What is EDI?

Electronic Commerce:

Combination of:

· Business strategies;

· Business processes;

· People and technology required to achieve supply chain integration.

EDI Definition

Electronic Data Interchange (EDI) is, in simplest terms, computer to computer transmission of business documents such as purchase orders, material releases and invoices, in a format easily recognizable by different companies.

EDI is not:

A real time on-line system where you can directly connect to your supplier's computer to inquire about purchase order and inventory status.

Why use EDI?

EDI enables companies to complete business transactions faster with less expense and fewer errors. There are many other indirect benefits that derive from this increased control and efficiency, such as faster transaction processing, increased accuracy and better information access, among others.

How does EDI work?

EDI isn't really very complicated or highly technical. It's just an extension of what most companies are doing already. That is, businesses today commonly use computers to hold and process information used in the management of various business functions such as purchasing, inventory management, payables and receivables and so forth. The computer is the repository of all information that will be included in business transaction documents. EDI simply takes these computer system capabilities one step further by adding the transmission of the business documents themselves. Purchase orders, invoices and the like are transmitted between trading partners over telephone lines in computer readable form.

EDI thereby makes it possible to exchange data, without ever rekeying the original transaction, information stored in the sender's internal computer files. Sending business documents computer to computer is more efficient than printing the data stored in internal computer files, mailing paper documents, and having a trading partner's clerical staff enter the same document data into it's own computer system. The elimination of paper documents reduces paper processing costs and clerical labor. Reducing document processing results in fewer mistakes and better and faster customer service.

What do I need to do EDI?

In order to communicate with your trading partners using EDI, you need a computer, modem, phone line and EDI translation/communication software. In addition, an interface program will have to be written between the EDI software and the computer application with which you wish to exchange documents. Many companies now use the Internet and send/receive Web (HTML) documents and/or offer "XML" (eXtensible Markup Language) files instead of EDI.

How are computers able to exchange business documents?

Standard message formats have been adopted by specific industries which allow computers to exchange common business documents. For example, formats have been programmed to arrange purchase order or invoice data in a completely predictable form, a form that computers can process. Translating documents from a company's internal format to an industry accepted EDI format is done with the help of software, available commercially, or through programming completed by a company's own data processing staff.

In order for the sender and receiver to communicate electronically, both must use the same industry standard format. Once a business document has been formatted for EDI, it can be sent to a trading partner's computer where it can be converted back to human-readable form as well as stored for further computer processing.

What is an EDI Value Added Network?

EDI trading partners traditionally found it more practical to use EDI Value Added Networks, commonly referred to as VAN's, rather than transmit data directly to each other. The EDI VAN acts as a clearinghouse and offers a variety of services that make EDI more accessible and cost-effective. Newer technologies use the Internet or an "extranet" such as "ANX" (Automotive Network eXchange).

How does a VAN improve EDI communications?

The role of the VAN includes maintaining the systems and equipment that allow incompatible sender and receiver equipment to "speak" with each other.

Also, VAN's make it possible to complete all of a company's communications in a single transmission, thus freeing the sender from transmitting documents one by one to each trading partner, a process which could prove far too costly if done in-house.

The EDI network can also provide many additional services, including development of EDI implementation plans, programs to assist a company's trading partners to also become EDI active, in-network translation from one EDI standard to another, conversion of EDI data to readable format and subsequent mailing or facsimile transmission to a company's non-EDI trading partners, and much more.

What is an EDI mailbox?

The term mailbox is used to refer to a unique identified area of information storage within a computer, a point of private user access and data consolidation to which EDI transmissions are sent and held until retrieved by the individual EDI VAN customer. Each VAN participant can retrieve documents from its assigned mailbox whenever convenient to it's own operations.

All major VAN's communicate with each other via an interconnect to transmit data from one network to another. Before signing up with any VAN, verify that they provide this service and how often they interconnect with other VAN's. A VAN should not hold data that is to be transmitted to your trading partner for more than one hour.

Start-Up Checklist:

· Network availability
· Obtain required EDI documents from trading partner
· Develop cross-reference to application data system
· Communications - Line Type and Speed
· Line protocol, Transmission Mode
· Transmission Initiation
· Install hardware and translation software
· Create application data file (ADF)
· Map data to ADF
· Test translation software with existing data
· Develop internal edits and controls
· Establish "Go-Live" date
· Determine length of parallel mode operations
· Document "Trouble-Shooting" procedures
· Fine tune existing system/procedures
· Add other applications, standards, users