A set of standards which have been established between different computer users to enable data created by one to be sent to another in an understandable form. For example, department stores use EDI to transmit orders to suppliers.
Electronic Data Interchange (EDI) is the computer-to-computer exchange of structured information, by agreed message standards, from one computer application to another by electronic means and with a minimum of human intervention. In common usage, EDI is understood to mean specific interchange methods agreed upon by national or international standards bodies for the transfer of business transaction data, with one typical application being the automated purchase of goods and services.
Despite being relatively unheralded, in this era of technologies such as XML services, the Internet and the World Wide Web, EDI is still the data format used by the vast majority of electronic commerce transactions in the world.
Standards
The EDI (Electronic Data Interchange) standards were designed from the beginning to be independent of lower level technologies and can be transmitted using Internet protocols as well as private networks. It is important to differentiate between the EDI documents and the methods for transmitting them. While comparing the bisynchronous 2400 bit/s modems and value-added network to the Internet some people predicted erroneously that EDI would be replaced. In 2002, the IETF published RFC 3335, offering a standardized, secure method of transferring EDI data via e-mail. The EDI documents themselves, as well as the traditional EDI service providers (value-added networks), remain active.
EDI documents contain the same data that would normally be found in a paper document used for the same organizational function. For example an EDI 940 ship-from-warehouse order is used by a manufacturer to tell a warehouse to ship product to a retailer. However, EDI is not confined to just business data related to trade but encompasses all fields such as medicine (patient records, laboratory results..), transport (container and modal information...), engineering and construction, etc.
There are two major sets of EDI standards.
These standards prescribe the formats, character sets, and data elements used in the exchange of documents and forms, such as purchase orders (called "ORDERS" in UN/EDIFACT and an "850" in X12) and invoices.
The standard says which pieces of information are mandatory for a particular document, which pieces are optional and give the rules for the structure of the document. Just as two kitchens can be built "to code" but look completely different, two EDI documents can follow the same standard and contain different sets of information.
Organizations that send or receive documents from each other are referred to as "trading partners" in EDI terminology. (Deviations from and clarification to the specification sheets should always be obtained in writing.)
Service providers provide global platforms (also known as trading grids) to connect and integrate "business partners" around the world. They provide integration platforms that make the exchange of EDI (or XML) documents transparent and easy between diverse constituents.
Interpreting data
Often missing from the specifications are real world descriptions of how the data should be interpreted. If an EDI document says to ship 10 boxes of candy it may not be clear whether to ship 10 consumer packaged boxes, 240 consumer packaged boxes or 1200 consumer packaged boxes.
EDI translation software provides the interface between the internal system and the common standards. For an "inbound" document it typically takes the variable length fields of the EDI document, translates the individual pieces of data and then creates a file of fixed length fields.
(In EDI terminology "inbound" and "outbound" refer to the direction of transmission of an EDI document in relation to a particular system, not the direction of merchandise, money or other things represented by the document. For example, an EDI document that tells a warehouse to perform an outbound shipment is an inbound document in relation to the warehouse computer system. Disadvantages of using EDI
Advantages
There are several advantages of using EDI all of which provide distinct benefits to the user. One of the most notable benefits to using EDI is the time-saving capability it provides.
Another benefit for the user of this information system is the ultimate savings in costs for the company. EDI allows for a paper-less exchange of information reducing handling costs and worker productivity that is involved with the organization of paper documents.
Electronic data interchange has another strong advantage over paper-based information exchange which has to do with accuracy of information. Also, unlike paper-based methods, EDI allows for the ability to send and receive information at any time thereby tremendously improving an organization's ability to communicate quickly and efficiently.
Disadvantages
There are a few barriers to using electronic data interchange. Existing processes built around slow paper handling may not be suited for EDI. With EDI, the invoice will typically be sent when the goods ship and will therefore require a process that handles large numbers of invoices whose corresponding goods have not yet been received.
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