Monday, July 1, 2013
INTRODUCTION
Everybody uses business
connections of one sort or another to get orders, send bills, make collections,
determine and pay what it owes, move goods, and control its money. The business
connections used historically to perform these operations have been the postal
service and the telephone. A relatively new link is electronic data
communications facilities.
Your links to
business connections are limited to the mail and the telephone. Both are slow.
Both terminate with that wall of people who feed the computer and who may make
errors.
What your company
needs is a better link to business connections and that is what electronic data
interchange is all about. To appreciate what electronic data interchange (EDI)
means, think about all those orders, invoices, freight bills, shipment
instructions, tracing requests, payment instructions, government reports, and
the like that your company sends out or receives every day. Think about each as
a single transaction.
WHAT IS EDI?
Traditionally,
the transfer of data from one company to another has been by paper documents.
This is known as a paper-based system. These documents have to be manually
forwarded and entered to the destination computer.
EDI is the
electronic exchange of structured business information, in standard formats,
between computers, EDI eliminates the need for a paper-based system by
providing an electronic link between companies. This reduces data entry tasks
and improves business cycle times.
EDI is the
electronic transfer of structured business documents in an organization--internally
among groups of departments or externally with its suppliers, customers and
subsidiaries.
In EDI
information is passed electronically from one computer to another over a
network without having to be read, retyped or printed. The information
transferred must have a defined structure agreed between your company, and the
company or group you send and receive data from.
Any company or
group which uses EDI is called a TRADING PARTNER. Examples of current uses of
EDI includes automatic teller machines (ATMs) in banks where EDI is used for
transferring and withdrawing funds between different bank accounts, airline
reservation systems, stock exchange transactions and car reservation systems.
USE OF EDI:
The data from one
computer is normally not in a form suitable to be entered directly into another
computer. The data may have to be arranged differently before it can be entered
into another computer or some items of data may not be needed at all. With EDI,
all the data is converted unto an agreed standard format before it is sent over
the network. The computer that receives the data can then extract the
information it requires.
Using EDI implies three things:
1. Information is
transferred electronically rather than on paper. This means that there is no
need to enter the data manually in the destination computer.
2. Information is
transferred between trading partners who have negotiated trading agreements and
have formalized their data transfer system.
3. Information that
is transferred complies with agreed standards for the format of the content and
the transmission control mechanisms.
ADVANTAGES
OF EDI OVER A PAPER-BASED DOCUMENT TRANSFER SYSTEM
This section
highlights the advantages EDI has over a traditional paper-based document
transfer system.
In a Paper-based System:
v A software
application generates a paper document on a form.
v Copies of the
document are made. Some are passed to internal departments to be filled, other
copies are sent to the trading partner via the postal service.
v The trading
partner receives the document and retypes the information on the form into
their computer. This retyping often introduces errors.
v The trading
partner generates a paper acknowledgement and this is sent to the originating
company.
The transfer of
documents in a paper-based system could take a considerable length of time.
In an EDI System:
v The application
program generates a file, which contains the processed document.
v The document is
converted to an agreed standard format.
v The file
containing the document is sent electronically over the network. This network
links the originating company and its trading partner.
v The file
containing the document arrives at the trading partner. It is translated into
the correct format and transferred to the recipient's application.
v A receipt is
automatically generated and sent over the network t the originating company.
EDI transmits documents to
the trading partner's application in a very short period of time and with no
human intervention.
HOW EDI WORKS?
Regardless of the
format chosen, companies using EDI communicate with their trading partners in
one of two ways: Either they exchange data with several trading partners
directly or they interact with multiple companies through a central information
clearing-house. In the latter case, all transactions are funneled through a
third party's computer system, which routes them to the appropriate receiver's
computer. This enables the sender to communicate with an unlimited number of
trading partners without worrying about proprietary systems, audit trails,
variable transmission speeds, and general computer compatibility.
Basically, here is how EDI works:
1. Prior to any
computer work, representatives of two companies interested in exchanging data
electronically meet to specify the applications in the EDI standard, which they
will implement.
2. Each company adds
EDI programs to its computer to translate company data in standard formats for
transmission, and for the reverse translation on the data it receives.
3. Then, as often as
operationally requires the two companies exchange data electronically in the
standard formats.
The data
transmitted originates from records in the sender's database after the sender
confirms that the receiver is an authorized recipient for such data. The sender
composes a transmission formatted in the EDI standards, the receiver translates
the formatted message to a computer record to be processed and used internally.
All transmissions are checked both electronically and functionally and the
protocol includes procedures for error detection and correction.
INFORMATION FLOW IN EDI:
1. A Company
collects data for its own operational or statistical requirements. This data is
edited and added to its own database.
2. Pertinent
information is extracted by the company from its database, summarized if
necessary, constructed into EDI transaction sets, and transmitted to the
company or organization requiring it for valid reasons.
3. The frequency for
preparing this information is determined by the operational requirements of
each recipient.
4. A communications
link for transmission is established according to the standard communications
protocol.
5. The recipient of
the information receives the transmission and checks it for its physical
characteristics (parity, check character, transmission mode). Retransmission is
requested if an error is detected in the physical characteristics of the
transmission.
6. The receiver
checks the functional characteristics of the data. A message is transmitted to
the original sender to acknowledge the transmission and to identify any errors
detected.
7. The receiver
processes the information received according to its own internal procedures and
timing requirements.
EDI COMPONENTS
A typical EDI
system implements a specific set of EDI by enabling the exchange of business
documents. It accepts documents from business software applications, converts
the document to a standard format and sends it to another software application
or trading partner.
EDI system
converts generic EDI messages (in EDIFACT or any other EDI standard) format to
RDBMS format and from RDBMS format to EDI format. There are EDI application
programs for software developers to configure EDI to work with the various user
application software programs. There is normally no end-user interaction with EDI--it
is entirely within the background of the EDI system.
RDBMS database
contains the data to be translated into EDI format and where EDI data is to be
converted (and written) to. EDI treats the application database generically--it
reads and writes to the tables and fields specified according to the message
mapping created by the |EDI Administrator during EDI message configuration.
These are done by EDI Configuration programs under the purview of EDI.
There
are three main components in an EDI system:
1. Application
Service-
Providers the means of integrating existing or new applications into the EDI
system.
2. Translation
Service-Converts
data from internal format standards to an external format and translates data
from an external format to an internal format standard.
3. Communication
Service-Passes
documents into a network via the agreed communication protocol.
FILE TYPES
EDI creates the following files as a document passes
through the system:
v Internal Format
File (IFF)
v External Format
File (EFF)
v Transmission File
Each of these
files is described in the following sections.
Internal Format File:
An internal
format file (IFF) contains a single document for a single trading partner.
Internal format file is principally for EDI's own use.
External
Format File:
The external
format file (EFF) contains the same data as the internal format file translated
into the appropriate standard document format.
Transmission
File:
A transmission
file contains one or more documents for the same trading partner. Documents of
the same type are packaged together in functional groups. The functional groups
going to one trading partner are packaged into an interchange set. An
interchange set contains one or more functional groups of documents with the
same sender and receiver.
EDI SERVICES
The three EDI
services all perform different tasks. The following sections give an overview
of what happens in each of three services.
Application
Service:
The Application
Service provides the link between a business application and EDI. It allows you
to send document to, and receive documents from, an EDI system.
A set of callable
routines is used to transfer documents from the business application into EDI.
Documents destinations can be either intra-company or to external companies,
i.e., trading partners.
The EDI
Application Service holds each incoming and outgoing document as a single
internal format file. EDI converts the document to a standard format and sends
it to the trading partner using the relevant communication protocol. A number
of different standards and communication protocols are available.
The following list describe
what happens in the Application Service:
For
outgoing documents:
v The business
application uses the callable routines to send a document from the business
application to the Application Service. The document is now in the EDI system
and is called internal format file.
v The Application
Service sends the document in the internal format file to the Translation
Service.
For
incoming documents:
v The Application
Service receives an internal format file from the Translation Service.
The Application
Service makes the data in the internal format file available in database so
that the business application can fetch the document from EDI. A callable
interface is used to do this.
Translation
Service:
v Converts outgoing
documents from an internal format file to an agreed external format.
v Translates
incoming documents from an external format to th EDI internal format file.
The external
document standards that a EDI system supports are EDIFACT, X12, TDCC, and
ODETTE
The following lists describe
what happens in the Translation Service:
For
outgoing documents:
v The Translation
Service receives a document in the internal format file from the Application
Service. It converts the internal format file to the appropriate external
standard (either EDIFACT, X12, TDCC, or ODETTE). The file is now an external
format file.
v The Translation
Service combines one or more external format files into a transmission file.
v The Translation
Service now sends the transmission file to the Communication Service.
For
incoming documents:
v The Translation
Service receives a document n the transmission file from the Communication
Service.
v Separates the
transmission file to produce external format files.
v It translates
each external format file, which may be in an external standard (either EDIFACT, X12, TDCC, or ODETTE) to the
internal format file. The file is now an internal format file.
v The translation
Service now sends the internal format file to the Application Service.
Communication
Service:
The Communication
Services sends and receives transmission files to and from the trading partners
either directly or by using a third-party service called a Value Added Network
(VAN).
The following
lists describe what happens in the Communication Service:
For outgoing documents:
v The Communication
Service receives a transmission file from the Translation Service. It checks
the file to see which trading partner it has to be sent to. When it has
identified the type of connection to be used for this trading partner t
determines which gateway to use.
v The Communication
Service sends the transmission file to the trading partner.
For
incoming documents:
v The Communication
Service receives a transmission file from the trading partner. The file arrives
through one of the gateways that EDI supports.
v The Communication
Service sends the transmission file to the Translation Service.
APPLICATION SERVICE Translation Service:
APPLICATION SERVICE Translation Service:
v Converts outgoing
documents from an internal format file to an agreed external format.
v Translates
incoming documents from an external format to the EDI internal format file.
CONCLUSION:
By eliminating
the paperbased documents the EDI was introduced. It is the new technology that
overcomes the traditional paperbased documents. By using EDI we can transmit
the data at electron speed. So it is a time sparing process and also low cost
as compared with telephone system.
Even though there
are more advantages with EDI there are some disadvantages also. To feed the
data into computer, work is compulsory. By comparing with computer speed human
speed is a bottleneck. And also errors may occur at the time of data feeding.
These errors can change the managerial decisions.
Another problem
if we want send more data urgently, first we feed it into computer and then
send it to the destination. To feed more data requires more time. Even though
the telephone cost is very high as compared to EDI process, we must use
telephone facility in these cases. So in these cased we can't use EDI system.
