What is EDI?

EDI is the electronic exchange of business documents between the computer systems of business partners, using a standard format over a communication network.

EDI - Electronic Data InterchangeEDI provides business process integration across

companies by exchanging business documents such as purchase orders, invoices, and shipment notices in electronic form, using industry standard formats.

Previously fax machines or traditional mail was used to exchange documents .Mailing and faxing are still used in business, but EDI is a much quicker way to do the same thing.

Cont…….EDI is a collection of standards, formats and file

layout.Currently there are multiple EDI standards

around the world:X12 standard and its subsets (i.e. UCS,VICS)HIPAA– USA only based standard for healthcare

transactions. It is a subset of the ANSI X12 standard set with additional healthcare specific transactions.

EDIFACT– European Standards for electronic commerce.

TRADACOMS– UK based EDI standard – currently in declining use.

COMPONENTS OF EDIEDI Standards

EDI Software's

Communication of EDI massages

EDI STANDARDS One-to-one communication

Exchange of information should be independent of Softwares.

Extract data from business applications to transfer it into a standard format (universally acceptable)

Transportation industry was first and then retail.

EDI Software'sConsists of computer instructions that translate

the information from unstructured, computer specific format to the structured EDI format and then communicate the EDI massages.

Functions:- Data conversion Data formatting

Available for:- mainframe computers, mini computers, micro computers

Software:- X-400, X-435

COMMUNICATION Of EDI MASSAGESElectronically exchange of EDI documents over

comm. Networks

Documents stored in user mail boxes on the networks EDI server

VAN: A VAN is a third party service that transmits and stores data in the “electronic mail-box” until it is picked up by the appropriate party. Since the EDI message contains addressing information, the VAN routes message to the mail-box of the recipient.

Purchasing

Receiving

Accounts Payable Accounts

Receivable

Billing

Shipping

Order Management

Manufacturing

Carrier

Shipment Notice

Invoice

Supplier Bank

Customer Bank

Remittance Advice

Payment Data

Account Information

EFT

Account Information

Shipment Status

Bill of Lading

CustomerVendor

Order Acknowledgement

Quote

Typical Business document exchanged by business partners

Request for Quote

Purchase Order

Purchase Order Change

SETTING UP EDI

Whether you use a service based solution or in-house software, you’ll need to format the data to your trading partner’s specifications. The process of formatting is called mapping.

EDI guidelines are not universal. The map created for Company A’s invoice cannot be copied and used for Company B’s invoice as Company B has its own criteria. You’ll need an implementation guide for every trading partner.

Cont…….Setting up communication: One of the most

important aspects of EDI is selecting how the data is going to get from one place to the other, such as through a VAN or using a direct connection.

Parts of the EDI system.

Application Program

Vendor Customer

Application Program

Translator Translator

Value - Added Network

EDI message EDI message

Business document Business

document

Parts of the EDI SystemTrade Partners : The trading partners can be any

combination of organization or business types.

Application program : AP’s are responsible for generating and processing data in business documents

Business document : A business document is a legal document that defines the transaction conducted between trading partners.

Translator : The translator is responsible for mapping application data to the EDI standard format.

EDI Message : The standards EDIFACT /ANSIX12 defined various EDI messages that govern the rules , format, and content of data in a transaction.

Value-Added Network :The VAN provides a mailbox on the network to each trading partner. This mail box is polled periodically for messages. The application software does not have to be connected or running at the time of message exchange.

Why should I use EDI? EDI and other similar technologies save a 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.

Benefits of EDI include: Reduced cycle time Better inventory management Increased productivity Reduced costs Improved accuracy Improved business relationships Enhanced customer service Increased sales Minimized paper use and storage Increased cash flow

Differences between ANSIX12 / EDIFACT

EDIFACT calls business documents messages and represents them by a name such as ORDERS for a purchase order, whereas ANSIX12 calls them transactions and represents them by a number such as 850 for a purchase order.

EDIFACT uses the same segment in multiple places, where as ANSI has a specific use for each segment.

EDIFACT has additional segments that apply to international trade.

Conditional fields in EDIFACT are the same as optional fields in ANSIX12.

How do I implement EDI? Contact the Uniform Code Council to obtain

introductory material, including a membership application.

The Council will then send you your Communication Identification Number, a Technical Manual, and provide other support services.

This Communication Identification Number is unique to your company, and identifies you to your trading partners.

CONT…..Contact trading partners and determine

what transaction sets they are using and what level.

Determine how you will process EDI. You have two choices, depending on your budget, your technical capabilities and the amount of EDI traffic:

EDI service bureauInternal EDI

CASE STUDY: How to Survive EDI Two owners of a start-up explain how they were able to meet their largest customer's EDI demands.

Even before Jody Kozlow Gardner and Cherie Serota knew what it was, they dreaded electronic data interchange (EDI). Belly Basics, their New York City maternity-clothing start-up, counted Federated Department stores among its largest customers, and last winter the scuttlebutt was that Federated was mandating EDI soon. "We had just started shipping product and weren't ready to change our operations," Serota says. "It was happening so fast." In February Federated told suppliers to be EDI-ready by August.

Ignoring EDI and dropping the customer wasn't an option for the $1.5-million company, which owes 25% of its sales to Federated stores. "Whatever it took, we had to do it," says Serota. EDI requires suppliers to receive computerized purchase orders from the retailer and return invoices in the retailer's chosen electronic format. Belly Basics' old modemless PC wasn't up to the task. So Serota and Gardner sought the most cost-effective solution.

First the partners reread Federated's letter. Their panic subsided a bit. They realized that being small gave them an advantage. Their line was limited to about 20 items, so changes such as computerizing inventory items wouldn't take much time. And since the company had been putting UPC bar codes on its products from the start, it had already met one EDI mandate.

The biggest challenge was the electronic order processing. The partners had two options: process the orders in-house by purchasing a $10,000 software package and better hardware, or hire a third-party service firm. Outsourcing won. "If 100% of our business were with Federated stores, we might bring EDI in-house," Gardner says. "But for two purchase orders a month, it's much better to go with a service."

Gardner gathered several names from her fulfillment warehouse and her Bloomingdale's EDI contact. She also talked to other companies in the same shoes. "One hadn't even done anything yet, and that was a relief," she says. "I was panicking, thinking the whole world was on EDI, and that's not the case."

Prices were comparable at the half dozen service companies Gardner called. She looked for the service that could make the process as painless as possible and explain it without jargon, and finally chose Intercoastal Data, in Carrollton, Ga. At a cost of about $40 an order -- about $1,000 a year for Belly Basics -- Intercostal processes purchase orders sent directly from Federated and faxes them to Belly Basics the same day. Belly Basics forwards the orders to its Long Island warehouse, as it always has. When Intercoastal receives an invoice from Belly Basics, the company sends it and a shipping notice back to Federated in the required electronic format.

In the end Belly Basics met Federated's deadline, which had been extended by several months for all suppliers. Says Gardner, "The whole thing sounded a lot scarier than it is."

Thank you

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