of expensive, private VANs is necessary.
◗ There are multiple EDI standards, so one company may have to
use several standards.
◗ An EDI cannot support dynamic trading in marketplaces.
◗ The system is complex.
◗ A converter is required to translate business transactions to EDI
code.
◗ The system is inflexible; it is difficult to make quick changes, such
as adding business partners.

42. Fig. 56 Application of EDI transaction in a manufacturing concern

44. EDI TRANSMISSION
There are 3 basic ways of transmitting EDI
documents through computers.
Value Added Networks
Interconnect Transmission
Direct Transmission

45. Value Added Networks :-
 The VAN acts as a clearing house to send and/or
receive data.
 Data to be transmitted can be stored by the VAN and
delivered on demand.
 Data can be archived and delivered a second time if
necessary without retransmission from the sender.
 The data transmission is secure, and VANs may also
provide messages for tracking transmission success.
For all these reasons , VANs are widely used to transfer EDI documents all
over the world. However , they are uneconomical for small enterprises
sending large amounts of data , since VANs charge for the amount of data
transferred , without due regard to the time taken.

46. Interconnect Transmission :-
Variation of VAN transmission.
Interconnects 2 VANs together.
Employed when trading partners
subscribe to different VANs.

47. Direct Transmission :-
EDI transfers data directly between trading
partners
Each partner must take care of auditing details , security ,
etc.
Direct transmission, vs. using a VAN, is far more economical
when exchanging a large volume of data.
Direct transmission provides a means of communication for
trading partners not using a VAN.

48. EDI APPLICATIONS
EDI is currently being utilized only in a limited realm of
activities, in spite of its enormous capabilities . It is so under-
tapped , that the industry joke goes that several companies are even
unaware of the expansion of EDI. As of now ,it is being used in the
following areas,apart from purely business purposes.
Streamlining buyer - seller interaction .
Quick transcript exchange in universities .
Transmitting large , complex engineering designs created
on specialized computers , in auto manufacturing .
Sending on-line catalogues to customers on product-
prices , discounts & terms , for large MNC s .

49. Legal and Privacy
concerns

50. One way of legal & security issue is Digital
signatures. The technical uses of digital signatures
are :-
1. Messages are time- stamped or digitally notarized
to establish dates and times at which a recipient
hard access or even read a particular message.
2. These signatures are to replace handwritten
signatures, as it is same legal status as handwritten
signatures.
3. Digital signatures should have greater legal
authority than handwritten signatures

53. THE LEGAL ISSUES OF ELECTRONIC COMMERCE AND DEVELOPMENTS
IN INDIA
ISSUES ADDRESSED BY DRAFT E-COMMERCE ACT
(Model Law of UNCITRAL on Legal Aspects of EDI )

54. In a world of paper documents, the established norms of contract
and commercial law have been sufficient to resolve legal disputes
concerning these documents. However, in an EDI setting, new
risks and problems are involved, requiring new modes of thinking
and behavior.
e.g.
When does an EDI transaction become binding ?
What can be done in place of a signature ?
Who bears the risk of erroneous transmission, lost record, fraud ?
etc..,

55. In general, the legal issues that are raised by the use of
EC/EDI include
evidential,
contractual, and
liability issues.

56. The evidential issues of EDI have two distinct aspects. The first
considers the questions of admissibility, whether an electronic
document is admissible as evidence in court. The second aspect
considers the need to have trade data properly authenticated,
the requirement to be signed.
The contractual issues of EDI considers the impact that the
use of EDI may have on traditional contract formation.
Within an EDI network, there exists two major relationships,
those between service providers and users; and an agreement
between the users themselves. These relationships leads to
commercial responsibility and extent of liability created through
use of EDI.

57. The Electronic Commerce Act of 1998 aims
to facilitate the development of a secure
regulatory environment for Electronic
Commerce by providing a legal
infrastructure governing electronic
contracting, security and integrity of
electronic transactions, the use of digital
signatures and other issues related to
electronic commerce

58. The act provides the definition of all the requisite terms and
addresses the following broad areas:
Electronic Records and Signature Generally;
Secure Electronic Records and Signatures;
Electronic Contracts;
Effect of Digital Signatures;
General Duties Relating to Digital Signatures;
Duties of Certification Authorities;
Duties of Subscribers;
Regulation of Certification Authorities and Repositories;
Government use of Electronic records and Signatures;
Liability of Network Service Providers;
Computer Crime

59. The Electronic Commerce Support Act, 1998 serves to
amend various Indian Acts to facilitate the continued growth
of electronic commerce and to resolve the questions raised
regarding the applicability of such legislation to the unique
features of the electronic regime.
The Act suggest amendments in the following Acts :
Amendments to the Indian Penal Code, 1860 ;
Amendments to the Indian Evidence Act, 1872;
Amendments to the Contract Act, 1872;
Amendments to the Indian Telegraph Act, 1885;
Amendments to the Banker’s Books Evidence Act, 1891;
Amendments to the General Clauses Act, 1897; and
Amendments to the Reserve Bank of India Act, 1934

60. EDI ISSUES

61. EDI AS A TECHNICAL ISSUE
•The Standardisation Issue
EDI AS A STRATEGIC ORGANISATIONAL ISSUE
Organisational Readiness for EDI
Integration with Existing Application Systems
Change Management Considerations
Senior Management Support