Tech Primer

Electronic Data Interchange (EDI)

What is EDI?

EDI refers to the exchange of data between one computer and another on a pre-defined structure where both have agreed upon the same message standard. This electronic communication helps in business transactions such as order, confirmation, shipping notices and so on between organisations. The relationship is usually developed between a vendor and a customer. EDI implies computer to computer transaction into vendor databases and ordering systems. The EDI system co-ordinates transaction, initiates deliveries and generates invoices. Data is exchanged between different companies using a network such as the Internet.

What are the essential elements of EDI?

Some of the essential elements of EDI are the use of an electronic transmission medium instead of physical storage such as magnetic tapes, and disks. The message is well structured and formatted. The exchange of documents from the sender to receiver speeds up. EDI enables direct communication between applications. It depends on a sophisticated information technology infrastructure that includes data processing, data management, networking capabilities that ensure efficient and reliable data transmission between remote sets.

How does EDI benefit industry?

There are numerous advantages of using EDI. Some of them are increased business opportunities in various sectors and reduction of workforce requirements. There’s quick data transfer, less time is wasted on exception handling, it also saves time in unnecessary re-capture of data. It is also beneficial in areas such as inventory management, transportation and distribution, administration and cash management due to automatic existing process leading to cost reduction, improved speed and better quality of services. EDI is being used by Federal Express, Eastman Kodak, American Airlines, Nike, Staples, NationsBank etc.

Is there an EDI standard?

EDI was first developed by automobile and transportation industry in the 1970s. It is used in numerous industries for distribution, finance, accounting, healthcare, manufacturing, purchasing, retail, filing taxes, shipping and government. The first set of industry EDI standard was developed by TDCC i.e. Transportation Data Coordinating Committee. ANSI or American National Standard Institute has approved a set of EDI standards known as X12; it is used for different types of documents such as air shipment, student loan, billing, notices, etc. The other types of EDI standards are UN/EDIFACT that stands for United Nations/Electronic Data Interchange for Administration, Commerce and Transport and the other one is Open EDI, also known as Open Electronic Data Interchange. These standards have replaced paper-based purchase order with their electronic equivalents. The Internet has given EDI a boost.

What’s the relationship between EDI and XML?

EDI is a widely used e-commerce technology whereas XML (Extensible Markup Language) is a good technology for business to exchange information. The existing EDI data format can easily be translated into XML. At some points, EDI blurs into XML-based e-commerce. It is easy to search data, decode, manipulate and display it in a consistent way.

How does EDI work?

EDI provides the electronic equivalent of common business documents—request for quotes, purchase orders and invoices—which are then transmitted electronically between computers of trading partners. Electronic documents are given standardised electronic format, as it is easy for everyone to correctly interpret information sent to them. Translation software is used by each partner to translate business data from ASCII (American Standard Code for Information Interchange) format or any other format to ANSI X12 form and vice versa.

What’s the difference between e-commerce and EDI?

E-commerce and EDI differ. E-commerce is an aspect of doing electronic business, person to person interaction or collaboration, money transfer, data sharing and exchange, Web site merchant systems etc. EDI is a subset of e-commerce. In EDI, users can exchange business information in a standardised electronic form.

For more information visit
www.anu.edu.au/people/Roger.Clarke/EC/EDIIntro.html

—Garima Grover