E-Commerce & EDI

By
Mamata Pandey
E-Commerce
E-commerce, or electronic commerce, refers to the buying and selling of
goods and services over the Internet.
It involves the use of electronic platforms, such as websites, mobile
applications, and social media, to conduct transactions between businesses
and consumers or between businesses.
It can also describe any kind of commercial transaction that is facilitated
through the Internet.
E-commerce has revolutionized the way businesses operate and has created
new opportunities for entrepreneurs and consumers alike.
 Ecommerce refers to the paperless exchange of business information using the
following ways −
• Electronic Data Interchange (EDI)
• Electronic Mail (e-mail)
• Electronic Bulletin Boards
• Electronic Fund Transfer (EFT)
• Other Network-based technologies
 Features of E-Commerce
• Non-Cash Payment − E-commerce enables the use of credit cards, debit cards, smart cards, electronic
fund transfers via the bank's website, and other modes of electronic payment.
• 24x7 Service availability − E-commerce automates the business of enterprises and the way they provide
services to their customers. It is available anytime, anywhere.
• Advertising / Marketing − E-commerce increases the reach of advertising of products and services of
businesses. It helps in better marketing management of products/services.
• Improved Sales − Using e-commerce, orders for the products can be generated anytime, anywhere
without any human intervention. It gives a big boost to existing sales volumes.
• Support − E-commerce provides various ways to provide pre-sales and post-sales assistance to provide
better services to customers.
• Inventory Management − E-commerce automates inventory management. Reports get generated
instantly when required. Product inventory management becomes very efficient and easy to maintain.
• Communication improvement − E-commerce provides ways for faster, more efficient, reliable
communication with customers and partners. product orders can be generated anytime, anywhere
without
Types of E-commerce Models
1. Business to Consumer (B2C): When a good or service is sold to an
individual consumer by a business, e.g., we buy a pair of shoes from an
online retailer.
2. Business to Business (B2B): When a good or service is sold by a business
to another business, e.g., a software-as-a-service is sold by a business for
other businesses to use.
3. Consumer to Consumer (C2C): When a good or service is sold by a
consumer to another consumer, e.g., we sell our old furniture on eBay to
another consumer.
4. Consumer to Business (C2B): When a consumer’s own products or
services is sold to a business or organization, e.g., an authority offers
exposure to their online audience in exchange for a fee or a photographer
licenses their photo for a business to use.
5. Business-to-government (B2G): In this model, businesses sell products
or services to government agencies through online portals or
marketplaces.
6. Government-to-business (G2B): In this model, government agencies sell
products or services to businesses through online portals or
marketplaces.
7. Government-to-consumer (G2C): In this model, government agencies
provide products or services directly to consumers through online portals
or marketplaces.
 Advantages of E-commerce:
• E-commerce enables fast and secure shopping.
• E-commerce also enables you to choose different goods and services
according to your choice.
• It is a simple way of selling and buying products and services.
• E-commerce replaced the paperwork as all transactions are through the
Internet today.
• It provides a better management system, as it has a centralized database.
• E-commerce via the Internet covers a large number of customers
worldwide making a digitalized world.
• E-commerce has several payment modes.
 Disadvantages of E-commerce:
• E-commerce has no universal standard for quality and reliability.
• E-commerce works through the Internet, it is possible that navigation on
the Internet itself may be slow.
• Strong security is required in e-commerce as all transactions are through
the Internet.
• There is a high risk of buying unsatisfactory products through e-commerce.
• It uses public key infrastructure which is not safe.
• Customers are also trapped in banking fraud which is quite frequent.
• Hackers also try to get access to data or destroy data in e-commerce.
Traditional Commerce vs. e-commerce
Sr. No. Traditional Commerce E-Commerce

Information sharing is made easy via

Heavy dependency on information electronic communication channels
1
exchange from person to person. making little dependency on person to
person information exchange.

Communication or transaction can be

Communication/ transaction are done in
done in asynchronous way. Electronics
synchronous way. Manual intervention is
2 system automatically handles when to
required for each communication or
pass communication to required person
transaction.
or do the transactions.
It is difficult to establish and maintain
A uniform strategy can be easily
3 standard practices in traditional
established and maintain in e-commerce.
commerce.
Communications of business depends In e-Commerce or Electronic Market,
4
upon individual skills. there is no human intervention.

Unavailability of a uniform platform as E-Commerce website provides user a

5 traditional commerce depends heavily on platform where al l information is
personal communication. available at one place.

No uniform platform for information E-Commerce provides a universal

6 sharing as it depends heavily on personal platform to support commercial /
communication. business activities across the globe.
EDI
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.
In EDI, paper documents are replaced with electronic documents such as Word documents,
spreadsheets, etc.
EDI automation will help streamline the communications process and help reduce errors and
delays that often occur during the ordering, fulfillment, and administrative processes.
EDI can be transmitted in two ways:
• Point-to-point: Two computers connect directly over the internet, usually with secure
protocols.
• Value-added network (VAN): A third-party network manages data transmission
EDI Documents
Following are the few important documents used in EDI −
• Invoices
• Purchase orders
• Shipping Requests
• Acknowledgement
• Business Correspondence letters
• Financial information letters
EDI components
An EDI transaction consists of four main components: the sender, the receiver, the
EDI standard, and the EDI software.
The sender is the party that initiates the transaction, such as an order, an invoice, or
a payment.
The receiver is the party that receives the transaction and responds accordingly.
The EDI standard is the set of rules and formats that define how the transaction data
should be structured and transmitted. There are many EDI standards, such as ANSI
X12, EDIFACT, or XML.
The EDI software is the application that enables the sender and the receiver to
create, send, receive, and process EDI transactions.
EDI Steps
An EDI transaction typically involves a sender creating transaction data using their
internal system, such as an ERP or a CRM, and converting it into an EDI format using
EDI software.
The sender then transmits the EDI document to the receiver using a communication
method, such as FTP(File Transfer Protocol), AS2(Applicability Statement version 2),
or VAN(Value Added Network).
The receiver receives the EDI document and validates its syntax and content before
converting it into its internal system format.
The receiver then processes the transaction data and updates their internal system
accordingly, before sending an acknowledgment or response to the sender using the
same steps.
Example
One common EDI conversation involves retailers or e-commerce and the suppliers
and manufacturers that provide the goods that they sell.
These conversations are frequently initiated when a retailer sends a Purchase
Order to a supplier, indicating that they need more product.
The supplier may respond with a Purchase Order Acknowledgement and then an
Invoice to receive payment for the purchased goods.
Finally, the retailer might respond with an Payment Order alongside a transfer of
funds.
Advantages of EDI System
Following are the advantages of having an EDI system.
• Reduction in data entry errors. − Chances of errors are much less while using a
computer for data entry.
• Shorter processing life cycle − Orders can be processed as soon as they are
entered into the system. It reduces the processing time of the transfer documents.
• Electronic form of data − It is quite easy to transfer or share the data, as it is
present in electronic format.
• Reduction in paperwork − As a lot of paper documents are replaced with
electronic documents, there is a huge reduction in paperwork.
• Cost Effective − As time is saved and orders are processed very effectively, EDI
proves to be highly cost-effective.
• Standard Means of communication − EDI enforces standards on the content of
data and its format which leads to clearer communication.
EDI challenges
EDI transactions can present some challenges to businesses, such as choosing the
right EDI standard and software, which can depend on the industry, trading partners,
and business needs.
Implementing and maintaining the EDI system can require technical expertise,
resources, and support.
Managing EDI relationships and agreements may involve coordination,
communication, and negotiation with trading partners.
Businesses must be prepared to adapt to changing business and regulatory
environments, which may require updates, modifications, or enhancements of the
EDI system.
 Here are some companies that use EDI:
• Boomi: An integration platform that connects applications and automates
workflows.
• True Commerce: An EDI platform that connects businesses across the supply chain
and provides automated connections with marketplaces like Walmart and
Amazon.
• Cleo Communications: Provides EDI software and services that enable the
electronic transfer of information between businesses and computer systems.
• Web EDI: A browser-based solution that allows smaller partners to exchange data
electronically with the hub.
• AS2 Gateway: A popular protocol for exchanging B2B e-commerce documents.
• Mobile EDI: The newest form of EDI, which uses applications built to support EDI
to accelerate supply chains.
• EDI VAN: A popular option to facilitate EDI, which offers a private B2B electronic
communications network via a third-party provide
Application of EDI
Companies can use EDI in various data transactions, including:
• Transportation management: Many businesses use EDI to send and receive
transportation and routing instructions for their orders, including major retailers like
Walmart, Lowes, Office Depot, and Costco.
• Purchase order management: Integrated EDI seamlessly integrates purchase orders with
the order system to efficiently manage orders. The EDI software then archives files to
improve accounting and reporting and for use as drafts for future documents.
• Invoice management: Invoice processing is essential for efficient business operation. EDI
reduces mistakes in the invoicing process, facilitating fast payment and accurate tracking.
• Warehouse management: EDI software uses the advanced shipping notice infrastructure
to gather data and provide the next steps in the warehouse management process.
Warehouses also use EDI for remote and third-party warehousing fulfillment processes.
• Product management: EDI solutions enable supply chain members to expedite product
delivery and pricing information. Partners will swiftly receive the information pertinent to
their needs in their required EDI format.
EDI standards
ANSI ASC X12 is the official designation of the U.S. national standard body for the development and
maintenance of EDI standards. The most widely used standard in the United States and much of
North America.
EDIFACT, known as Electronic Data Interchange for Administration, Commerce, and Transport, is the
international standard developed under the United Nations. The EDIFACT standard provides
messages that allow multi-country and multi-industry exchange.
HIPAA (Health Insurance Portability and Accountability Act) is a subset of X12 with healthcare-
specific requirements. Part of the HIPAA initiative seeks to establish standardized mechanisms for
electronic data interchange, security, and confidentiality of all healthcare-related data.
Tradacoms is an EDI standard introduced and implemented for the UK retail sector. Tradacoms was
introduced in the early 1980s and is maintained by the UK Article Numbering Association now known
as GS1 UK.