Electronic Data Interchange Systems

1. Electronic Data Interchange Systems

2. Contents • Electronic Data Interchange Systems • EDI Standards • Traditional versus Internet EDI • Process of Electronic Data Exchange • Advantages of EDI • Disadvantages of EDI

3. Electronic Data Interchange Systems • An Electronic Data Interchange (EDI) system provides for electronic communication of data between businesses. • Types of data sent include • Purchase order data • Shipping data • Invoice data • Product description data • Price list data • Insurance data

4. Figure : Suppliers, manufacturers, and retailers cooperate in some of the most successful applications of EDI. Electronic Data Interchange BACK

5. EDI Standards EDI standards are formats for EDI documents that specify what information goes where within an EDI document. These bodies include American National Standards Institute (ANSI X12 standards) and International bodies. There are two types of EDI standards: • Proprietary standard - EDI standard developed for a specific company or industry. This is also called a non-public or private standard. • Public standard - EDI standard developed for use across one or more industries BACK

6. Traditional versus Internet EDI • An EDI system, like all IOSs, requires a data communications link between businesses. • Internet EDI systems require special software to send encrypted standardized data. • EDI data is generally input directly into the system upon receipt.

7. PAPER DOCUMENT INTERCHANGE Data Entry PO Computer Computer Post Office Invoice Purchaser

8. ELECTRONIC DATA INTERCHANGE Data Entry PO Computer Computer VAN Invoice Purchaser BACK

9. Process of Electronic Data Exchange • How does EDI work? • Supplier’s proposal sent electronically to purchasing organization. • Electronic contract approved over network. • Supplier manufactures and packages goods, attaching shipping data recorded on a bar code. • Quantities shipped and prices entered in system and flowed to invoicing program; invoices transmitted to purchasing organization

10. Electronic Data Interchange

11. Process of Electronic Data Exchange • Manufacturer ships order. • Shipment notice EDI transaction sent (not shown) • Purchasing organization receives packages, scans bar code, and compares data to invoices actual items received. • Payment approval transferred electronically. • Bank transfers funds from purchaser to supplier’s account using electronic fund transfer (EFT). BACK

12. Advantages of EDI • Worldwide connectivity • Emergence of standards and guidelines • Greater reliability of information technology • Globalization of organizations • Need for timely, reliable data exchange in response to rapidly changing markets • Lower operating costs -Saves time and money • Less Errors = More Accuracy -No data entry, so less human error

13. Increased Productivity • More efficient personnel and faster throughput • Faster trading cycle • Streamlined processes for improved trading relationships BACK

14. Disadvantages of EDI Low speed Poor security Organizational participation Technical problems must be solved Can be expensive for small businesses to implement. There are various standard document formats for EDI that can cause problems with cross compatibility. BACK

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