EDI (Electronic Data Interchange)

Electronic data interchange is a method for computer to computer exchange of business documents in a standard electronic format between business partners. Companies will use the EDI systems for exchanging business information by the computer systems as transactions without a paper and so minimizes or completely eliminates the human intervention. Electronic data interchange will be generally used for B2B transaction

There are common EDI documents

1. shipping requests
2. Invoice
3. Acknowledgements
4. Purchase order

Here both the enterprises will have the EDI applications which are installed in their system. Enterprise 1 uses its EDI application that will create an EDI format of document where it wants to share with other enterprises. This document is shared with other enterprises in the network.

The document which is received by enterprise 2 in the original format on the EDI application. By this manner the two enterprises will exchange the business documents electronically and minimize or eliminate the human intervention.

Functions of EDI:

In traditional purchase order document exchange, the entire cycle will take anywhere from days to weeks.

Consider an example of manual process:

-The buyer will create a purchase order.

-Here the buyer takes the print out of the purchase order and then sends it to the supplier through the mail, fax.

-The supplier accepts the purchase order and manually enters it into its own order management system.

-The supplier will create an invoice.

-The supplier will print the invoice and then send it to the buyer through the mail, fax.

-The buyer accepts the invoice and manually enters the invoice data in its own back-end systems.

In other way the EDI order processing may take less time

• Here the buyer chooses to purchase a good or product.
• The buyer’s EDI system which is automatic and will create an EDI version of purchase order and also sends the order directly to the supplier.
• The supplier’s order management solution has that purchase order and also updates its own system.
• The supplier’s order management solution which automatically creates an acknowledgment or proof and also as an invoice and also transmits both documents to the buyer to confirm the  purchase order and provide a receipt for the order.

The process of EDI transactions are:

-we receive/ accept EDI purchase order.

-We send an EDI purchase order Acknowledgement to the buyer for confirmation of the successful reception of EDI.

-We send an EDI  advanced shipping notice which describes to the buyer all the contents of each shipment and also how the items are packed.

-We send an EDI invoice to the buyer.

What are the EDI components?

There are four components, they are

1. The device on which it will transmit the data.
2. An application or may be an outsourcing company that translates the data into a standardized EDI.
3. The connection between sender the recipient
4. Users can send and also receive the data.

How does the EDI system work?

There are three steps for transmitting data through EDI

1. Preparing the documents.
2. Translating the documents into EDI format.
3. They are transmitting the documents through the recipient.

What type of EDI system are there?

There are varieties of systems that are suited to an organization’s needs to the capabilities and also budget.

1. Direct EDI: Direct EDI refers to direct connection between the two parties; the sender and the recipient.There is a type of EDI system that makes sense for large organizations that may need to send a high volume of documents to the same recipient.
2. Value-Added-Network: EDI is a value-added –network that is also known as an EDI service which utilizes a secure network that will transfer the documents to the recipients.
3. AS2: There is EDI via Application statement. It is a secure communication protocol.As it will be using AS2 there are two computers to connect in a point-point mode through the internet.

Questions

1. What is EDI?
2. What are the uses of EDI?