Impact Of Electronic Data Interchange In E-Business

1.    Introduction: Electronic Data Interchange is considered as a technical representation between two parties, either internal or external. It refers as a transformation of data between two organizations.. It also transfers electronic document between two organizations. EDI implies sequence of messages between two parties in which one is originator and other one is recipient. EDI includes a variety of technologies for transmitting the data including modem, FTP, E-mail, HTTP, etc. EDI have some standard format with the help of which trading partners transmit there electronic document between each other. EDI plays very important role in organization. It is very useful in supply chain management. EDI improves speed & accuracy for exchanging the data because it uses internet facility. Information flow only from application to application. In EDI VAN act as a mail box that send & receive messages from business partner, so the envelop work get reduce. Electronic Data Interchange as the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. It goes on further to say that In EDI, the usual processing of received messages is by computer only. Human intervention in the processing of a received message is typically intended only for error conditions, for quality review, and for special situations.                                     
       
 

a.    Specifications: Organizations that send or receive documents between each other are referred to as "trading partners" in EDI terminology. The trading partners agree on the specific information to be transmitted and how it should be used. This is done in human readable. While the standards are analogous to building codes, the specifications are analogous to blue prints. (Using translation software.) Larger trading "hubs" have existing Message Implementation Guidelines which mirror their business processes for processing EDI and they are usually unwilling to modify their EDI business practices to meet the needs of their trading partners.

Often in a large company these EDI guidelines will be written to be generic enough to be used by different branches or divisions and therefore will contain information not needed for a particular business document exchange. For other large companies, they may create separate EDI guidelines for each branch/division.

b.    Transmission: Trading partners are free to use any method for the transmission of documents. In the past one of the more popular methods was the usage of a by sync modem to communicate through a value added network (VAN). Some organizations have used direct modem to modem connections and bulletin board systems (BBS), and recently there has been a move towards using some of the many Internet protocols for transmission, but most EDI is still transmitted using a VAN. In the healthcare industry, a VAN is referred to as a "clearinghouse".

c.    Value Added Networks: In the most basic form, a VAN (value added network) acts as a regional post office. They receive transactions, examine the 'source' and the 'destination' information, and route the transaction to the final recipient. VANs provide a number of additional services, e.g. retransmitting documents, providing third party audit information, acting as a gateway for different transmission methods, and handling telecommunications support. Because of these and other services VANs provide, businesses frequently use a VAN even when both trading partners are using Internet-based protocols.
•    Value Added Networks are the go-between in EDI communications.
•    The VAN is responsible for routing, storing and delivering EDI messages. They also provide delivery reports
2.    Types of EDI
i)    EDI via a VAN (Value Added Network): Value Added Networks, VANs, are private networks where EDI related information can be exchanged between companies securely. Trading partners will typically require an account with an EDI VAN provider which simply acts as an electronic mail box to both send and receive electronic documents. The sender connects with the VAN and sends its EDI transactions to the recipient's mailbox where they are stored. The sender then disconnects from the service. Then, at some point that is convenient, the recipient can connect to the network and receive those transactions from their mailbox. Most VANs offer an alerting service which informs the sender when messages have been sent successfully and informs the recipients when a new EDI message has arrived in their mailbox.

•    They offer a mailbox service; trading partners dial into a VAN via a network access point and use a file transfer protocol to send EDI messages to the VAN. The VAN automatically routes the message to the receiving partner's mailbox and the trading partner dials into the VAN and retrieves the message
•    VANs act as trusted third parties by inspecting and authenticating the EDI messages and verifying the identity of trading partners depositing and accessing them
•    VANs take responsibility for providing an audit trail of all EDI transactions and for tracking the trail of a message

ii)    EDI via the Internet (Web EDI): The Internet, as with VAN providers, uses its own communications protocols to ensure that EDI documents are transmitted securely. The most popular protocols are File Transfer Protocol Secure (FTPS), Hyper Text Transport Protocol Secure (HTTPS), and AS2.The Internet has provided a means for any company, no matter how small or where they are located in the world, to become part of a major supply chain initiative hosted by a global retailer or manufacturing company. Web-based EDI, or webEDI, allows a company to interact with its suppliers in these regions without the worrying of implementing a complex EDI infrastructure. In its simplest form, webEDI enables small to medium-sized businesses to receive, turn around, create and manage electronic documents using just a web browser. This service seamlessly transforms your data into EDI format and transmits it to your trading partner. Simple pre-populated forms enable businesses to communicate and comply with their trading partners' requirements using built-in business rules. Using a friendly web-based interface, EDI transactions can be received, edited and sent as easily as an email.

iii)    Advantages of using EDI over paper systems: EDI and other similar technologies save company money by providing an alternative to, or replacing information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc. Even when paper documents are maintained in parallel with EDI exchange, e.g. printed shipping manifests, electronic exchange and the use of data from that exchange reduces the handling costs of sorting, distributing, organizing, and searching paper documents. EDI and similar technologies allow a company to take advantage of the benefits of storing and manipulating data electronically without the cost of manual entry. Another advantage of EDI is reduced errors, such as shipping and billing errors,. One very important advantage of EDI over paper documents is the speed in which the trading partner receives and incorporates the information into their system thus greatly reducing cycle times. For this reason, EDI can be an important. As paper documents have been replaced with electronic transactions, it is easy to maintain electronic logs or audit trails of document handling activity. From this, businesses gain a substantial increase in the ability to track status and measure performance throughout the entire process.
•    The process takes seconds or minutes instead of days
•    The electronic document has not been handled by any mailroom staff, postal or delivery service or data entry staff. It will not wait in any in-basket waiting for collection and it won’t have to wait while staff are on the phone
 
iv)    EDI Improves Accuracy: Electronic transfer of data eliminates the need for copying data from one paper document to another, or for keying the data into a business application screen. Every time data is transferred, there is opportunity for error to be introduced to the process. In the typical manual purchase order, a person enters or copies information from the paper form at least once. With EDI, improved accuracy is obtained in several different ways.
•    Electronic data is usually derived from a database, where data has been subject to prior validation
•    Electronic documents are transferred accurately regardless of size. If transmission of a large document is not successful, users can invoke re-transmission procedures rapidly
•    Even if several different parties process the electronic document, with each party adding data to the existing document, none has the ability to alter previously entered information

v)    EDI Reduces Costs: Your company may obtain a variety of cost reductions as a result of implementing EDI. These reductions can include both cost savings and cost avoidance. These points summaries just a few of the more general types of savings you can expect:
•    Reduction of overhead costs, eliminating human handling in such areas as mailroom sorting and circulation, clerical document preparation and data entry. Upon implementing EDI, costs for paper, envelopes and mailing materials decrease as well as those for telephone and courier services used to support transmission of orders and paper documents. Additionally storage space for paper and supplies is freed thus reducing costs still further
•    Reduction of inventory costs through shortening order processing and delivery cycles, and generally lowering inventory levels. As goods can be delivered more quickly the buying company need not order new products as often and can lower or eliminate its level of inventory safety stock. Lowered inventory levels also results in corresponding reductions in carrying costs. Inventory costs can, in some businesses, account for as much as 90 percent of total product cost, so even modest reductions in this area can result in dramatic savings.

vi)    EDI Improves Operational Efficiency: In addition to improving speed, cost and accuracy, EDI can impact the business in a number of other ways, improving operational efficiencies and tightening relationships with your trading community.
•    Improved Trading Partner Relationships. In order to successfully transmit, interpret and process transmissions automatically, much trading partner co-operation and analysis are required. The party that originates the data depends on the sender to provide accurate and timely data. Thus it is important for both parties to agree on business procedures, data requirements, and usage, communication methods, operational windows and testing schedules prior to implementing EDI.
•    Improved processing and planning. In an electronic environment, rapid receipt of accurate and complete business transactions is the norm. Suppliers can process orders quicker and shipments can be scheduled accordingly, while the manufacturer can anticipate quicker receipt of goods and schedule manufacturing tasks accordingly
There are a few restriction to adopting electronic data interchange. One of the most significant barriers is the accompanying business process change. Existing business processes built around slow paper handling may not be suited for EDI and would require changes to accommodate automated processing of business documents. For example, a business may receive the bulk of their goods by 1 or 2 day shipping and all of their invoices by mail. The existing process may therefore assume that goods are typically received before the invoice.

3.    The Importance of EDI within the Enterprise: Today, business is becoming increasingly competitive. Companies must respond to international competition as well as to non-traditional competition. Telecommunications companies are competing with credit card companies. The additional competitive pressures are forcing companies to cut costs in non-core functions such as sending purchase orders, invoices, and payments.EDI has significant advantages over traditional or manual handling of paper business documents. EDI document processing occurs in seconds rather than the days or weeks it takes for manual processing. Because EDI enables real-time inventory control and accelerates order processing, it helps shorten sales cycles, reduce spoilage of perishable goods, and hold down warehousing costs.
4.    Conclusion: EDI implies sequence of messages between two parties. Systems analyst is playing an important role b/w these two parties. He evaluates the use of EDI technology in their enterprise infrastructure because EDI has the ability to automate many business processes. Traditionally, systems analysts had an inward focus in developing network and computer strategies that included a limited set of intra-company applications. Systems analysts must now look outward towards inter-company communication technologies, like EDI, to improve logistical performance and operation efficiencies

5.    Reference:
1.    E-commerce, (2006)  S.jaishwal galgotia publication.
2.    Creating a wining E-BUSINESS second edition CENGAGE Learning, New Delhi (2009), H Albert Napier, Stuart Wagner, Ollie Rivers, JB Napier
3.    http://en.wikipedia.org/wiki/Electronic_Data_Interchange
4.    http://e.d.i.tripod.com/edi_future.htm
5.    http://www.sagebusiness.com.au/pg-Future-of-EDI-electronic-data-exchange.seo