Electronic Data Interchange

(EDI)
 Objectives
• Definition
• Difference from traditional system
• Merits of EDI
• Demerits of EDI
• Components of EDI
• Types of EDI
•Electronic Data Interchange (EDI) is
the computer-to-computer exchange of
business documents in a standard
electronic format between business
partners(trading partners).
•B2B transactions in predetermined
format
• Automatically by computers
•Minimizing or completely eliminating
the need for human intervention
•Third party ventor
Many business documents can be exchanged
Eg
 Purchase order
 Invoices
 Advance shipment notice
 Customer documents
 Inventory documents
 Business Correspondence letters
 Financial information letters etc
the two most common are purchase orders and
invoices.
A Traditional Document Exchange of An EDI Document Exchange of a
a Purchase Order Purchase Order
This process normally takes between This process normally occurs
three and five days. overnight and can take less than an
hour.
•Buyer makes a buying decision, •Buyer makes a buying decision,
creates the purchase order and prints creates the purchase order but does
it. not print it.
•Buyer mails the purchase order to •EDI software creates an electronic
the supplier. version of the purchase order and
•Supplier receives the purchase order transmits it automatically to the
and enters it into the order entry supplier.
system. •Supplier's order entry system
•Buyer calls supplier to determine if receives the purchase order and
purchase order has been received, or updates the system immediately on
supplier mails buyer an receipt.
acknowledgment of the order. •Supplier's order entry system creates
an acknowledgment an transmits it
back to confirm receipt.
 Improved
service
Integration of Economy
procedures
Speed

Benefits of EDI
Accuracy
Automation
of operations

Process status Efficiency

visibility
1.Economy: Research has consistently shown that EDI costs only one third of
its paper-based equivalent. Expenses associated with paper, printing,
reproduction, storage, filing, postage and document retrieval are all reduced
or eliminated when we switch to EDI transactions.

2 Speed: Information moving between computers ,so moves more rapidly, and
with little or no human intervention.EDI can speed up our business cycles by
61%, improving business partner transactions and relationships.
Transactions that used to take 5 days by paper can be completed in less than
an hour.

3. Accuracy: Information that passes directly between computers without

having to be re-entered, eliminates the chance of data entry errors. There is
almost no chance that the receiving computer will invert digits or add an
extra digit. It improves data quality and delivering at least a 30—40%
reduction in transaction errors by eliminating errors from illegible handwriting,
lost faxes/mail and keying and re-keying errors.

4. Efficiency: Automating paper-based tasks allows our staff to concentrate

on higher-value tasks and provides them with the tools to be more productive.
Shortening the order processing and delivery times means that organizations
can save on human resources from the use of EDI.
5.Process status visibility
Replacing paper with e-documents facilitates monitoring. We can integrate
transactions and provides permanent knowledge of the status of messages

6.Automation of operations
The printing of commercial documents, their handling, classification, inserting into
envelopes, franking, sending, registration in ERP, etc. All of these tasks are dramatically
reduced or even disappear.

7.Integration of procedures between all trading partners

The interchange of electronic documents is agreed between sender and receiver: This
sets up a communication flow with common procedures and working models, clarifying
the commercial relation and allowing operations on the basis of known and shared
management models.

8. Improved service to end user

Implementing EDI involves the application of optimum work flows and response times.
The possibility of receiving advance receipt notification prior to the delivery of goods so
improving the final service received by the customer.
 Limited
Trading Partners
Proper
Backup
Expensive

Demerits of EDI
Initial
Time
cost
Consuming

Changing Need
Standards System Electronic
Protection
 Components of EDI

Application Translation Communication

Service service Service

•Trade Agreement •Translation •Communications

•Standard Document Management Software
Format Software •Communication
•Application software •Edi software Networks
•Network access
control software
COMPONENTS OF EDI
The following components and tools are necessary for performing EDI ARE-
Trade Agreement
A legally binding trade agreement between you and your trading partner.
Standard Document Format
The standard agreed upon format for the documentto be electronically
transmitted.
EDI Translation Management Software
Software used to convert the document your application’s format into the agreed
upon standard format. For optimum performance the translation software
should be on the same platform as your  business application.
Communications Software
A programming tool that enables you to write communications protocols, or a
separate application. It can be a module to the translator or a separate software
application.
Modem
A hardware device used to transmit electronic information betweencomputer
systems. The higher the baud rate, the faster the communications will be.
VAN
Stands for Value Added Network. A network to which you can connect
totransmit data from one computer systems to another. One network can act as
agateway to another.
Point-to-Point
A direct communication link from one computer to another. Sometrading
 Manage
d cloud
services
               
    

On-
Web Types premise
s
forms
               
of EDI software
                     
     

3PL
processin
g
Webforms are online browser applications that are
used either directly on the trading partner’s site, or
through a webforms aggregator service that links to
multiple retailers.
EDI Webforms allow the user to log onto a site to
receive orders, send acknowledgements and invoices,
and so forth.
 
webforms are more expensive per transaction, labor
intensive, and not integrated with Enterprise Resource
Planning. But this can be the right choice for
businesses with a small number of trading partners,
few EDI transactions, and lower business expansion
rates.
 
On-premises software,
While the EDI software is generally in-house
It needs to be self‐managed
Each company using EDI software sets up and manages its own
connections to trading partners
EDI software vendors can handle the setups and maintenance
for you, but that will generally be more expensive and less
timely than if performed by your own staff.
 In summary, this is the right choice for businesses with a large
number of trading partners and many EDI transactions, or a
business that is expanding at a very high rate. Enterprise
Resource Consulting can help you choose both EDI and ERP
software, and make sure they “play well” together.
Managed EDI cloud services 
are a relatively new alternative, inhabiting the gap
between webforms and on-premises software.
cloud technology
Managed EDI cloud services involve outsourcing of a
complete EDI capability. Managed EDI cloud services
are appropriate for small to medium companies that
have a new EDI mandate from multiple trading
partners,
Managed EDI cloud services do not require software
purchase, so the one-time expense is generally lower
than on-premises software.
It includes the services of EDI experts to set up and
operate EDI on behalf of the user.
It can work particularly well if your ERP is also on the
cloud.
Third party logistics processing
The final type of EDI involves third party logistics (3PL) warehouse
service companies.
3PLs can usually provide the data necessary, via what is often
called a “flatfile”.
You would then only need your ERP vendor to provide a program
to import and export that data on a timely basis.
If your company wish to avoid the setup costs of EDI software,
this method can be the best solution.
While 3PLs typically charge for the data they receive and transmit,
it may be less than the transmission charges you would otherwise
pay, because they want to retain your business for their
warehousing capability.
The one-time charges would be limited to whatever fees your ERP
vendor and the 3PL would charge for the import and export
programs.
 Conclusion
• B2B transactions automatically by
computers in predetermined format
• Minimizing or completely eliminating the
need for human intervention
Thank You