|
|
|
|
|
|
Lesson#36
|
ELECTRONIC DATA INTERCHANGE-EDI
|
|
|
|
Lesson 36
ELECTRONIC DATA INTERCHANGE (EDI)
EDI is used by organizations for transactions that occur on a
regular basis according to a pre-determined
format. It involves exchange of electronic business documents,
i.e., purchase orders, invoices etc. EDI
transactions are carried through special EDI software. This
technology was popularly used before the
introduction of e-commerce by different trading partners on
private electronic networks. Key features of
EDI include:
No paper work
No human intervention
Exchange of information takes place in seconds
EDI documents are formatted using published standards. Two
popular EDI standards are - ANSI
(American National Standards Institute) X12 standard and EDIFACT
(United Nations Standard of
Electronic Data Interchange for Administration, Commerce and
Transport).
EDI Example
Assume E-Pens (a manufacturing company of pens and ballpoints)
reviews sales and orders on monthly
basis to make forecast of its sales for the coming month. Sales
forecast is compared with the stocks of raw
material and other components and a production plan is devised.
This monthly plan needs to be flexible so
that materials could be ordered at short notice if these are not
available in the store. For instance, packaging
material should only be ordered for just in time (JIT) delivery,
so that E-Pens can cut down on its stock of
packaging and reduce the inventory cost. On the other hand,
packaging supplier also wants to improve its
processing of orders, particularly urgent orders. Before using
EDI technology, the order used to be
generated in the following format:
From:
E-Pens
---------
To: ABC & C0.
--------------------
Order Ref:AC8484
Order Date:15.3.2006
Qty Description Product Code
1500 Superior –Red PC-1075-R
1300 Superior – Silver PC-1075-S
-End of Order-
After both E-Pens and its supplier start using EDI system, any
amendment of the schedule on the
production control system reviews the materials requirements and
the order is automatically generated. In
case the above paper order is to be generated using EDI
software, the order data is coded and structured
into a common and generally accepted format. The order would be
written as follows in EDIFACT
(See Fig. 1 - not for exam):
148
UNB+UNOA:2+8484:xx+1149:xx+ Interchange Header
BEN0273
UNH+000001+ORDERS:2:932:UN Message 1 Header
BGM+220+AC8484
DTM+4:20060315:102 Data Segments
NAD+BY+8484326::91
NAD+SU+1149646:91
UNS+D
LIN+1++PC-1075-R:VP
Qty+21:1500
LIN+2++PC-1075-S:VP
Qty+21:1300
UNT+11+000001
Trailer
UNH Message 2
……
UNT
UNZ+1+BEN0273 Trailer
Fig. 1
In the above, ‘UNB’ refers to the start of interchange or
envelop header, ‘UNOA:2’ to the United Nations
Control Agency (level A) version 2, ‘8484’ to sender code,
‘1149’ to recipient code, ‘BEN0273’ to control
reference, ‘UNH’ to message header, ‘000001’ to message no.,
‘ORDERS’ to the message type, ‘2:932’ to
version 2 and release 932, ‘UN’ to control agency. ‘BGM’ refers
to beginning of message, ‘220’ to message
name code (i.e, order), ‘AC8484’ to order no., ‘DTM’ to date and
time of message, ‘4’ to a qualifier,
‘20060315’ to date, ‘102’ to format qualifier (century date),
‘NAD’ to name and address, ‘BY’ to buyer, ‘SU’
to supplier, ‘8484326’ to buyer address code, ‘91’ to code list
agency, ‘1149646’ to supplier address code.
‘UNS’ represents section control (that is, start of a section),
‘D’ is for section identification. ‘LIN’ indicates
line item (e.g, line item number 1 and 2), ‘PT-1075-R’ and
‘PT-1075-S’ indicate item number, and ‘VP’ stand
for item number type (that is, vendor part). ‘QTY’ represents
quantity, ‘21’ is quantity qualifier (indicating
ordered quantity), ‘1500’ and ‘1300’ is the number of ordered
quantity. ‘UNT’ is message trailer/end, ‘11’ is
control count (indicating no. of line segments in the message),
‘000001’ is message no. ‘UNZ’ represents
interchange trailer. Note that an interchange can have more than
one message, as shown in Fig. 1 above.
Value Added Network (VAN)
Value added networks are third party networks that provide
services to execute authorized transactions with
valid trading partners using EDI. Each VAN has a centralized
computer system that maintains two files for
each user, that is,
Postbox: where outgoing messages are placed, and
Mailbox: where incoming messages can be picked up
149
VAN Example
Value Added Network (VAN)
Customer
Super
Food
Best
Food
Nice
Food Meat Shop
Fruit shop
Bread shop
VAN Supplier
Postbox
Mailbox
Postbox
Mailbox
Postbox
Mailbox
Postbox
Mailbox
Postbox
Mailbox
Vegetables
Shop
Postbox
Mailbox
Postbox
Mailbox
Fig. 2
Note that in Fig. 2 above, Nice Store needs to place orders for
bread, meat and vegetables. It
establishes a link to VAN through the dial up line, and sends
EDI-based order messages for the three
suppliers which are temporarily stored in its postbox. VAN
computer system inspects postbox, unpacks
interchanges (electronic envelopes), repackages them as new
interchanges and moves them to the
mailbox of the intended recipients. The three recipients check
their mailboxes for new interchanges,
pick them up and cause them to be transmitted to their
respective processing systems. They can also
send acknowledgment messages and cause them to be stored in
their respective postboxes. VAN
checks them and put them in the mailbox of Nice Food.
Advantages of VAN
Two big advantages of using a VAN in EDI are time independence
and protocol independence. Time
independence means that the sending and receipt of the
interchange or messages can be carried out at
the convenience of the users involved. Thus, they are not
required to be connected with each other at
the same time. Protocol independence means that interchanges are
re-enveloped with the transmission
protocol appropriate to the recipient when they are retrieved
from the postbox by the VAN. Thus, a
VAN can provide protocol compatibility between the sender and
the recipient, wherever that is
missing.
Internet-Based EDI
Internet can support EDI in a variety of ways. Internet e-mail
can be used as EDI message transport
mechanism in place of having a VAN. An extranet can be created
with the trading partner allowing a
partner to enter information in the fields of web forms which
correspond to the fields of EDI message.
Also, web-based EDI hosting service can be utilized through
web-based EDI software. However, a lot
of work is still required to be done to make use of and
popularize internet-based EDI.
Benefits of EDI
Some of the benefits of EDI are listed as under:
Shortened ordering time
150
Since an order is generated automatically according to a
pre-defined format, thus, the ordering time is
very short.
Cost cutting
An EDI transaction is more cost-effective in the sense that
paper/stationary cost as well as cost of
hiring staff to complete a transaction is eliminated in case of
EDI. The only major cost is the expensive
EDI software itself. However, once an EDI system is in place, it
can save many expenses otherwise
associated with a normal transaction.
Elimination of errors
Messages are generated automatically, so the chances of any
typing errors caused by human intervention
are negligible.
Fast response
An EDI message can be read and processed on the receiver side
electronically with the help of EDI
software. So, if the receiver is a supplier of raw material, it
can quickly fulfill/implement the order as
compared to a paper order.
Accurate invoicing
Invoices or payment requests by the merchant/supplier can also
be generated using EDI standard
format, which are more accurate than paper invoices.
EDI payment
EDI standard documents can be used to electronically provide
financial information for payment
purposes.
Enterprise Resource Planning (ERP)
ERP is an approach that attempts to integrate all departments
and functions across a company onto a single
computer system that can serve all those different departments'
particular needs. For example, finance,
manufacturing and the warehouse department of a company may have
their own software to perform tasks
specific to each one of them. However, each software can be
linked together so that a customer service
representative can see the credit rating of a customer from
finance module, warehouse information from
warehouse module, and shipment information from the shipment
module. SAP is an example of ERP
software. ERP is complex. It is not intended for public
consumption as proper integration of ERP with ecommerce
applications is still a major problem.
Electronic Banking
Electronic banking, also known as cyberbanking, virtual banking,
home banking and online banking,
includes various banking activities conducted from home,
business, or on the road, instead of at a physical
bank location.
Advantages of e-banking
Get current account balances at any time
Obtain credit card statements
Pay utility bills
Download account information
Transfer money between accounts
|
|
|
|
|