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Issue of October 2006 
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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 K reports

Today’s businesses bank on efficient information exchange in the form of paper documents both within and outside an organisation’s 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 they’re on paper. This is where Electronic Data Interchange (EDI) technology steps up to the plate and facilitates the electronic exchange of business documents.


Anwer
Bagdadi

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 automated.

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 (ASC).

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.

About Value Added Networks
ADVANTAGES

  • 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 organisation’s ability to communicate quickly and efficiently.

DISADVANTAGES

  • 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.

Multiple standards


Ramendra
Mandal

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 today’s 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.”

Components of EDI

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 applications.
  • 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


Arun
Ramachandran

EDI is all about mapping and pre-defining data flows and routes. Once the workflow is defined, processes can be automated with minimal human intervention.

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 partner’s 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).

A Few EDI Protocols
  • cXML
    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.
  • RosettaNet
    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 technical dictionaries.
  • OASIS
    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.
  • UN/EDIFACT
    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.
  • Open-EDI
    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-agreement—assuming 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 paper files.”

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,” he informs.

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.

About Value Added Networks
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

Tomorrow’s EDI

Electronic commerce on the Internet is a multi-billion-dollar industry. This will only expand as bandwidth costs drop. X12 standards have increased EDI’s 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.

 
     
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