Edi Electronic Data Interchange Essay Research Paper

What is EDI? EDI is the transmission of structured data messages between computer applications. This method of moving information has already made great strides into the Automotive, Transport and Retail business sectors in the past few years and looks set to become the primary method of business data transfer in the next century. Why EDI? The concept of the ‘paper-less office’ may still be a contradiction in terms but EDI does at least offer an alternative method to the post, facsimile and telephone services, all of which still generate copious amounts of paper. The use of e-mail has already demonstrated the efficiencies of information sharing in an inter-office environment. EDI is the next step between involving businesses in a inter-company environment. The basic advantages of electronic trading are:- Reduced time sending receiving and processing information. – Reduced inventory stock and storage costs – Increased quality of information – Closer relationships with Trading Partners – Latent potential for other systems. MisconceptionsA common misconception about the EDI industry is that it is some type of videotext service or is some physically remote on-line ordering system. Certainly EDI borders onto these areas but what defines EDI is industry agreed message standards, electronic mailboxes and clearing houses. Another inaccuracy is that EDI is such a technical subject that it can only be developed in an I.T. department. Nothing could be further from the truth. EDI is too important a tool to be left entirely to an I.T. department s control. It defines how you negotiate contracts , how you interact with your suppliers, how efficient you are and how the outside world perceives you. Take the example of Viglen, an innovative leader in the Personal Computer market who now advertise EDI facilities to take electronic purchase orders. They know a fax has to be rekeyed, a telephone caller may have to wait but a successful electronic purchase order can go straight on a warehouse picking-list. The latent features of EDIHowever attractive the most immediate benefits listed above (there are many other published discussions on these aspects of EDI trading) the real leverage in EDI is the chance it gives a company to re-engineer its business processes and rethink the flow of information through a organization. These aspects are not always fully appreciated at the onset. Companies with established EDI links often cite the degree of control that EDI gives as the most positive benefit. It is this level of control that makes an implementation of EDI a strategic rather than a technological decision.There are four areas necessary for a successful EDI implementation. They are in order of importance :-  International , published standards  Mature communication networks  Dedicated software  Reliable hardware. 1. StandardsThe role of international standards is a prerequisite for computer applications talking to one another. Message formats for electronic forms must be at a higher level than an inter-company agreement for diversification and ambiguity has no place in the EDI world. 2. CommunicationsAnybody who keeps abreast of current events cannot fail to see the almost daily news item on communications links and the ‘Information Highway’. This is a positive benefit for EDI implementations as these are the foundations for EDI traffic. The success of the communications industry is enhanced by fixed and internationally agreed methods of transmitting data and it is these standards such as X.400 and X.25 which are the arteries along which EDI runs. It is now just as easy to send an EDI purchase order to Boston as it is to Alfred. There are also network providers who offer Value Added Networks (VANS) to ease the transition into electronic trading. 3. EDI software as a commodityToday there are a growing number of specialist companies which sell off-the shelf packages adaptable to the major world-wide EDI standards. Alternatively EDI software can be written in-house. For a company planning an EDI front-end onto their existing applications an EDI software project implementation would fall into three broad categories.  Message Maintenance.  Message composition and translation.  Adaptation of the existing software. Message Maintenance SoftwareAn electronic Data Dictionary should be maintained of all the message formats that you intend to use. This can then be used by the translation and composition software to ascertain if the incoming message is syntactically correct and also generate any outgoing messages correctly. Message Composition SoftwareThe construction of a message format such as an invoice is agreed by an EDI protocol standard. The EDI world is dominated by two similar but incompatible standards. EDIFACT & ANSI X.12. The emerging international EDI standard is the EDIFACT protocol (ISO 9735) sponsored by the United Nations. It has a large following in Europe, but significant numbers of US firms still use the ANSI X.12 standard. Within each industry there are implementations of messages that follow one of the major standards and define message types specific to that industry. Each common business transaction that you wish to make such as a request for materials, an invoice etc has a particular message. Pairs of these messages or single reoccurring messages make up the EDI transaction. For instance a Purchase Order message request might return an order acknowledgement followed by an Invoice message. Each message type is broken down into segments typically consisting of 10 to 100 characters, which describe a particular aspect of the transaction. Within each segment there are data items which hold the actual information of the message. Each data item has a fixed position within the segment and is separated by non-descriptive delimiting characters. Various other elements within the message provide security checking and character counts to ensure that the entire message is received in one piece. This fixed position allows software at each end of the communication line to extract each data element. This can then become a new database record, a shop floor Work Order, or an Insurance quotation. 4. Computer Hardware The actual technology to start EDI is well within the reach of a medium-sized business and parts of it such as modems or leased telecommunications lines may already be in place. The average personal computer can be used quite successfully for small-scale implementations. Complementary operating systems such as UNIX have already reduced any perceived problem of hardware incompatibility. The quality sourceEDI data presented to a existing computer application has a major advantage. Each EDI message either received or sent has only been keyed into a computer once. During that keying it may well have undergone construction and translation checks in syntax, quantities, suppliers address, Zip Code, etc that ensure the data will be as accurate as it is possible to be. As such the data will be ‘cleaner’ and will not need so rigorous checking as manually input data coming in a second or third time. Adding EDI also allows parallel developments in other related areas. For example the BACS (Banker Automated Clearing Service) is a good example of an established and flourishing EDI application. The integration of these systems should be a high level goal rather than an EDI project for a specific application. An open-ended approach to the design of this type is more important for this type of technology than many others as a rapid growth of this area is inevitable. The ‘critical mass’ necessary for such growth already exists. However adapting existing systems will always be more expensive than writing new ones. This should be borne in mind when costing the benefits of EDI. Another guideline is that software coupling with existing modules should be loose and detached. EDI is a standard and has many outside influences that will not be relevant to your internal organization.

The links with other related systemsEDI is considered a solid foundation for implementing Just-In-Time (JIT) systems and partly explains why the automotive industry is one of its leading sponsors. Co-operating closer with your suppliers is an essential part of both philosophies. The types of EDI trafficThere are generally agreed to be three types of EDI system. These are: – Batch – Interactive – Event-Driven. Batch EDIThis is still the most common and established approach that systems can effectively ‘talk’ to each other. It relies on a ‘Fire and Forget’ approach to an electronic mailbox or direct on a point-to-point communications link. This method is ideal for regular flows of documents of a similar type. It can be set off as nightly or even hourly task and relies on only a minimal amount of initiation is required on the part of the operator. This system is ideal when there are high quantities of repetitive information in a high volume. Event Driven EDIEvent-driven EDI takes the idea of batched messages a step further and starts to integrate it to the other processes into the commercial environment. It starts an elaborate cascade effect which (with specific controls) initiates and automates other processes as a result of the request from a customer. This could for instance be a system in a factory that can feed on information from EDI and build production schedules from incoming information. The schedule could alter as more information was received and could generate EDI requests for components necessary to make the product. Last-minute changes could become last-second changes with EDI of this sort. In this sophisticated aspect of EDI the process can truly said to be customer-driven as the bottle-necks in information flow are reduced. Interactive EDIOne of the most exciting developments of EDI is that of interactive EDI conversation (I-EDI). Messages that take the form of a whole series of conversational messages pairs that allow a person with an EDI requesting system to ‘interrogate’ a host system for information in real-time. The use of I-EDI has advantages over the medium from which it has usually evolved – the telephone. The initial message may be composed off-line before the conversation starts. There is no relaying of information to a third party at the host end. The reply is instant and can be manipulated, stored, or displayed in any way the requesting system wants. The conversation continues until the request is satisfied. Another aspect of I-EDI is that the requesting system usually has a person controlling the information conversation. The advantages are numerous for both parties. The host system can reduce telephone queries and re-keying of information, the requesting system can make hundreds of queries, orders, even cancellations are possible.Previous EDI versions may have said the equivalent of:”I’ll take 20 boxes of widgets ; here’s a purchase order”An Interactive conversation allows the message sequence of:”Have you got widgets in stock and what’s the price ?, Give me alternatives with prices if my first choice isn’t available.” It is not difficult to see the business advantages of EDI information dealing. What used to take minutes can now be done in seconds. By using I-EDI and application software to make use of it an organization can change from an Information processor to a Knowledge provider. I-EDI enables instantaneous choices, ’shopping’ for prices, a purchase order with last-minute changes, goods with fluctuating prices, a holiday booking with fluctuating inventory, etc. I-EDI is attractive to a company which relies on gathering tasks. For instance within the travel industry computerized reservation systems (CRS) rely on I-EDI to reserve space in hotels, aircraft and ships as well as purchasing other components such as insurance and Car-Hire. The problems to overcomeAn EDI transaction requires two or more players and close cooperation right from the planning stage. If your trading partners won’t implement EDI then there is nothing to gain. Once EDI is implemented there is a reliance on trading partners to keep protocol versions up-to-date and keep in-step with other traders developments. When a requesting system decides to use a message then the host has to be able to use the appropriate reply message. This could be thought of as an advantage in that both companies have a closer business relationship. However if the trading partner has a strong market position and is dominant then a degree of coercion may be felt. Current prices for EDI software range between 500(GBP) and 10000(GBP) for PC based systems. Conversion of existing systems may well be proportionally more expensive. On a lower level an EDI message compares very favourably with the price of a fax,letter or telephone call and costs are further discounted by volume. Getting it off the groundIn development terms it is easier to compose and send messages than to receive,integrate and reply. This is especially true of Interactive systems where the host may well be doing complicated searches and holding information while the electronic conversation is taking place. Rather than doing both phases develop the one that is most obviously useful.To take advantage of this the Royal Mail offers an EDIPOST service which can direct all outgoing EDI traffic from a committed EDI user to smaller trading partners without EDI via the postal service. Documents are received electronically and forwarded on an agreed Company layout via first-class post.A manufacturer may well allow EDI messages to come in but not develop an outward phase immediately. The incoming messages could then for instance be reformatted into an order-processing system. Both separate developments would be better than none and would allow a gradual preparation to fully automated electronic trading.The primary design criteria should be flexibility to cope with companies own constraints in obeying the EDI dialect that has been agreed upon. This should not extend to the point where a different adaptation of the software is made for each new trading partner.Once an EDI application is up and running it requires a full series of tests to clear any syntactical errors that will remain in the message structure until spotted. As EDI gets most benefits from a high-volume of information then that volume must be 100% correct and both parties must have confidence in what data conventions will be used.In sophisticated EDI networks each trading partner may tend to place a different emphasis on different parts of the standard. This is because of differing business requirements at a Trading Partner level.Any potential for conflicting interests can be documented in a Service Agreement between both parties laying down explicitly what can and cannot be done. Legal definitions are still difficult to find for EDI in a world dominated by paper and it has to be said that EDI agreements are based on trust and mutual gain rather than tightly written, legally-binding agreements. However while a degree of flexibility at either the message transmitter or recipient is useful it is not in either parties interest to deviate far from the Published standard, for obvious reasons. The only limit to an EDI network’s growth is communication lines and processing power. Each message is transmitted in seconds so the cost of each transaction can be measured in pence. Compare this with the cost of a stamp, envelope, the time of the person processing the document and the hidden costs in delays and its not hard to justify EDI. When the fusing of communications and computers took place a new field of study was created called telematics. EDI looks set to be the perfect telematic application for the 21st century. BibliographyArticlesWaiting in the wings – Computer Weekly Feb 11th 1993Moving data using EDI – Byte April 1991Insatiable MRP II – DEC Professional Sept 1992Web or Wheel – Electronic Trading – Which Computer Jan 1992TextElectronic Data Interchange – Paul Kimberley, McGraw-Hill ISBN 0-07-034551-1Electronic Trader Magazine. 0181 7422828 What is EDI? – Martin Preston, NCC Publications Electronic Commerce & Communications +44 (0)1462 441488