EDI Technology
Electronic data interchange (EDI) is an automated method of placing electronic transactions. The transactions involve transmitting a standardized message from one computer to another (Laudon & Laudon, 1991). The components involved in the EDI transactions are the transaction software and an EDI value added network (VAN). The transaction software is a computer application that sends and receives messages that adhere to the American National Standard Institute (ANSI) X.12 transaction sets. The ANSI X.12 standard dictates the messages' syntax in order to allow interoperability among EDI capable devices. The United Nations Standard Messages (UNSMs) are international EDI standards developed by the United Nations Electronic Data Interchange For Administration, Commerce and Trade (UN/EDIFACT) (DNS, 1995). The UNSMs are analogous to the ANSI X.12 transaction sets.
When an EDI transaction is executed, the transaction software will transform the data into the format defined by the ANSI X.12 standard and transmit this information to an EDI VAN. The EDI VAN is an EDI service provider that transmits messages to their destinations. Destinations are identified by an EDI address that points to an EDI mailbox. The mailboxes store transactions for a subscriber until the translation software connects to the EDI VAN and downloads EDI transactions from their mailboxes. When a transaction is downloaded, the EDI VAN will send a "functional acknowledgment" message to the sender in order to let the sender know that the recipient has received the transaction. The translation software will send any outward-bound EDI transactions to trading partners during the time when the translation software is connected to the EDI network.
Because there are many EDI VANs, such as MCI and GE Information Service (GEIS), they are interconnected in order to allow trading partners to have EDI mailboxes residing on different VANs. These interconnections allow EDI messages to traverse the EDI VAN of the sender and the EDI VAN of the subscriber. An EDI address will identify a subscriber's EDI VAN and EDI mailbox. In order to establish an electronic relationship, the EDI address of the trading partners and the transaction set(s) for those partners must be programmed in the translation software
The high end EDI VANs allow customers to connect to EDI services using many types of protocols such as asynchronous connections, bisynchronous connections (e.g., 2780/3780 emulation), SNA (e.g., 3770), Organization for Data Exchange through Tele-Transmission in Europe File Transfer Protocol (ODETTE FTP), X.25, X.400 and X.435. Most EDI VANs also provide access using switched and dedicated connections.
The EDI transaction goes beyond simple computer-to- computer communication and involves application to application communication. Specific transactions such as exchanging purchase orders and invoices, allow companies to automate their business processes.
The Importance of EDI within the Enterprise
Today, business is becoming increasingly competitive. Companies must respond to international competition as well as to non-traditional competition (Wheelwrite & Clark, 1992). Telecommunications companies are competing with credit card companies (AT&T's Universal card), and computer companies are competing with banks (Intuit's Quicken). The additional competitive pressures are forcing companies to cut costs in non-core functions such as sending purchase orders, invoices, and payments. Approximately 40,000 companies are using EDI to automate business functions (Clancy, 1994). This application of technology is benefiting companies by extending business hours, reducing order-entry expenses and billing cycles, improving cash management, improving access to information, and increasing accuracy of data (Clancy, 1994). For example, companies can cut handling costs by 50 to 70 percent by electronically transmitting purchase orders and invoices (Lyons, 1994). To realize these cost savings, some large institutional buyers, like the federal government, are even forcing their trading partners to use EDI technology.
EDI has significant advantages over traditional or manual handling of paper business documents. EDI document processing occurs in seconds rather than the days or weeks it takes for manual processing. Because EDI enables real-time inventory control and accelerates order processing, it helps shorten sales cycles, reduce spoilage of perishable goods, and hold down warehousing costs. EDI is both faster and more accurate than manual processing, so administrative costs, including the cost of error correction, drop significantly. Therefore, EDI users realize dramatic monetary and efficiency savings.
EDI Application Integration
This author believes that EDI's state of the art involves its integration with other applications (Lyons, 1994). Integration involves "mapping" the information from an application into EDI translation software that formats messages into standard ANSI X.12 messages. Information that gets "mapped" includes the recipient's name and other information required to place the transaction. The recipient's name is converted into a standard EDI mailbox address and the transaction information populates fields in the standard X.12 transaction messages.
Integration of systems such as bar-coded inventory control systems and telephone sales agent systems adds an additional level of business process automation (e.g. in, Hertz, 1994). The additional functionality involves using the intelligence in business applications to place transactions with vendors. For example, integration of inventory management systems or telephone sales agent systems can automatically send EDI purchase orders. Integration of accounting systems can automatically send EDI payments. This added functionality imbeds intelligence in the information infrastructure to automate many labor intensive business processes.
The Future of EDI
The future of EDI involves using the Internet instead of an EDI VAN for transporting EDI messages. This enhancement will allow trading partners to conduct electronic transactions without the added cost of paying for an EDI mailbox residing on an EDI VAN. However, problems that need to be overcome include those involving customer service, standards, and security.
Traditional EDI customer service handles many types of problems, specifically, those that result when messages do not arrive at their destination. Customer service personnel and technicians have limited visibility into the Internet because the Internet is a public network consisting of over 40,000 different networks. Therefore, it is very difficult to troubleshoot.
Problems associated with the standardization of EDI transaction sets may also hinder wide spread use of EDI over the Internet because transaction software must be re-written to operate using the Internet as a transport medium. However, the Internet Engineering Task Force (IETF), the governing body for Internet standard, has devised a standard for sending EDI documents over the Internet (Higgins, 1995).
Security of the data traversing the Internet is a concern because the Internet is a public network that can send data over many other public networks. Data may be compromised by individuals who have control over a particular node in the network. Those individuals can easily view data that traverses the node. Many vendors are reacting to this threat by offering Internet EDI products that contain encryption and key management software (Rodriguez, 1995). Individuals must be aware that all trading partners must have software containing common encryption algorithms and keys in order to conduct electronic transactions.
Conclusion
Systems analysts should evaluate the use of EDI technology in their enterprise infrastructure because EDI has the ability to automate many business processes. Traditionally, systems analysts had an inward focus in developing network and computer strategies that included a limited set of intra-company applications. Systems analysts must now look outward towards inter-company communication technologies, like EDI, to improve logistical performance and operation efficiencies (Leeman & Sevcik, 1995).
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