Electronic Data Interchange Systems

Contents Electronic Data Interchange Systems EDI Standards Traditional versus Internet EDI Process of Electronic Data Exchange Advantages of EDI Disadvantages of EDI

Electronic Data Interchange Systems Chapter Electronic Data Interchange Systems An Electronic Data Interchange (EDI) system provides for electronic communication of data between businesses. Types of data sent include Purchase order data Shipping data Invoice data Product description data Price list data Insurance data © 2001 Business & Information Systems 2/e

Electronic Data Interchange Figure : Suppliers, manufacturers, and retailers cooperate in some of the most successful applications of EDI. BACK

EDI Standards EDI standards are formats for EDI documents that specify what information goes where within an EDI document. These bodies include American National Standards Institute (ANSI X12 standards) and International bodies. There are two types of EDI standards: Proprietary standard - EDI standard developed for a specific company or industry. This is also called a non-public or private standard. Public standard - EDI standard developed for use across one or more industries BACK

Traditional versus Internet EDI Chapter Traditional versus Internet EDI An EDI system, like all IOSs, requires a data communications link between businesses. Internet EDI systems require special software to send encrypted standardized data. EDI data is generally input directly into the system upon receipt. © 2001 Business & Information Systems 2/e

PAPER DOCUMENT INTERCHANGE PO Data Entry Computer Computer Post Office Old way of doing business involves paper document interchange Problems with this process: Time to process a paper document Time to send paper document through mail Mailing costs Time to re-enter data several times Increased opportunity for errors due to re-entry of data Time to file and manage document storage Space required for document storage There are many disadvantages (and some advantages) to the traditional paper document interchange process. ______________________________________________________________ Purchaser Invoice

ELECTRONIC DATA INTERCHANGE PO Data Entry Computer Computer VAN Electronic interchange between the computer and an electronic post office eliminates these problems Information is exchanged via electronic post office or VAN ______________________________________________________________ _______________________________________________________________ Purchaser Invoice BACK

Process of Electronic Data Exchange How does EDI work? Supplier’s proposal sent electronically to purchasing organization. Electronic contract approved over network. Supplier manufactures and packages goods, attaching shipping data recorded on a bar code. Quantities shipped and prices entered in system and flowed to invoicing program; invoices transmitted to purchasing organization

Electronic Data Interchange

Process of Electronic Data Exchange Manufacturer ships order. Shipment notice EDI transaction sent (not shown) Purchasing organization receives packages, scans bar code, and compares data to invoices actual items received. Payment approval transferred electronically. Bank transfers funds from purchaser to supplier’s account using electronic fund transfer (EFT). BACK

Advantages of EDI Worldwide connectivity Emergence of standards and guidelines Greater reliability of information technology Globalization of organizations Need for timely, reliable data exchange in response to rapidly changing markets Lower operating costs -Saves time and money Less Errors = More Accuracy -No data entry, so less human error

Increased Productivity More efficient personnel and faster throughput Faster trading cycle Streamlined processes for improved trading relationships Lowering Operating Cost - EDI replaces paper transactions with electronic transmissions, saving time and reduced cost of business transaction and enabling the automatic processing of documents. Reduced Error and Increases Business Information Accuracy - With the implementation of EDI, there is no need for re-entering data, thus, reducing the risk for human error. Each re-entry of data is a potential source of error. Increase Productivity - Making personnel more efficient and it improves business capabilities by speeding up throughput.   Faster Trading Cycle - EDI allows faster and streamlining trading cycle between organizations  leading to improved relationships between trading partners. BACK

Disadvantages of EDI Organizational participation Low speed Poor security Organizational participation Technical problems must be solved Can be expensive for small businesses to implement. There are various standard document formats for EDI that can cause problems with cross compatibility. BACK

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