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    Electronic Data Interchange

    INTRODUCTIONProcessing and managing information is a tedious and time-consuming process. In a typical business environment,

    thousands of transactions happen in a day, managing this task is difficult and prone to human errors during data

    entry and it is also expensive.

    The solution to the above problem comes in the form of Electronic Data Interchange (EDI).

    What is EDI?EDI refers to the electronic interchange of data between computer systems. More precisely EDI is defined as The

    transfer of structured data for processing from computer to computer using agreed formats and protocols.

    Need of Networking InfrastructureEDI assumes availability of a wide area network to which organization can subscribe (Figure 1). All Organizations

    willing to join EDI services must subscribe to the common network. In addition, all organizations participating in a

    particular EDI services group should agree to a message format that they will use, and load appropriate EDIsoftware on their computer systems. This software is responsible for providing translation services, EDI services

    and network services. When a senders computer system produces a message and passes it to the translation

    service software, this translates the message into the common agreed structure and passes it to EDI service

    software. EDI service software executes necessary functions and procedures to send the message, track it in the

    network, and ensure that it reaches its destination.

    Fig. 6.1.1: EDI Business cycle

    EDI services, in addition, may include procedures to ensure security functions, building and accounting functions

    and generate necessary logs for auditing purposes. Network access services are responsible for actually controlling

    the interaction with the network that transports messages from one site to another.

    The transport network provides a powerful electronic messaging service to support EDI services. Transportnetwork uses a store and forward mechanism and messages are sent to mail boxes that are managed by the

    network service provider. The organization can send his message at any time independent of the recipients system

    status, i.e. whether or not it is ready for receiving. The recipient systems periodically check their mail boxes and

    transfer messages from network mail boxes to their own memory.

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    Processing of EDI Message Electronic Data InterchangeThus a transfer cycle is completed. The receiving computer applies necessary translator and convents the receivedmessage into a format understandable by its application software. The application software is programmed to

    recognize various messages and take necessary actions such as generating responses to receive messages and

    updating other databases.

    Features of EDITraditionally, data transfer from one company to another is done through the paper documents, which have to be

    manually forwarded and entered to the destination computer.

    EDI has helped in the electronic exchange of structured business information, in standard formats, between

    computers. It has reduced data entry link, eliminates the need for a paper bases system and Improved business

    cycle times by providing an electronic link between companies.

    EDI is the electronic transfer of structured business documents in an organization internally among groups of

    departments or externally with its supplies, customers and subsidiaries. In EDI, the information transferred over a

    network will not have to be read, retyped or printed but it must have a predefined structure agreed between the

    two companys which send and receive data.

    The two companies or groups which exchanged information through EDI are called the Trading partners. The

    computers, which these trading partners use, need not be from the same manufacturers.

    Examples of current uses of EDI include information teller machines (ATMs) in banks where EDI is used for

    transferring and withdrawing funds between different bank accounts, airline reservation systems, stock exchangetransactions and car reservation systems.

    Working of EDICompanies using EDI communicate with their Trading Partners, in one of the two ways:

    Exchange of data with several trading partners directly.

    Interaction with multiple companies through a central information clearing-house.

    Typical EDI Configuration One to MAny

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    One to Many

    In the latter case, all transactions take place through a third partys computer system, which then sends them to

    the appropriate receivers computer. This enables the sender to communicate with an unlimited number of trading

    partners without worrying about proprietary system audit trails, variable transmission speeds, and general

    computer compatibility.

    EDI works in the following mannerPrior to any computer work, representatives of two companies interested in exchanging data electronically meet to

    specify the application in the EDI standard which they will important.

    The two companies exchange date electronically in the standard formats.

    Each company adds EDI programs to its computer to translate the company data into standard formats for

    transmission, and for the reverse translation in the data it receives.

    The sender transmits the database formatted in EDI standards to the receiver who then translates the formatted

    message to a computer record to be processed and used internally. All transmission are checked both electronically

    and functionally and the protocol includes procedures for error detection and correction.

    Once a company has established standardized communications with another company, it is now in a position to

    communicate with any other company that is also using the EDI standards.

    The flow of information in EDI is as follows:Collection of data for its own operational or statistical requirements which is edited be added to its own

    database.

    Extraction of Pertinent information by the company from its database, summarized if necessary and

    constructed into EDI transaction sets, and finally it is transmitted to the company or organization requiring

    it for valid reasons.

    The frequency of preparing this information is determined by the operational requirements of each

    recipient.

    A communications link for transmission is established according to the standard communications protocol.

    The Receiver receives the information transmission, checks for its physical characteristics (parity check,character, transmission mode), requests for transmission if an error is detected in the physical

    characteristics of the transmission.

    Checking the functional characteristics of the data receiver and an acknowledgement sent to the original

    sender for receiving the transmission and to identify any errors detected.

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    To process the information received by the receiver according to its own internal procedures and timing

    requirement.

    EDI ComponentsA typical EDI system converts generic EDI messages (in EDIFACT or any other EDI standard) format to RDBMS

    format and from RDBMS format to EDI format. RDBMS database contains the data to be translated into EDI format

    and where EDI data is to be converted (and written). EDI configuration programs do these translations.

    There are three main components of an EDI system:

    Application Service

    Translation Service

    Communication Service

    Electronic Cheque

    A system that transfers moneyelectronically from the buyer's current account to the seller's bank

    account

    An e-cheque is a type of electronic transfer that withdraws money directly from your bank account bydirect debit. They are just like paper cheque's only they are electronic.

    Definition Of 'Credit Card'

    A card issued by a financial company giving the holder an option to borrow funds, usually at point ofsale. Credit cards charge interest and are primarily used for short-term financing. Interest usuallybegins one month after a purchase is made and borrowing limits are pre-set according to theindividual's credit rating.

    Smart CardA smart card is a plastic card about the size of a credit card, with an embedded micro chip that can be

    loaded with data, used for telephone calling, electronic cash payments, and other applications, andthen periodically refreshed for additional use.

    Digital SignatureA digital signature (not to be confused with a digital certificate) is an electronic signature that can be

    used to authenticate the identity of the sender of a message or the signer of a document, and possiblyto ensure that the original content of the message or document that has been sent is unchanged.Digital signatures are easily transportable, cannot be imitated by someone else, and can beautomatically time-stamped. The ability to ensure that the original signed message arrived means thatthe sender cannot easily repudiate it later.

    Web Page Definition:a web page is a document that's created in html that shows up on the internet when you type in or goto the web page's address.

    WebsiteA website, also written as web site,[1]web site, or simply site,[2]is a set of related web pages served froma single web domain. A website is hosted on at least one web server, accessible via a network such as

    http://www.investorwords.com/5048/transfer.htmlhttp://www.investorwords.com/3100/money.htmlhttp://www.investorwords.com/12803/buyer.htmlhttp://www.investorwords.com/5493/current_account.htmlhttp://www.investorwords.com/13835/seller.htmlhttp://www.investorwords.com/7006/bank_account.htmlhttp://www.investorwords.com/7006/bank_account.htmlhttp://searchcio-midmarket.techtarget.com/definition/microchiphttp://searchsecurity.techtarget.com/definition/digital-certificatehttp://en.wikipedia.org/wiki/Website#cite_note-1http://en.wikipedia.org/wiki/Website#cite_note-1http://en.wikipedia.org/wiki/Website#cite_note-1http://en.wikipedia.org/wiki/Website#cite_note-2http://en.wikipedia.org/wiki/Website#cite_note-2http://en.wikipedia.org/wiki/Website#cite_note-2http://en.wikipedia.org/wiki/Web_pagehttp://en.wikipedia.org/wiki/Fully_qualified_domain_namehttp://en.wikipedia.org/wiki/Web_serverhttp://en.wikipedia.org/wiki/Web_serverhttp://en.wikipedia.org/wiki/Fully_qualified_domain_namehttp://en.wikipedia.org/wiki/Web_pagehttp://en.wikipedia.org/wiki/Website#cite_note-2http://en.wikipedia.org/wiki/Website#cite_note-1http://searchsecurity.techtarget.com/definition/digital-certificatehttp://searchcio-midmarket.techtarget.com/definition/microchiphttp://www.investorwords.com/7006/bank_account.htmlhttp://www.investorwords.com/7006/bank_account.htmlhttp://www.investorwords.com/13835/seller.htmlhttp://www.investorwords.com/5493/current_account.htmlhttp://www.investorwords.com/12803/buyer.htmlhttp://www.investorwords.com/3100/money.htmlhttp://www.investorwords.com/5048/transfer.html
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    the internet or a private local area network through an internet address known as a uniform resourcelocator. All publicly accessible websites collectively constitute the world wide web.

    HypertextHypertext is text displayed on a computer displayor other electronic device with references (hyperlinks)to other text that the reader can immediately access, usually by a mouse click, key press sequence orby touching the screen. Apart from text, hypertext is sometimes used to describe tables, images andother presentational content forms with hyperlinks. Hypertext is the underlying concept defining the

    structure of the world wide web.[1]it enables an easy-to-use and flexible connection and sharing of

    information over the internet.

    Firewalla firewall is software or hardware-based network security system that controls the incoming and

    outgoing network traffic by analyzing the data packets and determining whether they should be allowedthrough or not, based on a rule set. A network's firewall builds a bridge between the internal network orcomputer it protects, upon securing that the other network is secure and trusted, usually an external(inter)network, such as the internet, that is not assumed to be secure and trusted.

    1. THE TRADITIONAL DEFINITION OF EDI

    One of the more commonly accepted definitions of Electronic Data Interchange, or EDI, has been "the computer-to-computertransfer of information in a structured, pre-determined format." Traditionally, the focus of EDI activity has been on the

    replacement of pre-defined business forms, such as purchase orders and invoices, with similarly defined electronic forms.

    HOW EDI WORKS

    In it's simplest form, EDI is the electronic exchange of information between two business concerns (referred to in the EDI

    world as trading partners), in a specific predetermined format. The exchange occurs in basic units called messages, or

    transaction sets, which typically relate to standard business documents, such as Purchase Orders and Customer Invoices. Over

    time the business community has arrived at series of standardized transaction formats to cover a wide range of business

    communication needs.

    Each transaction set has an extensive set of data elements required for that business document, with specified formats andsequences for each data element. The various data elements are built up into segments, or logically related groups of data, such

    as vendor address (which would be made up of data elements for street, city, state, zip code, and country).

    All of the related segments for a transaction are then grouped together, and are preceded by a transaction header and followed

    by a transaction trailer record. If the transaction contains more than one transaction (many purchase orders sent to one vendor)several transaction groups would be preceded by another type of record, referred to as a functional group header, and would b e

    followed by a function group trailer.

    TRADITIONAL IMPLEMENTATION OF EDI

    One of the first places that EDI was traditionally implemented was in the purchasing operations of a business. Before the

    implementation of EDI, a purchasing system would allow buyers to review their material requirements, and then create

    purchase orders, which would be printed out and mailed. The supplier would receive the purchase order, and manually enter itinto their customer shipping system. The material would be shipped, and an invoice would be printed, which would then be

    mailed back to the supplier.

    In this simple example, even if the purchased materials were shipped and received on the same day the purchase order was

    received, the cycle time could be as much as a week, depending on the speed of the mail and the backlog at the supplier's order

    entry system.

    With the introduction of EDI, this scenario changed dramatically. Purchasing agents would still review their material

    requirements and create their purchase orders. But instead of printing them out and mailing them, the purchase orders would be

    transmitted directly to the suppliers over an electronic network.

    On the supplier's end, the transaction would be automatically received and posted. This new process could allow the shipmentof material on the same day the purchase order was sent. As an added bonus, suppliers could send their shipping

    documentation electronically to the buyer in the form of a shipment notification, providing the buyer with accurate receiving

    documents prior to the actual arrival of the material. And the supplier gained an additional advantage as well, since now the

    invoice could be sent directly to the customer's accounts payable system, speeding payment to the supplier.

    http://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Local_area_networkhttp://en.wikipedia.org/wiki/Uniform_Resource_Locatorhttp://en.wikipedia.org/wiki/Uniform_Resource_Locatorhttp://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/Computer_displayhttp://en.wikipedia.org/wiki/Hyperlinkshttp://en.wikipedia.org/wiki/Content_formhttp://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/Hypertext#cite_note-1http://en.wikipedia.org/wiki/Hypertext#cite_note-1http://en.wikipedia.org/wiki/Hypertext#cite_note-1http://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Hypertext#cite_note-1http://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/Content_formhttp://en.wikipedia.org/wiki/Hyperlinkshttp://en.wikipedia.org/wiki/Computer_displayhttp://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/Uniform_Resource_Locatorhttp://en.wikipedia.org/wiki/Uniform_Resource_Locatorhttp://en.wikipedia.org/wiki/Local_area_networkhttp://en.wikipedia.org/wiki/Internet
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    TRADITIONAL BENEFITS OF EDI

    Whether implementation of EDI was in the area of purchase orders, advanced shipment notification, or automatic invoicing,

    several immediate advantages could be realized by exchanging documents electronically.

    SPEEDo Information moving between computers moves more rapidly, and with little or no human intervention.o Sending an electronic message across the country takes minutes or less.o Mailing the same document will usually take a minimum of one day.o Courier services can reduce the time (while substantially increasing the cost) but at best can shorten the cycle

    to hours.

    o Facsimile transmissions work well for small documents, but for several hundred pages, it's not a feasiblesolution.

    ACCURACY

    Even when alternate means of document transfer are used they suffer from the major drawback of requiring re-entry

    into the customer order system, admitting the opportunity of keying errors. But information that passes directly

    between computers without having to be re-entered eliminates the chance of transcription error. There is almost no

    chance that the receiving computer will invert digits, or add an extra digit.

    ECONOMY

    The cost of sending an electronic document is not a great deal more than regular first class postage. Add to that the

    reductions in cost afforded by eliminating the re-keying of data, human handling, routing, and delivery. The net result

    is a substantial reduction in the cost of a transaction.

    THE DOWNSIDE OF TRADITIONAL EDI

    Although these benefits are compelling, and were repeated in boardrooms around the world, actual acceptance and

    implementation of EDI was far less prevalent than might be expected, because for all the acknowledged benefits, the

    technological complexity of EDI presented a number of major stumbling blocks.

    EXPENSE

    Computers, especially mainframes, and their business application systems were complex and expensive. Primarily

    serving the peripheral functions of a business, they were not regarded as being fully integrated into all business

    activities.

    Traditionally, the mainframe computing environment was viewed as an information repository. EDI required that

    information technology be extended beyond core functions. So while there were substantial savings to be gained from

    the use of EDI, the cost of re-designing and deploying software applications to integrate EDI into an existing portfolio

    of business applications was high enough to offset the anticipated advantages.

    NETWORKING COMPLEXITY

    The need for extensive telecommunications capability posed a second major barrier to widespread EDIimplementation. Beyond the computer itself, a basic requirement of EDI is a means to transmit and receive

    information to and from a wide variety of customers or suppliers. This required a heavy investment in computer

    networks.

    Unlike the mail, to send electronic documents there must be a specific point-to-point electronic path for the document

    to take. So companies were either required to develop extensive, and expensive networks, or rely on intermittent

    point-to-point modem communication.

    ALTERNATIVES

    Because of the technological complexity and cost of implementation, cheaper alternatives short-circuited widespread

    utilization of EDI. To gain some of the advantages of EDI without the high price of computer hardware, software andnetworks, many innovative alternatives were developed. Overnight courier service, facsimile machines, and the ability

    to give customers limited access to mainframes through dumb terminals provided comfortable, quick, and reasonably

    priced alternatives to inviting a major alteration of business environments.

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    DIFFERENCE BETWEEN TRADITIONALEDI AND WEB-BASED EDI

    Traditional

    EDIEDI reality

    - Old, passelectronic

    standard

    - Time tested and

    successfully works- Straight forward to

    implement

    -

    Traditionally

    expensive

    - Cost of tools are

    getting cheaper

    e.g. EDIdEv

    Framework EDI- Can be implementedover the Internet

    - Less bandwidth

    - Cryptic

    - Once understood,

    quick to implement

    - Storagerequirements are

    minimal

    - Information can still

    be transported on

    floppy disk

    - Established

    companies

    (Fortune 500)

    and

    governments

    - Status quo

    - Established global

    user base

    - Low business risk

    lhkjjhkhhhh

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    Standards [edit]

    EDI provides a technical basis for commercial "conversations" between two entities, either internal or external. Notethe perception that "EDI" constitutes the entire electronic data interchange paradigm, including the transmission,message flow, document format, and software used to interpret the documents. EDI standards describe therigorous format of electronic documents. EDI is very useful in supply chains.

    The EDI standards were designed by the implementers, initially in the Automotive industry, to be independent of

    communication and software technologies. EDI can be transmitted using any methodology agreed to by the senderand recipient. This includes a variety of technologies, including modem (asynchronous and synchronous),FTP, e-mail,HTTP,AS1,AS2, etc. It is important to differentiate between the EDI documents and the methods fortransmitting them. When they compared thesynchronous protocol2400 bit/s modems,CLEOdevices, andvalue-added networksused to transmit EDI documents to transmitting via the Internet, some people equated the non-Internet technologies with EDI and predicted erroneously that EDI itself would be replaced along with the non-Internet technologies. These non-internet transmission methods are being replaced byInternet protocolssuch asFTP,telnet, and e-mail, but the EDI documents themselves still remain.

    As more trading partners use the Internet for transmission, standards have emerged. In 2002,theIETFpublishedRFC 3335, offering a standardized, secure method of transferring EDI data via e-mail. On July12, 2005, an IETF working group ratifiedRFC4130forMIME-based HTTP EDIINT (a.k.a.AS2) transfers, and ispreparing a similarRFCfor FTP transfers (a.k.a.AS3). While some EDI transmission has moved to these newer

    protocols, the providers of thevalue-added networksremain active.EDI documents generally contain the same information that would normally be found in a paper document used forthe same organizational function. For example an EDI 940 ship-from-warehouse order is used by a manufacturer totell a warehouse to ship product to a retailer. It typically has a 'ship-to' address, a 'bill-to' address, and a list ofproduct numbers (usually aUPC) and quantities. Another example is the set of messages between sellers andbuyers, such as request for quotation (RFQ), bid in response to RFQ, purchase order, purchase orderacknowledgment, shipping notice, receiving advice, invoice, and payment advice. However, EDI is not confined to

    just business data related to trade but encompasses all fields such as medicine (e.g., patient records andlaboratory results), transport (e.g., container and modal information), engineering and construction, etc. In somecases, EDI will be used to create a new business information flow (that was not a paper flow before). This is thecase in the Advanced Shipment Notification (856) which was designed to inform the receiver of a shipment, thegoods to be received and how the goods are packaged.

    Some major sets of EDI standards:

    TheUN-recommendedUN/EDIFACTis the only international standard and is predominant outside of NorthAmerica.

    TheUSstandardANSI ASC X12(X12) is predominant in North America.

    TheTRADACOMSstandard developed by the ANA (Article Numbering Association now known asGS1) ispredominant in theUKretail industry.

    The ODETTE standard used within the European automotive industry

    All of these standards first appeared in the early to mid 1980s. The standards prescribe the formats, character sets,and data elements used in the exchange of business documents and forms. The completeX12 DocumentListincludes all major business documents, including purchase orders (called "ORDERS" in UN/EDIFACT and an"850" in X12) and invoices (called "INVOIC" in UN/EDIFACT and an "810" in X12).

    The EDI standard prescribes mandatory and optional information for a particular document and gives the rules forthe structure of the document. The standards are like building codes. Just as two kitchens can be built "to code" butlook completely different, two EDI documents can follow the same standard and contain different sets ofinformation. For example a food company may indicate a product's expiration date while a clothing manufacturerwould choose to send color and size information.

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