Battle between the old and the new born

Since the time EDI was born it has passed through many phases of evolution. People found it interesting but could not implement because of its cost factor. In India, it was first implemented at Bombay Port Trust way back in 1951 when one simple document conversion used to take a weeks time. Round the globe the fever of EDI proliferated and severe technological improvement took place to make the EDI happen at an affordable price. In every sphere of life it takes a momentum once stumble block is removed, and EDI was no exception. EDI Technocrats contributed tremendously to develop easily usable mapping tools and B2B giants delved into improvising complex communication protocols for seamless payload transfer.

EDI started with a traditional notion and ultimately taken a cognizable shape in the form of Web based EDI after a concerted effort round the globe. Let us explore pros and cons of both the types and leave the choice of selection to you depending upon your business requirement.

TRADITIONAL EDI

Electronic Data Interchange is the electronic exchange of business documents from one company’s computer to another’s computer in nationally standard structured data formats. It formats these documents according to agreed-upon standards. Its efficiency has made it a condition of doing business in dozens of industries, including retail, grocery, warehousing, transportation (rail, ship, and trucking), health care, education, real estate, and government. Any standard business document that one company would exchange with another (such as a purchase order, inventory inquiry, and claim submission) can be exchanged via EDI between two parties, or trading partners, as long as both have made the preparations.
Special Characteristics of EDI are as follows:
a) Business Documents. EDI is used primarily to electronically transfer repetitive business transactions. These include purchase orders, invoices, approvals of credit, shipping notices, confirmations, and so on.
b) Data formatting standards. As EDI messages are repetitive, it is sensible to use some formatting (coding) standards. Standards can shorten the length of the messages and eliminate data entry errors, since data entry occurs only once. In the United States and Canada, data are formatted according to the ANSI X.12 standard. An international standard developed by the United Nations is called EDIFACT.
c) EDI translators. An EDI translator converts the data into standard format.EDI has been around for almost 30 years in the non-Internet environment. It is a system that standardizes the process of trading and tracking routine business documents. EDI translates these documents into a globally understood business
language and transmits them between trading partners using secure elecommunications links. To distinguish it from Internet-based EDI, we call
EDI on the non-Internet platform traditional EDI.
d) Each trading partner (companies trading EDI documents) maintains their own application system, EDI interface, and communications.

i) Application Interface System
• Processes the data to be sent to, or received from, the trading partner.

• Moves electronic transactions to or from the application systems.

• Programs separate and deliver inbound transactions to the application
systems.

• Delivers inbound transactions to the applications systems and gathers
transactions from the application systems for outbound transmission.

ii) EDI Software

• Manipulates and routes data between the application system and the
communications handler.

• Translates Business documents into and out of the X12/EDIFACT etc
formats.

• Creates Functional Acknowledgments (EDI transaction that notifies the
trading partner that an electronic document was received).

• Verifies the identity of trading partners.

• Validates the transactions by checking a master file against the information
transmitted.

iii) Communications Handler
• Transmits data to and from the trading partner through a value-added
network.


APPLICATIONS OF TRADITIONAL EDI

Traditional EDI has changed the landscape of business, triggering new definitions
of entire industries. It is used extensively by large corporations, sometimes in a
global network such as the one operated by General Electric Information System
(which has over 100,000 corporate users).
a) EDI enables companies to send and receive large amounts of routine transaction information quickly around the globe. There are very few errors in the transferred data as a result of computer-to-computer data transfer. Information can flow among several trading partners consistently and freely. Companies can access partners’ databases to retrieve and store standard transactions.
b) EDI fosters thru (and strategic) partnership relationships since it involves a commitment to a long-term investment and the refinement of the system over time.
c) EDI creates a complete paperless transport processing environment , saving money and increasing efficiency. Payment collection can be shortened by several weeks. Data may be entered offline, in a batch mode, without tying up ports to the mainframe.

d) When an EDI document is received, the data may be used immediately. Sales information is delivered to manufactures, shippers, and warehouses almost in real time.
e) EDI can save a considerable amount of money.




LIMITATIONS OF TRADITIONAL EDI

Traditional EDI has evolved over time from a point-to-point digital communication media to a comprehensive tool that allows large companies to reengineer their
supply chain systems . For example, a traditional EDI allows for a continuous
replenishment by suppliers or for instant payment upon delivery .
However, despite the tremendous impact of traditional EDI among industry
leaders , the set of adopters represented only a small fraction of potential EDI
users. Furthermore, most of the companies have had only a small number of their business partners on EDI, mainly due to its complexity and high cost. Therefore, in reality, many businesses have not benefited from EDI.

The major factors that have limited the use of traditional EDI are:

a) Significant initial investment is needed, and ongoing operating costs are high.
b) Business processes must be restructured to fit EDI requirements.
c) A long start-up time is needed.
d) Use of expensive, private VANs is necessary.
e) There are multiple EDI standards, so one company may have to use several standards.
f) An EDI cannot support dynamic trading in marketplaces.
g) The system is complex.
h) A converter is required to translate business transactions to EDI code.
i) The system is inflexible; it is difficult to make quick changes, such as adding
business partners.
These factors suggest that traditional EDI—relying on formal transaction sets,
translation software, and VANs—is not a suitable long-term solution for many
corporations. Therefore, a better infrastructure is needed. Internet-based EDI
coupled with XML and extranets is such an infrastructure.

INTERNET-BASED EDI

When considered as a channel for EDI, the Internet appears to be the most feasible alternative for putting online B2B trading within reach of virtually any organization, large or small. There are several reasons for firms to create EDI ability over the Internet:
a) The Internet is a publicly accessible network with few geographical constraints. Its largest attribute, large-scale connectivity (without the need for any special company networking architecture), is a seedbed for growth of a vast range of business applications.
b) The global nature of the Internet offers the potential to reach the widest possible number of trading partners of any viable alternative currently available.
c) Using the Internet can cut communication costs by over 50 percent.
d) Using the Internet to exchange EDI transactions is consistent with the growing interest of business in delivering an ever-increasing variety of products and
services electronically, particularly through the Web.
e) Internet-based EDI can complement or replace many current EDI applications.
f) Internet tools such as browsers and search engines are very user friendly, and
most users today know how to use them.
g) Internet-based EDI has several functionalities not provided by traditional EDI, which include collaboration, workflow, and search engines.

LIMITATIONS OF INTERNET-BASED EDI

The downside of Internet-based EDI are as follows:
a) Internet-based EDI lacks security and does not guarantee delivery.
b) The potential for fraud and deception is far greater.

TYPES OF INTERNET-BASED EDI

The Internet can support EDI in a variety of ways:
a) Internet e-mail can be used to transport EDI messages in place of a VAN. To
this end, standards for encapsulating the messages within Secure Internet
Mail Extension (S/MIME) were established.
b) A company can create an extranet that enables its trading partners to enter
information in a Web form whose fields correspond to the fields in an EDI
message or document.
c) Companies can utilize the services of a Web-based EDI hosting service in
much the same way that companies rely on third parties to host their commerce sites. Netscape Enterprise is an example of the type of Web-based EDI software that enables a company to provide its own EDI services over the
Internet. Harbinger Express is an example of those companies that provide
third-party hosting services.

THE PROSPECTS OF INTERNET-BASED EDI

Companies that used traditional EDI have responded positively to Internet-based
EDI. The Internet simply serves as an alternative transport mechanism to a more
expensive lease line. The combination of the Web, XML, and Java makes EDI
worthwhile even for small, infrequent transactions. Whereas EDI is not interactive,
the Web and Java were designed specifically for interactivity as well as ease of use.
Here are some examples of the transformation to or initiation of Internet-based EDI:
a) Compucom Systems was averaging 5,000 transactions per month with traditional EDI; within a short time after the transition to Internet-based EDI, the company was averaging 35,000 transactions per month. The system helped the company to grow rapidly.
b) Tradelink of Hong Kong was successful in recruiting only several hundred of the potential 70,000 companies that used the traditional EDI system to communicate with government agencies regarding export/import transactions. In 2001, the Internet-based system had thousands of companies registered and hundreds were being added monthly.