Transforming business with EDI
Electronic Data Interchange has transformed the way enterprises
conduct business across the globe. It has reduced paperwork and facilitated
instant document availability anytime and anywhere across the world. Dominic
businesses bank on efficient information exchange in the form of paper documents
both within and outside an organisations boundaries. These documents range
from purchase orders (e-procurement), spreadsheets and other office documents,
to engineering drawings or any other documents that might be exchanged between
business partners. The process of exchanging these documents can be quite cumbersome
if theyre on paper. This is where Electronic Data Interchange (EDI) technology
steps up to the plate and facilitates the electronic exchange of business documents.
CIOs like Anwer Bagdadi, Chief Technology Officer, CFC International
are of the view that EDI deployments help reduce the flow of hardcopy documents.
It enables faster decision-making as EDI workflow processes add intelligence
to application software based on pre-defined parameters. These processes help
in comparatively faster large-scale purchasing and scaling-up of operations,
and offer multi-level checking and validation which are of prime importance
in BFSI, legal, healthcare and e-procurement (for manufacturing companies).
Currently, EDI is predominantly used for applications such as inventory and
logistics management, transport and distribution, administration, and cash management.
EDI-based solutions require minimal human intervention as most processes are
Without EDI technology, exchanging documents, even electronic
ones, would have been a manual task thanks to incompatibilities
in application and database formats. To overcome these
problems EDI specifies a standard format for each type
of business document. These EDI standards are developed
under the auspices of standards development organisations
(e.g. ISO) and bodies like Accredited Standards Committee
The benefits of deploying EDI
include reduced paperwork, fewer errors in transcription,
faster response time for procurement and customer
needs, reduced inventory requirements, and timely
payment of vendors.
The benefits of deploying EDI include
reduced paperwork, fewer errors in transcription, faster
response time for procurement and customer needs, reduced
inventory requirements, and timely payment of vendors.
The basic motive behind standardisation is to ease EDI by adopting common standards
that allow for automated message processing. Standardisation of message formats
using a common syntax makes it possible for computers at both ends to assemble,
disassemble and process messages.
The goal is to migrate to a universal family of EDI standards to improve governmental
and private sector efficiency. This will also minimise EDI deployment and implementation
costs by preventing duplication of effort.
- Save money: The cost of paper and paper
processing is high, and adds to delays as compared to the proper deployment
and execution of EDI.
- Save time: EDI also saves time over paper processing since
the transfer of information from computer to computer is faster. With
no data entry, the chances of an error creeping in drops to near zero.
If the business partner needs a copy of a document, instead of calling
the organisation he can check their mailbox. EDI offers the ability
to send and receive information at any time, improving an organisations
ability to communicate quickly and efficiently.
- Initial hiccups: There are a few disadvantages
of using electronic data interchange. One of the more significant ones
is the initial set-up. The preliminary expenses that arise from the
implementation, customisation and training can be on the higher side,
and may therefore discourage some organisations.
- Too many standards: Too many standards bodies are developing
multiple standard document formats for EDI. For example, an enterprise
may be following the X12 standard format, while its trading partner
might follow the EDIFACT standard format.
- Trading partner limits: Some large organisations tend to stop
doing business with other enterprises since they do not comply with
EDI. For example, Wal-Mart is only doing business with other companies
that use EDI. The result of this is a limited group of people you can
do business with.
Enterprises and government organisations currently use multiple
EDI standards. Some standards include ASC X12, EDIFACT (Electronic Data Interchange
For Administration, Commerce and Transport), HL7 and NCPDP (National Council
for Prescription Drug Programs). All of these were developed by one or more
organisation, a different group in each case.
ASC12 defined the ASC X12-based standards for electronic interchange
of data across the network. NCPDP handles the pharmaceutical and healthcare
industry. EDIFACT was developed by the United Nations. This was later adopted
by the International Organisation for Standardisation (ISO). The current ISO
standard for EDI is defined using ISO 9735.
Ramendra Mandal, Country Manager (Sales & Marketing),
Informatica, estimates that data in office applications like e-mail, Word documents,
presentation slides and spreadsheets, and industry-specific standards such as
Society for Worldwide Interbank Financial Telecommunication (SWIFT) account
for as much as 80 percent of the information flowing through, from and to todays
enterprises. EDI solutions should offer integration of all enterprise
data (structured, semi-structured as well as unstructured), and map them to
the enterprise IT infrastructure.
The components and tools necessary for executing EDI-based transactions
will typically include:
- A trading agreement. This will be legally binding
between the enterprise and the trading partner.
- Standard documents format agreed upon by the partners involved for
electronically transmitting documents to execute various business processes.
- EDI translation management software which will be used to convert
the document into the agreed-upon standard format. Here, the translation
software should be on the same platform as other enterprise business
- Communications software. This will either be a programming tool that
enables an enterprise to compile communications protocols, a separate
application or even a module of the translator.
- Network infrastructure and various other hardware and switching devices,
which will be deployed to transmit electronic information between computer
systems. The fatter the bandwidth link between the enterprise and its
business partners, the faster the communications.
- Value Added Network (VAN) forms the network to which the enterprise
and its business partners can connect to transmit data from one computer
system to another.
- Point-to-Point connectivity will form a direct communication link
from one computer to another. Some enterprises offer a direct connection
to their EDI computer. Business partners may opt for this mode of communication
instead of using a VAN based on the level of transactions executed everyday.
Inside the EDI process
EDI is all about mapping and pre-defining data flows and routes.
Once the workflow is defined, processes can be automated with minimal human
The electronic replication has the same look and feel as the
original paper document it replaces. Organisations exchanging standard
EDI documents require software to map their internal application formats and
those specified by EDI standards, notes Arun Ramachandran, Head, Pre-sales
and Professional Services, Sybase India and SAARC.
To send an EDI document to a business partner, an organisation has to execute
an outbound map that translates from its internal format to an EDI one. The
resultant message or file is then transmitted to the trading partner over the
Net. At the trading partner, an inbound map is performed to translate the message
from the standard EDI format to that of the partners internal application
or database format. This translated document can be accessed according to the
document access policies defined by the sender. For example, if the sender has
granted a document with only read access, the recipient will only be able to
read the document and will not be able to modify it.
The infrastructure needed for deploying EDI applications depends on the individual
enterprise. If the application is an important one then it is advisable to deploy
a dedicated EDI server. Otherwise, the application can run alongside others
on the same application server(s).
cXML is a protocol adopted by procurement applications for exchanging
business documents. It is based on XML, and provides formal XML schemas
for standard business transactions, allowing programs to modify and
validate documents without prior knowledge of their form. It is said
to be the most widely adopted of all B2B protocols.
The RosettaNet standard is based on XML. It defines the message guidelines,
business process interface and implementation frameworks for interaction
between companies. The standard mostly addresses the supply chain domain,
and also manufacturing products and materials.
The RosettaNet standard is originally from the United States, and hence
widely used there. In Europe though, due to the widespread use of EDIFACT,
RosettaNet is used comparatively less, but its popularity is growing.
The standards cover core areas such as partner interface processes,
the RosettaNet implementation framework, and RosettaNet business and
The Organisation for the Advancement of Structured Information Standards
(OASIS) is a global consortium. The objective is to drive the development
and adoption of e-business and various Web service standards. Multiple
standards and protocols exist within OASIS.
- X12 EDIFACT Mapping
The American National Standards Institute has chartered the Accredited
Standards Committee X12. The sole objective is to develop uniform standards
for inter-enterprise electronic exchange for business transactions.
Apart from ASC X12 standards in 1986, the United Nations Economic Commission
for Europe (UN/ECE) approved the acronym UN/EDIFACT. The
abbreviation stands for United Nations Electronic Data Interchange for
Administration, Commerce and Transport. UN/EDIFACT is currently the
international EDI standard, and is designed to meet the needs of government
and private industry.
The International Standards Organisation and International Electrical
Committee are developing an EDI reference model. The joint venture is
called Open-EDI, whose goal is to enable electronic transactions among
multiple enterprises. Based on the standards it will not be mandatory
to have a prior business relationship with the other partner. Businesses
should be able to establish trading partners over networks like the
Internet upon first contact and without any pre-agreementassuming
trust systems are in place.
E is for expanding data horizon
Mandal points out that deploying an EDI solution helps expand the visibility
horizon of data within an organisation. The solution will also help increase
human resource and overall productivity since processes can be completed faster.
It facilitates regulatory compliance and results in a drastic reduction in maintaining
EDI helps do away with data redundancy, leading to fewer errors, less time wasted
on exception-handling, and a more streamlined business process. It offers the
prospect of easy and cheap communication of structured information between government
entities and their extended ecosystem of suppliers and clients.
As Ramachandran states, EDI can be used to automate existing processes
and rationalise procedures, thereby reducing costs and improving the speed and
quality of services. Since EDI necessarily involves business partners, it can
be used as a catalyst for greater efficiency across organisational boundaries.
Based on the advantages that EDI offers, the Indian Customs and Central Excise
department has initiated various EDI interfaces to help Customs House Agents,
Carry & Forward Agents, importers and exporters. The Indian Customs EDI
System (ICES) will help these entities prepare shipping bills and bill of entry
declarations in the format acceptable to the ICES for submission at the Customs
House through the ICEGATE (Indian Customs and Excise Gateway) portal at icegate.gov.in.
According to A K Prasad, Commissioner of Customs, the ICES set-up is developed
to provide a flexible and reliable framework to facilitate the secure electronic
exchange of messages between customs and its various EDI partners. The
gateway project will allow importers and exporters to file declarations from
their offices to any custom house covered by ICES through a Web-based interface,
On the flip side, one of the biggest disadvantages of EDI is that it requires
organisations to build on their existing set-up and processes. Employees also
need to be trained and familiarised with the system. The initial outlay and
the time that needs to be invested in an EDI implementation in terms of customisation
and training can prove discouraging unless it is factored-in from the start.
|A Value Added Network (VAN) will be an application
service provider (ASP) or the established network between an enterprise
and its partner. The ASP will act as an intermediary facilitating business
processes among enterprises. VANs transmit data formatted as Electronic
Data Interchange (EDI). This is now changing as they nowadays also transmit
data formatted as XML.
VAN providers offer EDI transaction services, security,
document interchange assistance, compilations in standard message formats
for the enterprise, deployments of communication protocols, and parameters
for EDI. Some of the VAN providers are GE Information Systems, IBM Global
Services, Sterling Commerce, inovisworks.net, ECGrid VAN Interconnect
Service and Data Interchange.
Do the math and it becomes apparent that EDI is poised
to play a dominant role in online commerce of the B2B variety, especially
in the case of large enterprises
Electronic commerce on the Internet is a multi-billion-dollar
industry. This will only expand as bandwidth costs drop. X12 standards have
increased EDIs compatibility with multiple Internet protocols. Do the
math and it becomes apparent that EDI is poised to play a dominant role in online
commerce of the B2B variety, especially in the case of large enterprises.