EDI

• What is EDI?EDI is the technology by which business documents and transactions are transmitted directly from one company’s computer system to another without manual intervention. When EDI is used to exchange documents, data is transmitted quickly and accurately, and is keyed in only once. The format of the data transferred must adhere to standards defined by one of the international standards organizations.
  
  The data transferred can relate to many common business transactions, including:
  
  · Sending of pricing information
  · Sending of inventory level information
  · Sending and receiving of purchase orders
  · Sending and receiving of purchase order acknowledgments
  · Sending and receiving of invoices
  
  Many businesses are finding EDI gives them a competitive advantage. EDI applications are adaptable to virtually all business functions and all sizes of organizations.
  
• BenefitsEDI helps to reduce the time and cost associated with exchanging information. This can help reduce lead-time and expenses.
  
• Additional Benefits:· Increased accuracy and reduced data entry.
  · Reduced postage costs.
  · Decreased paperwork.
  · More timely information.
  · Inventory reduction.
  · Increased customer satisfaction.
  
  Statistics show that 75% of one company’s output is another company’s input. EDI enables information to flow in a timely manner with no manual re-keying or postroom delays.





• How Does EDI Work?First, trading partners agree upon a standard for file formats. In North America, the most common EDI standard is ANSI X.12. Most European companies are using the UN/EDIFACT EDI standard.
• In the case of a purchase order, the general information flow is as follows:
  · The customer takes orders from his in-house system and “translates” them into the agreed upon EDI standard..
  · The customer transmits the file of orders to Business  using the agreed communications medium.
  · Business receives the file of orders and “translates” the file into there in-house system format and the order is automatically entered onto system.
  · Business's system produces a purchase order acknowledgement and “translates” this into the EDI standard.
  · Business transmits the purchase order acknowledgement to the customer.
  · Business processes the orders that same day.





• A Word about StandardsAs stated above, the trading partners must agree on a format for the data to be transferred. Adoption of the ANSI X.12 and/or UN/EDIFACT standard(s) enables companies from any industry to use a standard format for data interchange. More and more companies are moving to one of the EDI standards in order to maintain only one format within their organization.
  
  ANSI X.12 is the primary standard used across North America and EDIFACT is the main standard currently in use across Europe. Message specifications for each standard are revised and reissued regularly, and there are numerous different versions of each standard in use. Therefore when choosing a standard with which to communicate with, you must also agree on the version of that standard that you wish to implement.
  
  The standards are extremely broad and designed to cover EDI requirements for all industries. A number of subsets or interpretations of the standard have therefore emerged. These industry guidelines have been developed by different industry groups.
  Examples of the organizations controlling guidelines for different industry sectors are as follows :
  CompTIA Computing Technology Industry Association
  (Computing Industry)
  EDIFICE EDI Forum for companies with Interests in Computing & Electronics
  (Electronics Industry)
  EANCOM (Retail industry)
  ODETTE (Motor industry)





• TranslationTo understand the need and function of EDI translation, it is necessary to understand there are three main components of an EDI model, of which each layer is independent of the others. The translation layer is the middle layer between the applications layer and the communications layer. The applications layer consists of processes that extract and feed business information to and from the business applications. This layer exists internally in each partner’s business systems.
  The function of the translation layer is to convert EDI data to application data and vice versa.
  
  
• Communications
  The final component of the EDI model is the communication layer. This provides the necessary electronic means of sending and receiving EDI data with external companies. The most commonly used communication takes place across a Value Added Network (VAN).