Unit2

E-Commerce - EDI
• https://www.youtube.com/watch?v=li-eClybZKA
 Need for e-business

> 90,000,000,000,000

Greater than 90 TRILLION sheets of paper are

produced by American business annually
E-business Strategy

Move From
Paper Intensive
Non - Integrated

Automated
Integrated

Create Data Once - Use It Many Times!

 ELECTRONIC DATA INTERCHANGE

TRANSACTION
DATA

COMPANY A COMPANY B
EDI is the computer-to-computer exchange of routine business
documents (data) in a standard format between companies.
What is EDI
• electronic Data Interchange (EDI) is the computer-to-computer exchange of
business documents in a standard electronic format between business
partners.
• Business documents -. 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
• Electronic Data Interchange is the computer-to-computer exchange of business
data and documents between companies using standard formats recognized
both nationally and internationally.
• The information used in EDI is organized according to a specified format set by
both companies participating in the data exchange.
PAPER DOCUMENT INTERCHANGE
PO Data Entry

Computer Computer

Post Office

Purchaser Invoice
ELECTRONIC DATA INTERCHANGE
PO Data Entry

Computer Computer

VAN

Purchaser Invoice
https://www.youtube.com/watch?v=6bdg8rFmq9Q
EDI Standards
• Companies speak precisely the same language
• Same codes in same places
• Proprietary codes --> to standards (X12, EDIFACT,X400)
• Different computers can communicate with one another
• In 1968, the Transportation Data Coordination Committee was formed, charged with exploring
ways to reduce the paperwork burden
• American National Standards Institute (ANSI): coordinating body for standards in the United
States since 1918
• Accredited Standards Committee X12 (ASC X12) chartered by ANSI in 1979 to develop EDI
standards
• The current ASC X12 standard includes specifications for several hundred transaction sets
 EDI BENEFITS

Increased Business Reduced Inventory

Opportunities

More Accurate Records and Decision-making Information

Lower Data Entry Costs
 EDI BENEFITS

Decreased Mailing Costs Greater Customer

Satisfaction

Reduction In Order Time Better Cash Management

EDI is Cross Functional

Account Executives
Accounting Shipping

EDI has an impact on all departments

Order Processing
Information
Systems
Benefits of EDI
• The use of an electronic transmission medium
• The use of structured and formatted messages based on
agreed standards
• Relatively fast delivery from sender to receiver
• Direct processing by receiver’s application software, usually
resulting in some response to the sending party
EDI benefits
• Reduced re-keying of redundant information
• Reduced manual reconciliation of different documents
• Reduced sorting, distributing, and filling of documents
• Reduced correction of errors caused by incorrect data
entry
• Reduced document mailing or telephoning of
information
• Reduced transmission time
Barriers to Adoption
• Trading partners not knowing benefits
• Hardware costs
• Interfacing translator, software costs
• Need for software modifications
• Network (VAN) service charges
• Costs and effort for trading partner conversion
EDI Components

Standards
EDI Hardware

Software Communications
EDI Components
• Four basic components of EDI:
1.Hardware - Includes computers and modems
2.Software - Select one to fit your requirements
Software that translates data from internal formats to standardized EDI formats and vice versa, facilitating
accurate data exchange.
Local software like Ramco Logistics or Tally often include EDI modules that translate data into compatible
formats, making it easy for Indian SMEs to interact with larger partners.
3.Communications –
Communication Networks: Systems for data transmission, including Value-Added Networks
(VANs), AS2 (Applicability Statement 2), FTP, or APIs, which secure data flow between trading
partners.
AS2 and secure FTP are popular in India, especially in sectors with high compliance, like
pharmaceuticals. Large retailers like Reliance Retail may use VANs for EDI transactions with
suppliers.
EDI Components
4.EDI Standards:
• Rules governing the format and structure of documents, such as ANSI X12 (American National
Standards Institute), EDIFACT, and XML (eXtensible Markup Language),which ensure that data
can be universally understood between systems.
• Predominantly uses EDIFACT and XML standards in India..

EDIFACT (Electronic Data Interchange for Administration, Commerce, and Transport) is an

international EDI standard developed by the United Nations for formatting business documents.
It’s widely used in sectors like shipping, logistics, and manufacturing to standardize documents
like invoices, purchase orders, and customs forms for easy cross-border communication.
 How EDI Works
The APL Group
quote
664 danbury Ct
ST* 843 12345
Wilson, ct NTE**Ship
Complete
RFQ # 1234
N1 *SE* The Apl
06/07/95
Grp Inc...
1 WIDGET #5678
2 dz gizmos N3 *664
DANBURY

Converts Internal Data Converts ANSI X12

Format to ANSI X12 Standard format to
(outbound) Internal Format
(inbound)
How EDI Works
• Document Preparation
• Translation to EDI Format
• Transmission of EDI Message
• Reception and Translation by Recipient
• Document Processing
• Acknowledgment and Response