MUTHAYAMMAL COLLEGE OF ARTS AND SCIENCE (AUTONOMOUS)

DEPARTMENT OF COMPUTER APPLICATION

Staff Name: Mrs.V.Krishnaveni Class: III B.COM “C” Paper Code: 21M6UCAE10

Paper Name: ECOMMERCE Unit: II

1. Electronic Data Interchange: Benefits – EDI legal, Security and Privacy Issues – EDI software
implementation.
2. Value Added Network – Internal Information Systems – Work flow automization and Coordination –
Customization and Internal commerce
ELECTRONIC DATA EXCHAGE
 EDI stands for Electronic Data Interchange. EDI is an electronic way of transferring business documents in
an organization internally, between its various departments or externally with suppliers, customers, or any
subsidiaries.
 EDI is a complicated mixture of three disciplines: business, data processing, and data communications.
 Internet standards are excluded from the discussion of communications protocols, since the audience is
probably already familiar with SMTP, MIME, and other Internet messaging protocols.
 Electronic data interchange is the interchange of standard formatted data between computer application
systems of trading partners with minimal manual intervention.
 Electronic data interchange is the electronic transfer, from computer to computer, of commercial and
administrative e data using an agreed standard to structure an EDI message.
EDI Layered Architecture:
 EDI architecture specifies four types:
 Semantic (or application) layer
 Standard layer
 Packing (or transport) layer
 Physical network infrastructure layer
EDI semantic Layer:
 EDI semantic layer describes the business application that is
driving EDI.
 For a procurement application this translates into requests
for quotes, price quotes, purchase orders, acknowledgments,
and invoices.
 The information seen at this layer must be translated from a company specific from to a more generic form
so that it can be send to various trading partners, who could be using a variety of software applications at this
end.
 When a trading partner sends a document, the EDI translation software converts the proprietary format into a
standard mutually agreed on by the processing system.
 When a company receivers the document, their EDI translation software automatically changes the standard
format into proprietary format of their document processing software so that company can manipulate
the information in whatever way it chooses to.

1
EDI Standard layer:
 It specifies business form structure and it also influence the content at application layer.
 For instance, a purchase order name field in an X12 standard might be specified to hold a maximum of 50
characters.
 An application using 75 character field lengths will produce name truncation during the translation from the
application layer to the standard layer.
 The EDI standards and application level, although separate, are closely interwined.
 American National Standards Institute(ANSI)X12
EDI transport layer:
 EDI transport layer corresponds closely with the non electronic activity of sending a business form from
one company A to company B.
 The business form could be sent via regular postal service, registered mail, certified mail or private carrier
such as united parcel service (UPS) or simply faxed between the companies.
 The EDI documents are exchanged rapidly over electronic networks using the existing e-mail programs and
infrastructure.
 EDI document transport is more complex than simply sending e-mail messages or sharing files through a
network, a modem, or a bulletin board.
Physical network infrastructure layer
 Dial-up lines, Internet, a value-added network, etc.
EDI in Action:
 It shows the information flow when paper documents are shuffled between organizations via the mailroom.
 When the buyer sends a purchase order, then relevant data extracted & recorded on a hard copy.
 This hard copy is forwarded to several steps, at last manually entered into system by the data entry operators
 This process is somewhat overhead in labor costs & time delays.

 Information flow with EDI are as follows:

2
 1. Buyer sends purchase order to seller computer
2. Seller sends purchase order confirmation to buyer
3. Seller sends booking request to transport company
4. Transport company sends booking confirmation to seller
5. Seller sends advance ship notice to buyer
6. Transport company sends status to seller
7. Buyer sends Receipt advice to seller
8. Seller sends invoice to buyer
9. Buyer sends payment to seller EDI as a fast, inexpensive & safe method

BENEFITS
 EDI can be a cost and time savings, Speed, Accuracy, Security, System Integration, Just-In-Time Support.
Direct Benefits:
 Since the transfer of information from computer is automatic, there is no need to re-key information. Data is
only entered at the source.
 Cost of processing EDI documents is much smaller than that of processing paper documents.
 Customer service is improved. Quick transfer of business documents decrease in errors allows orders to be
fulfilled faster.
 Information is managed more effectively. There is an improved job satisfaction among data entry operations
etc.
Long-term Strategic Benefits:
 Customer relations are improved through better quality and speed of service.
 Competitive edge is maintained and enhanced. Reduction in product costs can be achieved.
 Business relations with trading partners are improved.
 More accurate sales forecasting and business planning is possible due to information availability at the right
place at the right time.
 Cost & time savings, Speed, Accuracy, Security, System Integration, Just-In-Time Support.

3
 Reduced paper-based systems, i.e. record maintenance, space, paper, postage costs Improved problem
resolution & customer service
 Expanded customer/supplier base or suppliers with no EDI program lose business EDI Applications in
Business.
Lower operating costs:
 EDI lowers our operating expenditure by at least 35% by eliminating the costs of paper, printing,
reproduction, storage, filing, postage, and document retrieval. It drastically reduces administrative, resource
and maintenance costs. EDI support can lower other costs as well, such as Matson Logistics who reduced
their ASN fines 12% by switching to a more efficient EDI solution.
Improve business cycle speeds:
 Time is of the essence when it comes to order processing. EDI speeds up business cycles by 61% because it
allows for process automation that significantly reduce, if not eliminate, time delays associated with manual
processing that requires us to enter, file, and compare data. Inventories management is streamlined and made
more efficient with real-time data updates.
Reduce human error and improve record accuracy:
 Aside from their inefficiency, manual processes are also highly prone to error, often resulting from illegible
handwriting, keying and re-keying errors, and incorrect document handling. EDI drastically improves an
organization‟s data quality and eliminates the need to re-work orders by delivering at least a 30% to 40%
reduction in transactions with errors.
Increase business efficiency:
 Because human error is minimized, organizations can benefit from increased levels of efficiency. Rather
than focusing on menial and tedious activities, employees can devote their attention to more important
value-adding tasks. EDI can also improve an organization‟s customer and trading partner relationship
management because of faster delivery of goods and services, as well as
Enhance transaction security:
 EDI enhances the security of transactions by securely sharing data across a wide variety of communications
protocols and security standards.
Paperless and environmentally friendly:
 The migration from paper-based to electronic transactions reduces CO2 emissions, promoting corporate
social responsibility.
EDI: LEGAL, SECURITY AND PRIVACY ISSUES
 Analyzing the security requirements of particular applications can be aided by considering the security
characteristics the application should possess as well as the sensitivity level for each.
 As enhanced security techniques become more cost effective and increasingly ubiquitous, the task will
become easier.
Legal Status of EDI Messages:
 To understand the legal framework, let„s take a look on three modes of communication types: Instantaneous
communication, delayed communication via the U.S. Postal Service (USPS), & delayed communication via
non-USPS couriers:
 Instantaneous: If the parties are face to face or use an instantaneous communication medium such as
the telephone, an offer or acceptance is deemed communicated and operable when spoken.
 Delayed (USPS): The “mailbox rule” provides that an acceptance communicated via USPS mail is
effectively when dispatched or physically deposited in a USPS mailbox.

4
  Delayed (non-USPS): Acceptances transmitted via telegram, mailgram, & electronic messages, are
communicated & operable upon receipt. Couriers fall within this category. The legal disparity between
USPS and non-USPS services requires reexamination, as the difference is no longer there.
Digital Signatures and EDI:
 The cryptographic community is exploring various technical uses of digital signatures by which messages
might be time-stamped or digitally notarized to establish dates & times at which recipient might claim to
have had access or even read a particular message.
 If digital signatures are to replace hand written signatures, they must have the same legal status as
handwritten signatures, they must have the same legal status as hand written signatures.
 It provides a means for a third party to verify that notarized object is authentic.
EDI SOFTWARE IMPLEMENTATION
 EDI software has four layers:
 Business application
 Internal format conversion.
 EDI Translator.
 EDI envelope for document messaging
 These four layers package the information and send it over the value-added network to the target business,
which then reverses the process to obtain the original information.
EDI Business Application Layer:
 It creates a document, an invoice in software application.
 This software application then sends the document to EDI translator, which automatically reformats the
invoice into an EDI standard.
 If both the EDI translator and business application are on the same type of computer, the data will be move
faster and more easily from one to another.
 The translator creates and wraps the document in an electronic envelope.
 The EDI wrapper software can be a module to the translator, a programming tool to write to different
communications protocols, or a separate application.

EDI Translator Layer:

 Translators describe the relationship between the data elements in the business application and the EDI
standards.

5
 The translator ensures that the data are converted into a format that the trading partner can use. If EDI is
done without translation, companies run a great risk of transmitting data that trading partners may not be
able to read.
 For example, if a word processing file is uploaded and the recipient tries to open it in a database program,
the result is a mess of characters instead of the expected information.
 Customer translators have several disadvantages:
 A customer translator is very restrictive: It is often designed for one trading partner and limited
transaction sets.
 A customer translator is difficult to update: If the trading partner changes standards or wants
additional transaction sets, precious weeks or even months can be wasted making the changes to the
EDI translator and making sure that everything works correctly.
 A customer translator is unsupported: There‟s no one to turn to when help is needed –no one to talk
us through a difficult-to-implement requirement from our trading partner.
EDI Communication Layer:
 The communications portion-which could be part of the translation software or a separate application-dials
the phone number for the value-added network service provider or other type of access method being used.
 Three modem connection:
 Direct dial or modem to modem connection
 Limited third-party value-added network services
 Full service third-party VANs
 These networks could be private networks or public networks such as the internet.
 Full third-party services provide more than just communication between two or more parties. Electronic
mailboxes and associated extra features are the heart of these third-party services.
 A third-party network can also provide a “gateway” to interconnect with other third-party networks.
 This facilitates communication between businesses having accounts with different third-party networks
running a variety of protocols and systems.
EDI Implementation Cost:
 Prices for EDI products vary from no cost to several thousands of dollars for full-function applications. The
final cost depends on several factors:
 The expected volume of electronic documents: Generally speaking, PC products cost less but handle
only a few documents and trading partners.
 Economics of the EDI translation software: Some products initially look like a bargain, but as needs
grow, hidden costs suddenly appear
 Implementation time: Some applications are easier to learn and use than others. The more time spent
in training, the more time it takes to get into production mode.
 Maintenance fees and VAN charges can vary considerably and as such can affect the cost of EDI systems:
 Maintenance fees: Most companies charge an annual maintenance fee, usually a percentage of the
translator‟s list price.
 VAN charges: VAN bill for data transmission, similar to long-distance phone calls. Some base their
billing per document; other charge based on the number of kilo-characters in each document.
VALUE ADDED NETWORKS
 A VAN is a communication network that typically exchanges EDI messages among trading partners.
 It also provides other services, including holding messages in ”electronic mailboxes”, interfacing with other
VANs and supporting many telecommunications modes and transfer protocols.

6
 Business can exchange data either by connecting to each other directly or by hooking into a VAN.
 VANs have allowed companies to automatically and securely exchange purchase orders, invoices, and
payments.
 Disadvantage is EDI-enabling VANs is that they are slow & high-priced, charging by the no. of characters
transmitted.
 Large EDI-capable businesses and government agencies with more than a handful of trading partners almost
always rely on VAN, and small organizations with six or more trading partners are good cadidates for using
VANs, as are organizations with minimal internal expertise regardig computers, modems,
telecommunications, and EDI.

Van Pricing Structures:

 Customers can pick and choose from an array of VAN services and be billed accordingly.
 These services may include EDI translation software and support, EDI to fax support, e-mail capabiltiy,
inter-VAN connectivity and most commonly transmission of X.12 documents.
 VAN services entail three types of costs: Account start-up costs, usage or variable costs, and VAN-to-Van
interconnect costs.
Account Startup Costs:
 Opening an account with a VAN incurs start-up costs as well as other vaiable costs such mailbox/network
fees. The overall start-up costs vary depending on the EDI readiness of the organization and the trading
partner, the number of trading partners, line attachment options and software appllication options.
VAN Usage or Variable Costs:
 VANs charge session fees based on use of their servies.
 VANs charge to both send and receive data. If a users agrees to cover all of the transaction costs, the VAN
can charge twice for each transaction:
 When the user sends or receives
 When a trading partner sends or receives
 VANs provide customized software that may or may not operate with other VANS.
Interconnect Costs:
 A company that exchanges EDI data with a trading partner that subscribes to a different VAN will pay a
VAN interconnect fee for the number of characters in each document.
7
 Most VANs offer interconnects, but they often charges monthly fees for using them and may have other
charges as well.
VAN Service Providers:
 A wide range of VAN providers exist. Some provide only the network for electronic communications, and
others also provide such services as customizing vendor profiles to screen procurement data.
 Some of the well known EDI VAN service providers are:
 AT & T: Strong coverage in the United States and in the main European centers, with extensive X400
electronic mail interconnections.
 British Telecom (BT): Owns GNS, the world's largest VAN, combining the work. domestic packet
switching service (PSS). End-to-end GNS connection is available in thirty-six countries with gateway
connections to 100 more planned.
 Cable & Wireless: Offers its Global Digital Highway linking the world's main commercial centers
 GEIS: Very experienced; presence in fifty countries. Firmly established in e-mail and EDI services for
specific business applications.
 Advantia/IBM: Large customer base and long experience, particularly in its own systems network
architecture (SNA) protocol connectivity.
 Infonet: Long-established internationally. Among its shareholders are MCI, Transpac, Singapore
Telecom, and other organizations that are themselves considering VAN activity.
 Saturn: Concentrating initially on tailored solutions for the financial market, notably for multiple sub-
64- kbps services such as analog voice tie lines, subrate voice services, and lower-speed data lines.
 Scitor: It has coverage in 150 countries as a result and boasts 200 help-desks, but it lacks wide
commercial experience.
 Sprint: It is known for competitive prices but lacks the "one-stop shop" appeal of some players.
 Transpac: New to the international market, it owns the largest European domestic network. It owns a
part of Infonet for its overseas cover.
 Unisource: It relies on Sprint for non-European cover. Must overcome tariff and regulatory obstacles
and keep internal controls in order to maintain cost-effectiveness and security.
VANS and the Internet:
 VANS that use private networks could soon face stiff competition for EDI business.
 VANs are taking seriously reports that Internet access providers, with flat-rate pricing, will zero in on their
value-added services business.
 VAN providers are repositioning themselves and their service offerings to be competitive.
 The new services go beyond the usual email and EDI applications to offer a wide range of functions,
including global directory services, access to information servers, and even interactive groupware sessions
involving users form different organizations.
INTERNAL INFORMATION SYSTEM
 Information usually begins with corporate data. Corporate data provide the building blocks to form the
information and knowledge that underlie the operations of all enterprises regardless of industry, size, or
country.
 Corporate information is created, managed, and stored in many forms and places, and its value is contingent
on the ability of workers to access, manipulate, change, and distribute it.
Proprietary Systems as Differentiators:
 The following well-known computer systems are representative of an important in the application of
computing to build competitive advantage and enhance organizational effectiveness:

8
  SABRE: Which eventually became a computerized reservation system (CRS), and United Airlines‟
Apollo systems, the other leading CRS, transformed ticket booking, marketing, and distribution in the
airline industry
 COSMOS: Federal Express's customer service system, tracks every movement of every package in the
network through hand-held computers carried by all employees who handle packages.
 McKesson: the pharmaceutical wholesaler, implemented its pioneering ECONOMOST system by
placing terminals in drugstores and tying them into McKesson's central computer.
 United Service Automobile Association (USAA): Used its Automated Insurance Environment to
outperform its insurance industry rivals in ser- vice quality, premium growth, and profitability.
 Mrs. Fields Cookies relied on its Retail Operations Intelligence system: An automated store
management network, to build and operate a nationwide. chain of 400 retail outlets without a costly and
stifling bureaucracy.
Information Architecture
The focus of the new paradigm lies in creating an information architecture that enables cross-functional
systems and better information utilization.
Cross-Functional Systems:
 Early on in business computing, unifunctional automation was the norm; applications were focused on
automating discrete business tasks.
 Cross-functional automation with emphasis on integrating the enterprise. with information flowing from
one business area to another, is rapidly becoming the norm.
 Cross-functional integration has shifted the entire thrust of corporate computing from monolithic
mainframes toward client-server systems connecting corporate databases, workers, and tasks via the net-
working infrastructure.
Information Not Data:
 The focus of competitive differentiation today is not on building better systems than those of the
competitors, but is based on the use of corporate information.
 corporate systems of the future will be built around information and companies are attempting to become
information architects rather than systems builders.
 Organizations can easily auto- mate and capture the efficiency benefits of information technology, some
times by buying off-the-shelf packages.
 As a result, companies find it harder to differentiate themselves simply by automating faster than the
competition.
WORK FLOW ATOMIZATION AND COORDINATION
 In last decade, a vision of speeding up or automating routine business tasks has come to be known as
“work-flow automation.
 This vision has its root in the invention of the assembly line and the application of Taylor's scientific
management principles.
 Similar trend is emerging in the automation of knowledge-based business processes called work-flow
automation.
 The goal of work-flow automation is to offer more timely, cost-effective, and integrated ways to make
decisions.
 Typically, work-flows are decomposed into steps or tasks, which are task oriented. Work-flows can be
simple or complex.

9
 Simple work-flows typically involve one or two steps or tasks. Another way of looking at work-flow is to
determine the amount of cross-functional activity.
 In other words, companies must adopt an integrated process view of all the business elements.
 Integrate across the business function offer identifying the information needs for each process.
 Integrating business functions, application program interface, and database across Departments and groups.
 Complex work-flows involve several other work-flows, some of which executes simultaneously.
Work-Flow Coordination:
 The key element of market-driven business is the coordination of tasks and other resources throughout the
company to create value for customer.
 Effective companies have developed horizontal structures around small multifunctional teams that can
move more quickly and easily than businesses that use the traditional function-by-function, sequential
approach.
 Some of the simplest work-flow coordination tools are electronic forms routing applications such as lotus
notes.
 As the number of parties in the work flow increases, good coordination becomes crucial.
Work-Flow Related Technologies:
 Technology must be the “engine” for driving the initiatives to streamline and transform business
interactions.
 Large organizations are realizing that they have a middle-management offer all the drawn sizing and
reorganization of fast few years.
 Pressures for more comprehensive work-flow systems are building rapidly.
 Work-flow system are limited to factory like work process.
CUSTOMIZATION AND INTERNAL COMMERCE
 Technology is transforming consumer choices, which in turn transform the dynamics of the marketplace
and organizations themselves.
 Technology embodies adaptability, programmability, flexibility, and other qualities so essential for
customization.
 Customization is explained as:
ELECTRONIC COMMERCE CONSUMER BEHAVIOR
AND TECHNOLOGY AND CHOICE

ORGANIZATIONAL DYNAMICS
AND MARKET PLACES

Mass Customization, Not Mass Production:

 Mass customization, in marketing, manufacturing, and management, is the use of flexible computer-aided
manufacturing systems to produce custom output.
 Those systems combine the low unit costs of mass production processes with the flexibility of individual
customization

10
 "Mass Customization" is the new frontier in business competition for both manufacturing and service
industries.
Four types of mass customization:
 Collaborative customization - Firms talk to individual customers to determine the precise product
offering that best serves the customer's needs.
 Adaptive customization - Firms produce a standardized product, but this product is customizable in the
hands of the end-user.
 Transparent customization - Firms provide individual customers with unique products, without
explicitly telling them that the products are customized.
 Cosmetic customization - Firms produce a standardized physical product, but market it to different
customers in unique ways.
 Most of the written materials and thinking about customization has neglected technology.
 It has been about management and design of work processes.
 Today technology is so pervasive that it is virtually impossible to make clear distributions among
management, design of work, and technology in almost all forms of business and industry.
 Technology has moved into products, the workplace, and the market with astonishing speed and
thoroughness.
 Today the walls that separated functions in manufacturing and service industries alike are beginning to fall
like dominoes.
 Customization need not be used only in the production of cars, planes, and other traditional products.
 It can also be used for textiles and clothing.
 Technology is also enabling new forms of customized production in apparel industry
Customization of Services
 Customization is also becoming important in service industries, where product differentiation holds the key
for attracting and retaining customers.
 Unlike manufacturing firms, organizations that provide services, as opposed to manufacturing products have
unique characteristics that warrant special attention.
 Speed and concurrent activity are essential for success in any customized service.
 Example of customization of service is the entertainment industry.

************** UNIT-II COMPLETED ******************

11