Unit – 6

EDI Applications in Business

EDI legal, security, standardization
EDI software implementation
VANs (Value Added Network)
Internet Based EDI
Introduction of Electronic Data Interchange (EDI)

EDI is an electronic way of transferring business documents in an organization

internally, between its various departments or externally with suppliers,
customers, or any subsidiaries. In EDI, paper documents are replaced with
electronic documents such as word documents, spreadsheets, etc.

EDI Documents
Following are the few important documents used in EDI −

• Invoices
• Purchase orders
• Shipping Requests
• Acknowledgement
• Business Correspondence letters
• Financial information letters

Traditional inter-organisational work (Need of EDI)

• Historically, paper documents were prepared and mailed by the initiator of

a transaction, delivered through the postal system, then opened, sorted and
key-punched by the recipient. This process required a significant degree of
human resource and represented non-value-added time in the business
cycle.
• Repeated re-keying of data to transfer information from one computer-
based system to another, also added errors which had to be detected, traced
and resolved.

• failing of paper based system can be seen in frequent reliance on telephone

tag. Information is either unavailable, inaccessible or in the mail while
crucial decisions must be made now.

• Electronic Data Interchange : EDI is a means of communications being

rapidly assimilated into everyday business practice.

• It is facilitated by a technology infrastructure which permits routine

information exchange between computer-based processes.

• The processes which exchange Information through EDI are typically

mirror-image business applications owned by two or more trading partner.
The most common trading partner are vendor and customer.

• is defined as the inter-process communication ( computer application to

computer application) of business information in a standardized electronic
form.

• EDI communicates information pertinent for business transactions

between the computer systems of companies, government organization,
small businesses and banks.

• EDI is indeed a relatively easy to install technology, but it does not address
a technical problem; rather it addresses a business process problem.

• Industry segments realizing meaningful returns from EDI investments have

achieved results by applying the technology to the strategy, mission and
goals of their constituent business.

• EDI must be viewed as part of an overall integrated solution to

organizational requirements. Merely moving data from point A to point B
is not sufficient. EDI improves efficiency by integrating the data transfer
within the business application for which the data are intended.

• The speed of information flow made possible by EDI can expose

inefficiencies in processes which are dependent on the data being
exchanged. EDI applied to an inefficient internal function may only
accelerate the pace of deterioration and jeopardize, the business
relationship between trading partner.

• Creative use of the EDI tool by management has effectively reduced non-
value-added costs, increased the availability of working capital and
 improved the quality of both the data and the business processes, served by
that data.

• EDI represents the next major step in the evolution of business

communication businesses in the next century will be as dependent on EDI
as they are on the telephone today.

• EDI usage in one context as a technological solution that focuses on

mechanical transport and assembly of business form and in another context
as a business methodology that focuses on the content and structure of
forms. These context can be can be cleared by examining the Layered
Architecture of EDI.

EDI architecture specifies four layers

1. Semantic or Application Layer
2. Standard Translation Layer
3. Packing or Transport Layer
4. Physical Network Infrastructure Layer

Semantic Layer : It describes the business application that is driving EDI. For
a procurement application, this translates into requests for quotes, price quotes,
purchase orders, acknowledgements and invoice.

This layer specific to company and the software it uses, i.e. the user interface and
content visible on the screen are tailored or customized local environments.
Standard Translation Layer : in 1968 transportation Data Coordinating
Committee (TDCC) quickly determined a standard set of data could be defined
and that a standardized view of he data could be formulated for each transport
document required using the TDCC syntax, the grocery and warehousing
industries, respectively farmed the Uniform Communication standard (UCS) and
Warehouse Information Network Standard (WIMS) to provide data elements and
transaction types specific to their need. These standards provided greater
efficiencies they also were limited to industry-specific solution.

EDI Transport Layer : EDI transport layer corresponds closely with the non-
electronic activity of sending a business form from one company A to B. The
business form could be sent via regular postal services, registered mail, or private
carrier or simply faxed between the companies. The EDI transport carrier of
choice is becoming email.

Physical Layer : Dial-up lines, Internet

Electronic Data Interchange (EDI) : Definition and concepts

Electronic Data Interchange (EDI) is the electronic interchange of business

information using a standardized format; a process which allows one company to
send information to another company electronically rather than with paper.
Business entities conducting business electronically are called trading partners.

Many business documents can be exchanged using EDI, but the two most
common are purchase orders and invoices. At a minimum, EDI replaces the mail
preparation and handling associated with traditional business communication.
However, the real power of EDI is that it standardizes the information
communicated in business documents, which makes possible a "paperless"
exchange.

The traditional invoice illustrates what this can mean. Most companies create
invoices using a computer system, print a paper copy of the invoice and mail it to
the customer. Upon receipt, the customer frequently marks up the invoice and
enters it into its own computer system. The entire process is nothing more than
the transfer of information from the seller's computer to the customer's computer.
EDI makes it possible to minimize or even eliminate the manual steps involved
in this transfer.
The process improvements that EDI offers are significant and can be dramatic.
For example, consider the difference between the traditional paper purchase order
and its electronic counterpart:

A Traditional Document Exchange An EDI Document Exchange of a

of a Purchase Order Purchase Order
This process normally takes between threeThis process normally occurs
and five days. overnight and can take less than an
hour.
Buyer makes a buying decision, creates Buyer makes a buying decision,
the purchase order and prints it. creates the purchase order but does not
Buyer mails the purchase order to theprint it.
supplier.
Supplier receives the purchase order andEDI software creates an electronic
enters it into the order entry system. version of the purchase order and
Buyer calls supplier to determine iftransmits it automatically to the
purchase order has been received, orsupplier.
supplier mails buyer an acknowledgmentSupplier's order entry system receives
of the order. the purchase order and updates the
system immediately on receipt.
Supplier's order entry system creates
an acknowledgment an transmits it
back to confirm receipt.
EDI is the intercompany communication of business documents in a standard
format. The simple definition of EDI is a standard electronic format that replaces
paper-based documents such as purchase orders or invoices. By automating
paper-based transactions, organizations can save time and eliminate costly errors
caused by manual processing.

In EDI transactions, information moves directly from a computer application in

one organization to a computer application in another. EDI standards define the
location and order of information in a document format. With this automated
capability, data can be shared rapidly instead of over the hours, days or weeks
required when using paper documents or other methods.

Today, industries use EDI integration to share a range of document types — from
purchase orders to invoices to requests for quotations to loan applications and
more. In most instances, these organizations are trading partners that exchange
goods and services frequently as part of their supply chains and business-to-
business (B2B) networks.

How Does EDI Work ?

The overall process of EDI can be divided into three stages:

1) Preparing EDI documents. At this point, the sender has to prepare the
document with an order. The data has to be organized in such a way that it
will be read by the EDI software, thus, instead of printing a PO (purchase
order), the system creates an electronic version of it and optimizes it
according to EDI standards. Among the approaches for document
preparation, there are importing data instead of reprinting it manually,
reformatting electronic docs into the data files, and purchasing ready-made
EDI software.
2) Translating them into the EDI format. This step requires leveraging
specialized EDI translation software. Such apps divide the data into proper
segments and elements. To get past the purchasing of the software, you can
send the data to the EDI service provider, and he’ll do this task. By the
way, the provider enables interpreting documents not only to but also from
the EDI format.
3) Transmitting documents. To transfer EDI documents, traders use three
main approaches:
• Direct. It is performed via an exact secure Internet protocol directly

from one computer to the other

 • Via the VAN. The data is sent to the service provider, and from there,
it goes to the recipient
• Mixed type. Used while transmitting large amounts of data is essential.
A part of it may be transferred directly, and a part via the provider.

Using VAN to deliver documents may be rather expensive as the fee is taken by
the VAN networks owning companies for each transmission. However, it may
help you save some setup costs.

Documents are encrypted, and apart from this, passwords and identifications are
used to achieve higher security during the document exchange. Ways of
protecting information depend on the protocol you’re using, so while integrating
the EDI, choosing the right protocol for your business is necessary.

One more thing to mention is that while establishing your business, it is important
to become EDI capable. This term means that you’re using the software proper
for EDI implementation and that it allows applying both client and vendor-side
encryptions, etc.

Types Of EDI Protocols

There are many types of EDI protocols. They contain some guidelines that differ
according to the business type, region, and other factors. Choosing the proper one
depends on what is EDI going to be used for. Among the most often-used
protocols there are:
o Direct and VAN
o AS1 sends the data with the help of email protocols. Files are sent in the
form of attachments. This version of AS protocol is not secure enough as
it allows optional encryption of the messages.
o AS2. Most often used protocol due to its simplicity and security. Sends
information over the HTTPS, which means the most secure end-to-end
encryption.
o AS3 isn’t designed to replace the AS2 but has certain benefits to those
kinds of users who imply FTP in their business as it is built on its basis
thus the basics are the same. However, it is much more secure than FTP
and has higher application interoperability. For the great majority of
traders, AS3 is not secure enough
o AS4 was made as an updated version of AS2. It has almost the same
features but is easier to set up and maintain further on
o OFTP is a technology created exactly for B2B docs. Initially, it was built
for point-to-point communication but now it is optimized the way it can
easily work with VAN
o Web EDI is probably the simplest form of EDI communication. It is
performed with the help of online-shared forms. Documents there can be
created, updated, and changed. Such an option is suitable for small and
mid-size businesses as web EDIs are still not optimized for the large data
transfer
o Mobile EDI replicates the idea of the previous type but on mobile devices.
The process starts with scanning the barcodes, and then as in the other
cases: reading info, interpreting it, checking, setting, etc. More and more
businesses want to imply mobile devices in their supply chain so mobile
EDIs are becoming very popular
EDI DOCUMENTS

EDI file : It is a document with some data saved strictly formatted according to
one of the EDI standards. The data in them is kept only in the text format. EDI
document is used to directly transfer commercial information. There are a lot of
EDI document types but the most common include:
o XML types (cXML, ebXML, etc.)
o xCBL

o ANSI

o X12

o CSV

o EDIFICE

o EDITRANS

o ETIS
EDI document types are used for different industries, e.g., the last three are
designed for information technology, transportation, and telecommunication
companies accordingly.

Benefits of EDI

Practical advantages of using EDI, and why it is a good idea to implement EDI
solutions in your business. The main upsides are:
➢ Fast processing. Document transactions take minutes instead of days spent

on sending postal mail, or hours for writing electronic letters, and filling
them with information manually. In addition, the work based this way
requires fewer people thus, the staff that might have been busy with manual
 work can now do more valuable jobs. Real-time tracking, as a function of
any EDI software, ensures both coworking sides that messages are
delivered in time.
➢ No human errors. While gathering business information, filling it in the
documents manually, sending them by email, tracking letters, etc. there is
a great chance that there will appear mistakes at some point, be it the loss
of messages, problems with secure delivery, or simple inattention.
➢ High accuracy is a solution to the problem described in the previous point.
Because each process in EDI is automated, the data is gathered, interpreted,
and sent correctly, and always on time.
➢ Commercial benefit. Needless to say that expenses on paper, printing,
storage, and retrieval of documents, filling them, transportations, etc. are
drastically reduced by using EDI. It also saves costs usually spent on
handling errors, such as lost letters, or rewriting illegible for some reason
mails.
➢ Improved relationships with customers. EDI severely reduces the time
gap between ordering a product and receiving it, which leads to more stable
working relations between sellers and buyers. Other than that, the absence
of errors enhances the level of satisfaction as well.
➢ Environmental aspects. In the modern world, saving ecology is extremely
important, and EDI has its upsides in this area. It allows reducing paper
resources by replacing paper letters with electronic faxes, and the level of
CO2, usually appearing by using petrol-powered transport.
Computer-to-computer– EDI replaces postal mail, fax and email. While email
is also an electronic approach, the documents exchanged via email must still be
handled by people rather than computers. Having people involved slows down
the processing of the documents and also introduces errors. Instead, EDI
documents can flow straight through to the appropriate application on the
receiver’s computer (e.g., the Order Management System) and processing can
begin immediately. A typical manual process looks like this, with lots of paper
and people involvement:

• The EDI process looks like this — no paper, no people involved:

• Business documents – These are any of the documents that are typically
exchanged between businesses. The most common documents exchanged
via EDI are purchase orders, invoices and advance ship notices. But there
are many, many others such as bill of lading, customs documents,
inventory documents, shipping status documents and payment documents.
• Standard format– Because EDI documents must be processed by
computers rather than humans, a standard format must be used so that the
computer will be able to read and understand the documents. A standard
format describes what each piece of information is and in what format (e.g.,
integer, decimal, mmddyy). Without a standard format, each company
would send documents using its company-specific format and, much as an
English-speaking person probably doesn’t understand Japanese, the
receiver’s computer system doesn’t understand the company-specific
format of the sender’s format.

✓ There are several EDI standards in use today, including ANSI,

EDIFACT, TRADACOMS and ebXML. And, for each standard
there are many different versions, e.g., ANSI 5010 or EDIFACT
version D12, Release A. When two businesses decide to exchange
EDI documents, they must agree on the specific EDI standard and
version.
✓ Businesses typically use an EDI translator – either as in-house
software or via an EDI service provider – to translate the EDI format
 so the data can be used by their internal applications and thus enable
straight through processing of documents.

• Business partners – The exchange of EDI documents is typically between

two different companies, referred to as business partners or trading
partners. For example, Company A may buy goods from Company B.
Company A sends orders to Company B. Company A and Company B are
business partners.

EDI Systems
Different types of EDI are implemented to suit the business's needs, capabilities
and budget -- assisting multiple consistent business partners, supporting partners
around the globe or in other situations. Methods include Direct EDI (point-to-
point); EDI via VAN or EDI network services provider; EDI via E S2; EDI via
FTP/VPN, SFTP or FTPS; Web and Mobile EDI; and EDI outsourcing.

Direct EDI: With Direct EDI, one connection is created between two business
partners. Larger businesses might choose this method if they have numerous
transactions with the same partner per day.

EDI via VAN (value-added network), EDI Network Services Provider: This
model protects businesses from the complications that come from supporting the
many communication protocols that are required when dealing with multiple
business partners. It is a secure network where documents are transmitted
between business partners.

EDI via Applicability Statement Version 2 (AS2): This communications

protocol securely exchanges data over the Internet. Two computers (a client and
a server) connect in a point-to-point mode through the Internet. AS2 is sent
securely in an envelope that uses digital certificates and encryption.

EDI via FTP/VPN, SFTPS, FTPS: file transfer protocol (FTP) over Virtual
Private Network (VPN), Secure File Transfer Protocol (SFTP) or File Transfer
Protocol Secure (FTPS) exchange documents through the Internet, connecting
business partners directly. These protocols encode data during transmission from
one business to the other, to protect sensitive information. Data are decrypted
upon arrival.

Web EDI: EDI is directed via Internet browser, duplicating paper-based

documents into Web forms that contain fields where users enter information. It is
then automatically converted into an EDI message and sent via secure Internet
protocols.

Mobile EDI: This method enables the transmission of documents through mobile
devices.

Managed Services: Managed services systems outsource the EDI document

control to a third-party provider.

Business needs and processes determine which EDI system to implement. Before
moving to EDI in your organization, establish a managerial structure. Members
of the team should have EDI and executive experience. Next, set priorities for
adoption and then analyze which areas of the business will benefit most from
EDI. Select an EDI network provider that focuses on your business necessities.
Then, assimilate EDI and data into the business.

To outline how the data in the EDI transaction correlates to the data in the internal
system, create a map that will determine where each incoming field goes and if
the data needs to be reformatted. Test the system before implementing it live.

EDI Standardization
EDI Standardization is what set EDI apart from other electronic methods of
transferring data. Before getting into details about administration of EDI
standards such as ANSI ASC X12 or UN/EDIFACT, it is important to understand
why standards are used.

EDI standardization and particularly standards are built on the concept of making
electronic business documents uniform, without regard to country or place of
origin or industry. Even though a purchase order for a steel manufacturer will be
different from a hospital purchase order, the EDI standard ensures the document’s
integrity. The EDI standard provides the controls needed to track the exchanged
electronic business documents and confirm that all the data that was sent, was, in
fact, received and processed by the trading partner.

The use of published EDI standards enhances the overall usefulness of the
intercompany business transactions. Millions of lines of codes have been written
to produce multiple commercial products that translate EDI data according to
standards. Hundreds of leaders from different industries have met for more than
30 years to develop and grow EDI standards worldwide.
EDI Document Standards
ANSI ASC X12

In 1979, the American National Standards Institute (ANSI) chartered the

Accredited Standards Committee (ASC) X12 to develop uniform standards for
inter-industry electronic exchange of business transactions, namely electronic
data interchange.

ANSI X12 was originally conceived to support companies across different

industry sectors in North America however today there are more than 300,000
companies worldwide using X12 EDI standards in daily business transactions.
ASC X12 also contributes to UN/EDIFACT messages that are used widely
outside of the United States.

A List of ANSI X12 document types is below:

Communications and Controls

102 Associated Data

242 Data Status Tracking

815 Cryptographic Service Message

864 Text Message

868 Electronic Form Structure

993 Secured Receipt or Acknowledgment

997 e Functional Acknowledgment

999 Implementation Acknowledgement

Finance
130 Student Educational Record (Transcript)

131 Student Educational Record (Transcript)Acknowledgment

132 Human Resource Information

133 Educational Institution Record

135 Student Loan Application

EANCOM

This standard was originally conceived in 1987 by the EAN General Assembly
and was to be developed on the then emerging international UN/EDIFACT
standard. The EANCOM messages, maintained by GS1, are more detailed in
nature compared to the TRADACOMS message set. EANCOM was originally
developed for the retail sector and has subsequently grown to become the most
widely used UN/EDIFACT subset and is now found in a variety of other industry
sectors such as healthcare, construction and publishing.

Further information about EANCOM can be found here ⟶

VICS

The Voluntary Inter-industry Commerce Standard is used by the general

merchandise retail industry across North America. It is a subset of the ANSI ASC
X12 national standard. VICS EDI is being utilized by thousands of companies,
department and specialty retail stores, mass merchandisers and their respective
suppliers. In 1988 GS1 US became the management and administrative body for
VICS EDI. GS1 US also manages the ASC X12 derived Uniform Communication
Standard (UCS) for the grocery industry and Industrial/Commercial Standard
(I/C) for the industrial sector.

UN/EDIFACT

United Nations/Electronic Data Interchange for Administration, Commerce and

Transport is the international standard that was developed by the United Nations.
The work of maintenance and further development of this standard is done
through the United Nations Centre for Trade Facilitation and Electronic Business
(UN/CEFACT) under the UN Economic Commission for Europe. The EDIFACT
standard provides a set of syntax rules to structure, an interactive exchange
protocol and provides a set of standard messages which allow multi-country and
multi-industry exchange of electronic business documents. EDIFACT is widely
used across Europe, mainly due to the fact that many companies adopted it very
early on. EDIFACT has seen some adoption in the ASPAC region, however, there
are currently more XML-based standards being used in this particular region
today.
A list of EDIFACT document types can be seen below:
APERAK Application error and acknowledgement message

AUTHOR Authorization message

AVLREQ Availability request – interactive message

AVLRSP Availability response – interactive message

BALANC Balance message

BANSTA Banking status message

BAPLIE Bayplan/stowage plan occupied and empty locations message

BAPLTE Bayplan/stowage plan total numbers message

ODETTE
The Organization for Data Exchange by Tele Transmission in Europe is a group
that represents the interests of the automotive industry in Europe. They are the
equivalent of the Automotive Industry Action Group (AIAG) in North America.
The organization develops tools and recommendations that improve the flow of
goods, services product data and business information across the whole
automotive value chain. ODETTE has been responsible for developing
communications standards such as OFTP and OFTP2.0, constant improvement
processes such as Materials Management Operations Guideline / Logistics
Evaluation (MMOG/LE) and automotive-specific document standards as defined
via the link below.

Tradacoms
This is an early standard for EDI and was primarily used in the UK retail sector.
It was originally introduced in 1982 as an implementation of the UN/GTDI
syntax, one of the precursors of EDIFACT, and was maintained and extended by
the UK Article Numbering Association, now called GS1 UK. The standard is
more or less obsolescent since the development of it effectively ceased in 1995
in favor of the EDIFACT EANCOM subsets. Despite this it has proved durable
and the majority of the retail EDI traffic in the UK still uses it today.

VDA
This organization develops standards and best practices to serve the needs of
companies within the German automotive industry. The VDA has developed over
thirty messages to meet the need of companies such as VW, Audi, Bosch,
Continental and Daimler AG. Further information about these messages can be
found via the link below.

HIPAA
The Health Insurance Portability and Accountability Act was enacted by the U.S
congress in 1996. A key component of HIPAA is the establishment of national
standards for electronic health care transactions and national identifiers for
providers, health insurance plans and employers. The standards are meant to
improve the efficiency and effectiveness of the North American health care
system by encouraging the widespread use of EDI in the U.S health care system.
The HIPAA EDI transaction sets are based on X12 and the key message types are
described below.

RosettaNet
This consists of a consortium of major computer, consumer electronics, semi-
conductor manufacturers, telecommunications and logistics companies working
together to create and implement industry-wide, open e-business process
standards. These standards form a common e-business language, aligning
processes between supply chain partners on a global basis. The RosettaNet
document standard is based on XML and defines message guidelines, business
processes interface and implementation frameworks for interactions between
companies. Using RosettaNet Partner Interface Processes (PIPs), business
partners of all sizes can connect electronically to process transactions and move
information within their extended supply chains. Further information about
RosettaNet PIP documents can be found from the link below.

SWIFT
The Society of Worldwide Interbank Financial Telecommunication was formed
in 1973 and is headquartered in Brussels. SWIFT operates a worldwide financial
messaging network which exchanges messages between banks and financial
institutions. SWIFT also markets software and services to financial institutions,
much of it for use on the SWIFTNet Network. SWIFTNet is the infrastructure
used to exchange these documents and FIN, InterAct and FileAct are used to
encode the SWIFT documents for transmission. The majority of interbank
messages use the SWIFT network. As of November 2008, SWIFT linked 8740
financial institutions across 209 countries. The SWIFT document standard is split
into four areas, Payments, Trade Services, Securities and Trading.
EDI: LEGAL, SECURITY ISSUES
In EDI, Trading is done between countries and corporations.
In EDI, legal issues and computer security are important.
Companies that deal with EDI should take the services of a lawyer during the
design of EDI
applications, so that evidentiary/admissibility safeguards are implemented.
There are 3 types of communications when considered for EDI issues:
1) Instantaneous: – If the parties are face to face or use an instantaneous
communication medium such as telephone.
2) Delayed with postal service: – The mailbox rule provides that an acceptance
communicated via postal service mail is effectively communicated when
dispatched or physically deposited.
3) Delayed with non-postal service: – EX: – Couriers, telegram.
Messaging systems combine features of delayed and instantaneous
• Messaging delay is a function of the specific applications, message routing,
networks traversed, system configuration and other technical factors.
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.

Implementing EDI
Implementing EDI across your organization and enterprise resource systems is a
complex process. The following are just a few of the top EDI best practices that
come with EDI integration.

1. Create An Internal Team Structure

Research and create your internal team structure for who will be managing the
system, communicating with trading partners, and team members who are on the
other end of the supply chain and enterprise resource planning (ERP).

You must make sure to identify the owner of the EDI translator and their function,
as well as who will be in direct communication with the other vital roles within
your organization. Your EDI system will be the on-going communication method
for your organization and gaining the support of your internal teams will benefit
them and how EDI will impact the complete supply chain.

2. Evaluate Your Organization’s Priorities

At this point, you will need to begin to evaluate and identify the priorities for the
implementation of your EDI. Consider all the necessary factors, such as the
number of trading partners, suppliers and other customers you will be using EDI
with.

Review the volume of transactions and the various types you’ll exchange with
your business partners. Ask questions concerning what your new EDI platform
can eliminate.

• What types of manual effort can be removed from data entry and reporting?
o Identifying this will help eliminate steps from your current business
cycle that can be automated.
• Can you now create inventory control within your EDI and ERP?
o If so, you will also be able to improve customer service from time
of service, the request of inventory and the delivery of products.
o You’ll also now be able to facilitate just-in-time manufacturing and
improve overall business partner relationships.

Evaluate your entire organization to determine which areas of your business are
ready for EDI. Determine which process will cost the least to implement EDI and
which will deliver the most significant savings and increase in profitability.

Once you’ve evaluated the above areas, you can map out the scope of your
project, as well as descriptions of your internal strengths, weaknesses and
opportunities that come with additional systems.

3. Create A Timeline

This is the point at which you will lay out the timeline for implementation. Be
sure to review the timing of the system development and the funding required for
the project on your implementation schedule. Once your plan has been created,
you’re then ready to begin research for the EDI translator.
4. Select A Translator

Your translator selection is key to EDI integration and success. Your translator
will aid in interpreting the EDI information it receives from the sender and
translating it into the agreed upon format that the receiver has proposed.

Successful EDI translators should provide validation of the document’s

adherence to agreed upon EDI standards, document checking for redundancies
and confusion, and functional acknowledgment reconciliation that alerts EDI
teams when documents don’t look right.

5. Review Your Implementation Guide

Once you’ve selected your translator, you will also request an implementation
guide for each trading partner, requiring you to utilize EDI. The implementation
guide will lay out your communication model, this includes:

• Direct connection to each other

• Utilization of an EDI network provider
• Direct connection for high-volume business partners and use of EDI
network for additional customers
• The outsourcing of your EDI program to a managed service provider

Once you’ve reviewed the implementation guide, you’ll have the required
transaction standards to begin mapping with your trading partners.

6. Define The Map

Now that the data analysis is complete and the data structures are understood, the
map can be defined to the EDI translation software. For most EDI software
packages or VAN services, the EDI coordinator will be able to define the map.

The map defines how the data in the EDI transaction relates to the data in the
internal system. The EDI software then stores the map, typically in tabular form.
When a transaction enters the system, the EDI translator uses this map to
determine where each incoming field goes and whether the data needs to be
reformatted.

There are three major processes involved in the mapping of EDI data:

1. Mapping. The transformation of an EDI document into another format or

vice versa.
2. Translation. The acceptance of inbound EDI data or the preparation of an
outbound file for transmission.
3. Communications. The transmission of EDI transactions.
EDI Software Implementation

To implement EDI software as nowadays, big companies want to employ it in the

working process to save time, costs, and other resources.

EDI software : It is a set of tools that help to perform all the necessary operations.
They include formatting documents into a proper file type, integration with
backend processes, and transmitting messages among the traders.

EDI Software Implementation EDI software has four layers :

1. Business application
2. Internal format conversion
3. EDI translator and
4. EDI envelop for document messaging

These four layers package the information and send it over the value-added
network to the target business, which then reverses the process to obtain the
original information.

1 EDI business application layer It creates a document- in this case, an invoice-

in a software application. This software Application then send the document to
an EDI translator, which automatically reformates The invoice into the agreed-
on EDI standards Enter the information in the EDI form specified for that
particular business transaction EDI translator software changes the EDI form to
fit the EDI standard that the target application can understand The translator
wraps the document in an electronic envelope “EDI package "that has an ID for
your trading partner

2. EDI translator Layer Translator describes the relationship between the data
elements in the business application and the EDI standards. The translator ensures
that the data are converted into a format that the trading partner can use

3. EDI communication Layer The communication portion- which could be part

of the translation software or a separate application- dials the phone number for
the value added network service provider or other type of access method being
used

The future of EDI

Consider this scenario: a chargeback related to a damaged shipment is triggered
using an EDI 214 document — a Transportation Carrier Shipment Status
Message. The material in the shipment is unusable or unsaleable. Disputes will
most likely arise based on the chargeback.

In future supply chains, EDI will be the core document exchange capability to
support innovations such as the Internet of Things (IoT), blockchain and artificial
intelligence (AI)³. Future EDI will use:

• IoT sensors incorporated into a shipment’s packaging and tied to periodic

EDI 214 messages to improve package condition visibility in near real
time.
• Blockchain technology underpinning EDI information flows for
shipments to offer a shared version of the truth that can quickly resolve and
even avoid chargeback disputes.
• An AI agent that monitors all relevant events and information connected
to a shipment and can identify a non-compliant event. AI agents can also
determine if a reshipment is required, analyze the most efficient source of
replacement, initiate a new shipment and accept an authorized return.

Disadvantages of EDI
Following are the disadvantages of EDI:-

1. Too many standards:-

There are too many standard bodies developing standard documents formats for
EDI. For example, one company may be following the x12 standard format, while
it’s trading partner follows EDIFACT standard format.
2. Changing standards:-

Each year, most standards bodies revisions to the standards. This poses a problem
for EDI users. One organization may be using one version of the standard while
it’s trading partners might still be using older versions.
3. EDI is too expensive:-

EDI is expensive and requires a heavy investment to launch and maintain the
technology. Small companies might find it difficult to invest in EDI because of
the expenses to be incurred in implementing and maintaining it.
4. EDI limits your trading partners:-
Some large companies tend to stop doing business with companies who don’t
comply with EDI. For example, WalMart is doing business with only those
companies that use EDI. The result of this is a limited group of people you can
do business with.
5. Rigid requirements:-

EDI needs highly structured protocols, previously established arrangement,

unique proprietary bilateral information exchanges.
6. Requires maintenance of links with other systems:-

Responsibilities may have to be changed during the introduction of the EDI

system. Unless this system and the links with the other systems are managed well,
it is not possible for the data processing department to be involved in production
and purchasing decisions.
7. Open to limited traders:-

EDI requires expensive VAN (Value Added Network) networking to operate at

peak efficiency. Only high-volume, large trading partners can afford this
investment.
8. Requires implementation of EDI program:-

Some companies are only doing business with others who use EDI. If a company
wants to do business with these organizations, they have to implement an EDI
program.
9. A requirement of special hardware and software:-

EDI is a point to point Every contact requires special hardware and software.
10. Usage not easy:-

As a system, EDI is not easy to learn, use and implement.

Value-Added Network (VAN)
A value-added network (VAN) is used by businesses to exchange information
among each other. The main goal of a VAN is to facilitate electronic data
interchange (EDI) between businesses. The VAN sits on top of an existing
common carrier. The carrier provides additional services on top of the
infrastructure called value-added services. Hence, the name value-added network.
A VAN is a closed network, which means that only members of the network can
access the data. VANs are not connected to the wider internet and use a different
infrastructure.
Typical provider of VANs include:
Telecommunication companies
Industry groups
Specialized service providers
Large companies

Value Added Network (VAN) VANs are third-party communication networks

established for exchanging EDI traffic amongst the partners. Various businesses
(trading partners) subscribe to the VAN services. For every subscriber, the VAN
maintains an account, which serves as an electronic post office box for the
subscriber, for sending and receiving the EDI messages. The subscriber’s account
receives and accumulates all incoming mail from other partners that can be
viewed by the account owner as and when they connect to the VAN account.
There are a number of third-party Value Added Network providers in the market
place. Many of the VANs today, also offer the document exchange ability of EDI
documents with other VANs.

Value Added Network (VAN) Translation, Editing, Compliance checking,

verification, Format translation, Alerting services, Storage and Mailbox. Value
Added Network : VAN Dial up/leased line Producer Transport Bank Trader

Services Provided By The VAN : Document conversion from one standard to

another; typically required when two trading partners use different standards for
EDI Exchanges i.e. ANSI ASC X12 to EDIFACT or TDCC to ANSI ASC X12;
Converting one ANSI ASC X12 document to another ANSI ASC X12
documents; often within the same system the documents may need to be
converted to another type. For example, a Motor Carrier Details & Invoice (210)
document may need to be converted to Generic Freight Invoice (859). The sender
may follow certain conventions that are different from receiver. Translation from
a sender's conventions of a standard document to the receiver's conventions; i.e
translate field separators, discard unwanted characters format translation from
EDI standard to or from flat file, flat file to flat file, XML, and other formats data
translation among the PDF, XLS, MDB or other web-based documents.

Value Added Network (VAN) : The appropriate customer data can be saved in
the VAN account and later appended on messages where needed. For example,
sender’s Bill of Lading (BOL) number can be stored in the account and upon
receipt of the BOL acknowledgment (997), an acknowledgment message
including BOL number can be created and transmitted to sender. VAN provider’s
computers also store data such as customer profiles, repetitive waybill codes, etc
which can be used for filling up the EDI transaction document help of customer
profile code. The customer profile stored on the VAN can be accessed using the
customer profile code and the data from the profile stored on the VAN can be
used for completing the EDI transaction. The subscribers can interactively
enquire about the status of any EDI transactions made by them. Subscribers can
receive “verify acknowledgments” in the mailbox even when they are not online.
The VAN can alert the subscriber (receiver) that there is data in their mailbox to
be picked up through means such as: By sending a fax notification By calling a
pager or other alerting device that signals users about the waiting mail in the
mailbox.

Value Added Network (VAN) : The VAN can capture the specified data from
transaction which, in turn, can be used for generating customer-specified reports.
The subscriber may specify the editing requirements, VAN can edit for
completeness and correctness as per requirements. For example, it can verify that
the line item charges on an invoice add up to total value shown on the EDI invoice
In situations where such missing or mismatching data is found during the edit
process, the VANs usually send messages to the originator informing it about the
missing/mismatched data and request re-transmission of the same; For example
in ASC X12, upon receipt of Shipment Status Message (214) with missing data,
send a Status Inquiry (213) transaction to carrier requesting correction and re-
transmission. Validate and verify the information stored in customers’ databases
for missing data and send messages to appropriate firms requesting correction of
the missing data.

Third Party VAN Providers : GEIS- Operated by General Electric of USA, has
presence in over 50 countries. Cable & Wireless- Highly reliable with a
subscriber base of over 2000 top companies of the world, holds nearly 8% market
share of global VAN market. GNS – It is one of the largest Value Added Network
and has presence in 36(? Check internet) countries. Transpac – A France based
EDI VAN provider owns the largest domestic VAN market share and has strong
presence in Europe. It uses Infonet for offering VAN service outside the domestic
domain. Infonet- VAN service jointly owned and operated by WorldComm,
Singapore Telecom and Transpac. The owning organizations themselves offer
VAN services in the local domains and cover rest of the world through the
Infonet. Satyam Infoway – The private national Internet Service Provider (ISP)
offers EDI VAN services in India, in association with the Sterling Software of
USA. In addition to the standard VAN services, it offers Web EDI VAN services
as well. NICNet – The National Informatics Center, has established connectivity
through 600 points of presence in India. The NICNet in late 1999 started offering
Value Added Network (VAN) Services to facilitate and encourage the EDI
adoption in India. Some of implementations of EDI in India: Indian Customs,
Port Trust and Apparel Export Promotion Council use the NICNet VAN.

Types of Value-Added Networks

There are three types of VANs, based on how the computers in the network are
connected:
1. One-to-One : The one-to-one network is a connection between two
businesses
exchanging data.
2. One-to-Many : A single business connected to multiple other businesses,
e.g., a major retailer connected to its different suppliers.
3. Many-to-Many : Multiple businesses connected to one another. This is the
most common type of network used in the financial markets since there are many
market participants connected to each other via a single venue.
Benefits of VANs
Value-added networks enable electronic communication between businesses,
taking advantage of available technological benefits, as listed below:
1. Error correction
VANs help in error correction, as they reduce human involvement, and improve
recordkeeping. They can perform checks at the transaction level and ensure
minimal error.

2. Improved exchange
The exchange of data becomes real-time with VANs. This improves decision-
making and record-keeping and provides essential business intelligence to
generate insights about operations.

3. Secure

Electronic data transfers can be made securely using encryption. All

communication between businesses can be encrypted to protect business secrets.

4. Standardized

VANs transfer data using standard formats, such as XML and CSV. They allow
the data to be read by the various Enterprise Resource Planning (ERP) software
used by companies. They also enable the use of newer technologies without
making changes to existing technology.

Challenges for VANs

Value-added networks are extremely useful. However, in the age of the internet
and highly developed communications capabilities, there are some
considerations, including:

1. Building costs

As stated before, VANs are standalone networks, which means a company would
need to hire specialized individuals to build the network, as well as pay for the
infrastructure. On the other hand, internet-based systems come with most of the
infrastructure already in place and need only the software work to be done.

2. Maintenance and upgrade

Technical and specialized staff is required to keep the network running.

Moreover, upgrading is also difficult due to the unique nature of the networks. In
comparison, internet-based technologies are much easier to maintain without
requiring a very high degree of technical sophistication.
Internet Based EDI

Internet based EDI The Internet appears to be a cheap, efficient, and ubiquitous
channel for transmitting Electronic Data Interchange (EDI) transactions.

Internet based EDI has begun to grow at significant rates over the past few years,
spurred in large part by the adoption of key Internet based EDI technologies by
companies.

For most companies, the world of EDI is one that they have been exposed to
for only the past five to ten years. EDI itself however is significantly older,
going back to the days before the Internet was prevalent as a communication
medium between businesses. During this time, EDI transactions were typically
exchanged using third-party service providers known as Value Added
Networks or VANs. Internet based EDI has begun to grow at significant rates
over the past few years, spurred in large part by the adoption of key Internet
based EDI technologies by companies like Walmart.

How Internet-Based EDI works?

The basic operational aspect of Internet based EDI is simply to use already
existing communication protocols available on the Internet to exchange EDI
data. For this reason Internet based EDI uses the SMTP (email), HTTPS and
Secure FTP communication protocols to exchange data. Because these
communication channels are being used to send and receive Internet based EDI
however they are often referred to through a set of acronyms that were
established in the mid 90s. Accordingly, when using SMTP for Internet based
EDI the common terminology is AS1, while HTTPS is AS2 and Internet based
EDI through secure FTP is known as AS3.

Benefits of Internet Based EDI

Internet based EDI can have a number of benefits over using VANs. The reason
is simple - VAN based EDI and other "aggregators" of EDI data charge based on
the amount of data that is used and transmitted over their lines. By employing
Internet based EDI you establish a direct link to your trading partners bypassing
third parties and sending and receiving data directly. It was this benefit, coupled
with the low cost of using the Internet. For businesses that rely on EDI for their
operations using Internet based EDI can save a great deal of money and provide
significant return on investment.

The Future of Internet-Based EDI

The future of this technology is very bright indeed. While in the early days
software that allowed for AS1, AS2 or AS3 communications was extremely
expensive there are solutions in the market place that make using Internet based
EDI significantly more cost effective making it a viable technology not only
for large organizations with hundreds of trading partners, but also for smaller
businesses who trade with only one or two trading partners. Because of these
developments many small businesses are beginning to convert to this
technology and are seeking software solutions that either include this
technology or that have it available as an add-on at reasonable prices.

Electronic Data Interchange(EDI) Applications

Order Integration
Creating, sending and follow-up of supply orders involves dedicating important
technical and human resources to processing the orders to suppliers at the right
time and in the proper way.

Integrating Invoices
The integration of electronic invoices gives incredible upper hands to senders and
collectors and furthermore liable for better administration productivity
proportions, and significant cost savings.

Despatch Advice Integration

The despatch advice is a key business transaction to verify that the goods received
correspond to the purchase order specifications.

Application of EDI in e commerce

Document Preparation
Firstly, the buyer collects and organizes the data so that it can work with EDI.
There are several approaches to preparing documents such as exporting
computer-based data from spreadsheets, enhancing apps to create output files
ready for EDI standard translation.

EDI Document Translation

EDI translation app is used for converting internal data format into the EDI
standard format using the appropriate segments and data elements. Data is sent to
the EDI service provider who will handle the translation to and from the EDI
format.

Connect And Transmit EDI Documents

After translation, EDI documents are sent to the suppliers. Direct, point to point
EDI connection, a combination of both direct EDI and VAN are used for
connecting to the EDI services provider.

Applications of EDI in various sectors

• Retail Sector
• Financial Sector
• Manufacturing sector
• Automobile Sector