EDI in industries

EDI in Industries

Health Care EDI

There are various industries that EDI has a firm hold within, and the health care industry is one of those. Within the delivery of health services there is a great amount of paperwork which must be filed, delivered, ordered, compiled and documented. To alleviate the pressure of this paper pile, EDI has been incorporated into the system so as to provide a technological replacement for some of this domination. The standard for the health care industry is HL7, which is also the umbrella organization which oversees the development of standards and their evolution.

It is not only an organization within the United States - there are many other countries involved in HL7 projects throughout the world. They are intended to utilize the standards of the HL7 to organize and develop information exchange using these standards. Currently, HL7 tends to use XML technology in order to exchange documents. However, EDI is also well established within many data transmission industries, and it has been used throughout the health service industry.

It also appears that EDI is enabling manufacturers to meet the record-keeping requirements specified by government acts. The HL7 has long since its inception moved well beyond its initial messaging protocols. Currently it works on various areas of standards improvements. It aims to standardize knowledge representation, which is for the specification of components for context management. Health care data interchange is supported by the use of Health Information Exchange.

XML document standards are being standardized. These advancements are allowing a patient’s record at any point to be represented as an HL7 document. The medical record of a patient, in fact is even able to follow them not just through but between different hospital systems and even to different hospitals. The HL7 has become a foundation standard for universal electronic medical recording. It is used world wide.

Financial Sector

Due to its highly secure nature and speed of transmission, the finance industry also depends on EDI for its data transfers. Similar to non-financial EDI, financial EDI (FEDI) involves data interchange, but it involves payments and movements of money, which involves a financial institution. The partners of the transaction must have a good relationship with their finance institution to make FEDI effective. A growing number of companies are adopting FEDI in the U.S. The flow of FEDI is that the first partner - or sender - in the transaction extracts information electronically from the accounts system. The data is then formatted into a standard EDI. This form is then transmitted electronically to the bank for processing.

The financial institution then puts the data into a format that can be sent to the Clearinghouse. The payment data is transmitted to the second partner- or receivers - bank. The sender’s account is credited, and a receipt sent to them also for automatic accounting purposes. All of this is done electronically. Financial enterprises use these communication systems to transfer funds from their house bank and to receive statements.

Outbound messages such as payment orders and direct debits are carried out using EDI. Also inbound messages such as debit advices, credit advices, bank statements and lockbox data is transferred by EDI. Bank Communication Systems perform the following tasks related to EDI processing: conversion of data from IDoc to EDI and the opposite; message and interchange handling; communication; administration of partner profiles; and monitoring of processing.

Some of the perceived benefits of FEDI are that the purchasing partner enjoys an increase in productivity, a decrease in expenditure due to the electronic nature of the transaction as opposed to paper, a lower likelihood of fraud, and electronic invoicing capability. The seller benefits because it can receive products that are ostensibly younger, decrease the cost of processing due to automation of posting, reduce error incidence thereby increasing quality, and establish regular incoming monies. Hence the trading partners are able to improve each one‘s business without depreciating the others. In this way they improve their relationship with and importance to each other.

Many businesses are adopting EDI to make payments. It allows them to outsource their payments processing, resulting in a single file for all the payment instructions being sent to the bank in an EDI format. The bank can then execute all payment orders, including ACH and wire transfers, and will also print and mail the payable checks. This reduces paper enormously, and heavily decreases errors. All the payments can be dealt with electronically. Conversely, those companies collecting said payments are also able to utilize EDI by having their bank receive the payments, and then send them electronically to the companies’ accounts receivable system for automatic cash application. Again, companies are streamlining and reducing paper wastage.

The Automotive Sector

Since the late 1960’s the automotive sector in the United States was utilizing EDI as a means for communicating with suppliers, and for communication within their own plants. The car industry fell into confusion when General Motors tried to lower costs through holding onto an inventory which could only be one day’s worth of supplies. Because of this, the inventory costs were greatly lowered. This was done via EDI, and it allowed them to set their own system of communication with their suppliers. This strategy was soon being used by other automotive companies to lower their costs in a similar manner.

This led to the need for a documentation standard throughout the industry. This was made clear via the Automotive Industry Action Group, which combined with automakers and their suppliers for the development of an EDI standard which could be used by the entire industry. With this system, the industry would be able to construct a standard which is specifically related to the automobile industry. Now, however, it is being used to streamline operations, reduce daily running costs, and implement complementary systems that allow the industry to work at an optimal rate. As with any industry, time is money, so when is reduced, ostensibly the other is increased.

By implementing EDI in a more wide reaching scope, the automotive industry is improving its bottom line. The following benefits were noted when a supply chain introduced EDI into their business system: shorter lead times; more inventory turns; reduced cost of data entry; fewer data entry errors; better scheduling; faster release processing; and increased productivity. The industry has been able to rework its business structure, and incorporate EDI into various new applications such as JIT or Just in Time, which is an inventory system which is designed to ensure inventory is delivered just when it is required.

This guarantees a reduction in inventory costs, and redundancy in inventory. It requires great co-operation between supplier and customer and an efficient communications system - which is where EDI comes in. Companies use EDI to order their requirements, and have them shipped in a timely manner.

Transport Sector

The transport sector was one of the first industries to adopt EDI services, whether by sea, air, road or rail. In 1968 the Transport Data Coordination Committee and the National Association of Credit Manager’s Credit Research Foundation began developing standards for electronic data interchange. In 1979, the American National Standards Institute charted the Accredited Standards Committee (ASC) X12 to develop uniform EDI standards.

Throughout the 1980’s, five standards were published, and they were gaining acceptance in North America. Europe was continuing to work using other standards. This was causing difficulty in international trade, as the lines of communication were becoming confusing. As such the creation of an international standard was required - and the United Nations EDI for Administration, Commerce and Transport (UN/EDIFACT) was born.

These established standards that were flexible enough to meet the needs of all parties, and also included three additional regions, of Australia/New Zealand, Asia and Africa. This enabled international shipping and transporting of goods to be much more seamless. Instead of each part of the transporting system such as ship, a then truck and then receiver all getting pieces of paper stating the delivery order and what was contained, each part of the process will receive exactly the same data electronically. EDI within the shipping industry allows for improved communications and more accurate descriptions of deliveries, on and off loading, and a saving in time and personnel.

It also allows for a more interactive experience for customers - as for the rail systems in Australia, where document exchange occurs between everyday customers and the system. The EDI system allows for swift and efficient flow of information to occur between the components of the shipping process.

The introduction of EDI has greatly improved the quality and efficiency of the shipping industry, whether it is between supplier and customer, or the elements of shipping. The improved communication also decreases the amount of paper and incidence of error, which is a common bonus of EDI usage.