Electronic Data Exchange

Electronic Data Interchange (EDI) is a system which allows document information to be communicated between businesses, government’s structures and other entities. It is a set of standards which creates a cohesive system within which all parties are able to electronically exchange data information within a set of protocols.

Although it can be considered that EDI consists of only the actual conveyance of the document, it is also seen as the implementation of the operating systems whereby EDI can be put into practice. EDI is the data format of most electronic commerce transitions in the world. There are other competing conveyance portals such as XML services, Internet and World Wide Web; however, EDI remains the dominant data format.

The EDI standards describe structures that represent documents such as an invoice or shipping order for a company. EDI sets up a system whereby businesses and other entities with non compatible operating systems are able to communicate on the same “page”, so to speak. EDI provides applications whereby a more efficient and environmentally friendly network is created between communication partners. It allows a homogenous viewing of all documents put through the system.

However, its potential is not just in creating automated system networks - as in for automatic re-ordering. It enables companies to exchange information at a speedier rate, and ensure greater security of delivery. Moreover, it creates a greater ability for businesses to become more efficient and streamlined.

As EDI is a non-internet based information exchange system, it was assumed that it would disappear when the Internet became more entrenched in society and business. However, EDI has survived, and is used by many industries. EDI establishes a firm connection between businesses that does not necessarily rely on Internet options. However, it can be used over the open Internet, as is increasingly occurring. Electronic transmission began in the 1960s within the transport industries. This change also required a parallel standardization of documentation. A committee was formed to coordinate the development of translation rules among four existing sets of industry-specific standards.

At about the same time, the United Kingdom was also developing its own standards for documents called Tradacoms. These were later extended by the United Nations Economic Commission for Europe, and were eventually accepted by about 2000 export organizations. Problems arose when these two differing organizations of information attempted to exchange information during trade. These information sets were largely incompatible, and required a working party to begin to create a range of documents that were able to be internationally understood and transmittable. Currently, EDI is used by thousands of companies throughout the world, including companies in USA, UK, Australia, New Zealand and Singapore. It is because of the advantages of reduced human interference and increased speed of processing that the EDI system is favored by many corporations.

Adjuncts

EDI creates a system whereby companies, governments, and entities that work on different computer systems to exchange information efficiently. EDI is a standardized format of relevant data which can be transmitted from one computer system to another with minimal human intervention. It is widely used and industry to transmit what would have formerly been sent as a document, through the post. By utilizing EDI, the communication partners are able to send a range of documents electronically, which provides and increased efficiency rate as well as reduced paper expenditure. There are currently hundreds of “documents” that can be exchanged electronically between multiple trading partners.

The Internet has allowed for an increased flow of these exchanges, rather than those allowed through closed computer systems. EDI is a popular and efficient way to send and receive documents that would otherwise be spending wasted days on the road in the back of a delivery van. However, there is Value Added Network (VAN) used in this situation, and it is similar to a post office. It is a middle man ‘warehouse’ where EDI documents can be storage until the receiver is ready for them. This ensures that important documents do not bounce back to the sender, or get lost in the tray.

Although VAN is used by many companies, and in particular the healthcare industry, many EDI’s are being sent over the internet. However, as VAN’s provide a myriad of other services such as retransmission of the document, provision of third party audit information, and acting as a gateway for different transmission methods, handling telecommunications support etc., they are quite popular within vicarious industries. Increasingly, EDI documents are being embedded into other transmission vehicles such as XML, which is being seen as one way to reduce costs. Although EDI originated in its current form in the United States, its’ origins can be seen throughout international co-operative operations which require standardized manifests and instructions.

EDI Elements

Variables

EDI sounds similar to electronic mail (email), but is actually quite different. While email allow for free unstructured test messages to be sent from one computer to another (or multiple) computers, EDI supports structured business messages to be transmitted between partners. Previously these would have been hard copy documents or printed business documents. So rather than having documents pass from person to person, they go from computer to computer. Essentially, EDI is made of four elements. Firstly, EDI are based on the use of an electronic transmission medium, such as a VAN, but now increasingly on the open Internet. This is opposed to the physical storage mediums of magnetic tapes and computer disks.

Secondly, EDI’s use structured formatted messages that are based on agreed standards - in this way the messages can be read by any system that understands the rules they are governed by. However, this is not always as simple as it seems, as there are also the provision of EDI translation software packages. These are required to set up an interface between the company computer and the EDI sent/received document. EDI provides a relatively fast delivery of electronic documents from sender to receiver. And lastly, EDI provides direct communication between applications, rather than between computers. EDI requires some degree of technology infrastructure.

This includes data management and networking capabilities, data processing, the efficient capture of data into electronic form, the processing and retention of data, controlled access to it, and efficient and reliable data transmission between remote sites. Although it is possible for communication partners who use EDI to be directly linked to one another, it is most likely preferable to use a third party service provider. The EDI system creates a protocol by which businesses and governments alike are able to swiftly exchange information with a unified code system to recreate documents that are sent electronically.

Overview

EDI provides a safe, easy and paper free exchange of information between businesses, companies and governments using protocols that allow different systems to understand each other. EDI opens up communication between applications, thereby eliminating the human element, which can be not only prone to error, but also time consuming. So rather that putting documents into an envelope, finding a stamp, addressing the envelope and sending it through the post, what EDI does is eliminate this process and replace it electronically. However, EDI is only considered to be the standardized format of the transmitted message. EDI itself is a highly regulated protocol which allows the message to be sent between entities that may not work on the same system.

The EDI consists of many symbols and words that can be read with a “solution” and thereby be a document that is understood by both entities. The advantages of EDI have been proposed as being the reduction of unnecessary re-captures of data, and the automation of existing processes. It is used world wide by over 30,000 Corporations and Businesses to conduct business transactions electronically. Not only does it provide increased efficiency due to limited human interference, but it allows for international protocols to be recognized, and thereby stream line corporation communications.

Although the fullest range of business documents have not been devised which can cater to the international needs, they are in the process of production. Industries such as inventory management, transport and distribution, administration and cash management can all benefit through the use of this system. It directly reduces the amount of data capture and transcription, which generally reduces the incidence of errors, handling time and incidence of delays, which are critical to businesses. It is these delays which can often make or break business ventures. However, with EDI, these can either be eliminated or heavily reduced.

Underlying the increased efficiency, these systems are run on what are now internationally agreed upon standards and protocols which allow information to be freely and securely exchanged through a variety of mediums. No longer are companies, corporations or governments constrained by the speed at which a package, or document pile can travel within a transport vehicle. The transmissions using EDI can be almost instantaneous, and thereby alleviate some stresses, and increase the ability of users to communicate more effectively.