Oz – Foundations of Electronic Commerce © 2002 Prentice Hall EDI and the Internet Oz – Foundations of Electronic Commerce © 2002 Prentice Hall

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall2 Learning Objectives Explain the concept of Electronic Data Interchange (EDI) List the benefits of EDI Explain the notion of virtual private networks Articulate the benefits of EDI conducted via extranets Illustrate a typical scenario of EDI-based transactions

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall What is EDI?

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall4 Electronic Data Interchange (EDI) The exchange of electronic documents between organizations Trading partners Directly from a computer application in one organization to an application in another organization Standardized form Standardized form

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall5 EDI can take place over a value added network (VAN) An EDI message is made up of a data segment Facts separated by delimiters One or more data segments + header + trailer = a transaction set

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall6 Typical EDI Transaction Client’s Bank Client Supplier Supplier's Bank 1. Price Proposal3. Invoice5. EFT 2. Purchase Order4. Payment Approval6. Notice of Deposit

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall7 Main EDI benefits: Cost savings and accuracy Time savings Uniform communication

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall8 VAN services asynchronous mail-box service Provide trading partners with an asynchronous mail-box service Dial into the VAN Use a file transfer protocol to send the document The VAN routes the document to the receiving partner’s mail-box

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall9 EDI in action Not a new concept EDI partnerships between major buyers and suppliers are the norm require Some major buyers require all their suppliers to implement EDI

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall10 Great expectations Not yet ubiquitous, and only of moderate success High, often asymmetric costs The Internet explosion may encourage more companies, including small businesses, to adopt EDI

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall11 Intranets and extranets Intranet - a TCP/IP-based internal network access limited only to employees and other authorized parties Firewall = software that prevents unauthorized parties from accessing private resources

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall12 Virtual private network (VPN) A private network configured within a public network Can be used to create an extranet, which allows the company to open some of its private resources to suppliers and/or customers

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall13 Traditional vs. extranet EDI Benefits of extranet EDI: Global network availability Free software Existing universal equipment Low training costs Single set of standards Fast communication

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall14 Shortcomings of extranet EDI: Inferior security No speed control Only partially developed XML standards

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall15 Standardization of EDI on the Internet EDI services offered by VANs: TRANSACTION INTEGRITY TRANSACTION INTEGRITY The entire transaction is communicated PRIVACY PRIVACY Private networks offer better privacy NONREPUDIATION NONREPUDIATION The inability of a trading partner to deny sending or receiving a document

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall16 Eventually, XML standards will allow Web-based EDI to match most of the features now offered by VANs BuyerXML server Vendor MRP Internet ERP Web EDI using XML

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall17 Business use of extranet EDI today Target Software allows vendors to exchange complex documents PIPs and Arrow Electronics Partner Interface Processes (PIPs) XML standard

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall18 Transport Club and SWIFT Examples of hubs that handle the bulk of extranet EDI Have launched Bolero.net a B2B hub that establishes an online center for importers, exporters, shipping organizations, and financial institutions

Oz – Foundations of Electronic Commerce © 2002 Prentice Hall EDI and the Internet Oz – Foundations of Electronic Commerce © 2002 Prentice Hall