Have you heard someone mention EDI (Electronic Data Interchange) or e-commerce
and wondered what it was? Put simply, e-commerce is the exchange of information
on trade in goods, services, or money from computer to computer. For example,
the purchase of a widget on the Internet, where a law, a tracking night
Package delivery, or receiving a paycheck electronically.
Now imagine a business. You want to make the same transactions, but
Thousandstime on the day. That's where Steps EDI EDI is an agreed
Standard message that the exchange of information from one computer application
another with the minimum of human intervention. And 95% of all e-commerce applications
EDI for the exchange of this information. It can be done with special software via e-mail,
via the Internet or through tailor-made compounds. And it goes beyond the purely
Forward purchase of goods and invoices. A company may request information
aboutStocks in warehouses of its suppliers and customers, receive an order confirmation
Status and to send money electronically in addition to automatic notification that a
Bill was paid. These are just some of the many types of automated transactions
EDI is not new. In fact, it is much older than you might
think. But in some industries it's just a few years old. And the health of the industry
the United States had to be mandated by the federal governmentGovernment before they dared
Venture into EDI.
Who uses EDI? And how and where it all started? What are the benefits? What
the costs? What are the legalities? And why, with all the obvious advantages,
some industries are reluctant to conversion to EDI? Now we start at the beginning to see
how it came about.
Who uses EDI?
About 90% of the Fortune 1000 companies currently use EDI. Companies such as
American Airlines, BMW,Coca-Cola, Dunkin Donuts, Eastman Kodak, Federal
Express, Gordmans, Heinz, InFocus, JCPenney, Kohls, Lowes, Macys, Nike,
Openheimer, Prudential Insurance, Queens City Government, Radio Shack, Staples,
Texaco, United Airlines, Verizon, Wachovia, and Yokohama tires, to name a few.
EDI is commonly used in the manufacturing, shipping, warehousing, utilities,
Pharmaceutical, construction, petroleum, metals, food, banking,
Insurance, retail, government,Healthcare and textiles among other industries.
Every company that buys or sells goods or services can potentially use EDI. Because it
supports the entire business cycle, EDI can streamline the relationship that each
Company has with its customers, distributors, suppliers, and so on. After
A recent study, the number of companies, the EDI is expected to quadruple within
the next six years.
History of EDI
The first recorded EDI databack to the 1850s when the railroads and the West
Union used the telegraph to-business information. From there,
Samuel Morse code was the only patented method of communication
the lines.
Were in 1948 during the Berlin Airlift, thousands of tons of food and consumables
are required to be air shipped. The task of coordinating these programs (the
manifested with different languages and number of copies had arrived addressed)
ofthe development of a standard manifest.
Activated in the late 1950s and early 1960s, the rise of the computer company store
and processing of information by electronic means businesses need a sensible way to
Communications of the data. This method was developed by the widespread use of realized
Computer telecommunications. Could with telecommunications companies
transfer the data electronically over telephone lines, and the data entered directly
in the economy, a trading application.These electronic exchanges
shorter reaction times, less paperwork, and eliminates the potential for
Transmission errors. Computer telecommunications, however, only part of the solution
the problem.
Early electronic interactions are based on proprietary formats agreed between two
Trading partners. Due to different document formats, it was difficult for a company
to exchange data electronically with many trading partners. Was asked one
Standard formatfor which data are exchanged. In the United States, 1968
Transportation Data Coordinating Committee (TDCC) was formed to coordinate
Development of translation rules among four existing support groups of industry-specific
Standards.
In the mid-1970s, it was clear that the TDCC standards were not enough, and the work
began for the national EDI standards. The Electronic Data Interchange Association
(EDIA), a non-profit organization established to serve as administratorseveral
different industry groups. Each industry has served up a committee to determine new
Standards, modify existing, and provide the information to the EDIA for
Publication and dissemination. EDIA was asked to develop a set of standards
for the food industry. The first such standard is the uniform
Communication Standard (UCS), which was applied to an actual takeover by the
Quaker Oats Company in 1981.
In 1979, the American National StandardsInstitute (ANSI) Accredited Standards
Committee (ASC) was founded. There were representatives from the transport sector,
Government and industrial PC makers the committee's inaugural meeting
was held in Rosslyn, Virginia, with the aim to create a set of standard data formats
on the basis of the TDCC structure:
- Have the hardware-independent;
- Goods clearly, so that they could be used by all trading partners;
- Reduction of laborTasks of the exchange of data (eg data re-entry);
- It allowed the sender of the data to know the exchange, including whether and control
if the recipient has the transaction.
Was in 1982, version 1 of the ANSI ASC X.12 certified version of the draft standards
published.
Around the same time, the UK Department of Customs and Excise, the
Help SITPRO (the British Trade Board, the simplification of procedures) was
developing its own standards forDocuments in international trade, called
TRADACOMS. These were later extended by the United Nations Economic Commission
for Europe (UNECE) into what GTDI known as the (general-purpose commercial
Data Interchange Standards) have been accepted gradually by around 2,000 British
executing agencies.
Problems created by the trans-Atlantic use of two different (and largely
incompatible) standardized documents have been addressed by the
EducationUnited Nations Joint European and North American Working Group
(UN-JEDI), which began the development of Electronic Data Interchange for
Administration, Commerce and Transport (EDIFACT) document translation
Standards.
From the outset, Value Added Networks (VANs) as "electronic mail" for
Buyers and suppliers who need to exchange data. For example, Company A might
Please send an electronic order to the VAN and the VAN Company B could also
pick him up. If Company B claimed that she did not get the nomination, VAN
would be confirmed as a third party mediator and would determine whether the purchase
Thus was included in the deed or not. This is the kind of "value-add" this
Networks available.
Despite the advantages, VAN EDI had limited acceptance because it is cost-prohibitive
to implement for most companies. Before Internet EDI were available, such as
80% of providers in a givenSupply chain were, with their
Customers manually by fax, phone and mail because they can not afford it
the investment required for VAN EDI. These inefficiencies in the entire sequence
Supply chain, including: lost or incorrect orders, invoices late, out-of --
Shares, etc.
With the advent of secure Internet EDI, companies of all sizes can now
electronically with their trading partners to make.VAN and services such as
"Message Disposition Notifications (MDNS) are directly integrated into the software
Products.
Benefits of EDI
Imagine a very simple, non-EDI-based purchase: A buyer decides he needs 365
Widgets. It creates a purchase order, print it out and opens it in the mail. When
the supplier receives the order, she types it into their computer system of a company. The
Inventory man pulls the order and ships the widgets. Next, the supplier hasPrints
Mails from and an invoice. It is not hard to imagine that this process could
several days. EDI has the potential of large amounts of time from the cut to
Process. Sending documents such as purchase orders or invoices electronically
Takes minutes, not days, and shipments can often go on the day the order is
in.
In addition, the electronic format can not be entered again upon arrival. And
that is the part of the biggest benefits of EDI.This saves an enormous amount
And labor means that no errors are introduced during the data input into the system through
Your employees. Lead times are reduced, and data entry backlogs are almost completely
eliminated. This allows a very quick order. A real system can easily
Handle receipt of an order and shipping that order with his account the same day.
Studies show that the average reduction in turn around time is about 40%
Most companiesFunctions such as order processing, procurement, manufacturing,
Logistics and finance.
This often allows a company, the first devices to handle much larger volumes of EDI
no additional staff costs and other costs. This means sales and
increased revenues if it is recaptured, the initial investment in EDI.
These savings come from:
• No data entry errors by your operator
• No time-Mail
• Reduced process and workTime
• reduced lead times
• Reduce cycle time by
• Reduce storage costs
• No registration and other processing of paperwork
EDI improves margins by fulfilling customer needs and thus
Strengthen the relationship. It also allows time and effort to focus on to other
internal priorities.
Studies have shown that the processing cost of an order or invoice, including
Companies more than $ 5 in paper, postage, handling,direct labor and other such odds
and ends of the direct costs. With EDI, this can be reduced to about 50 cents;
sometimes as little as 13 cents, depending on how the EDI transmitted document.
If your direct handling costs are higher, the savings is greater.
Another advantage is the implementation of Just-In-Time (JIT) ordering
Methodology. Just-in-time, to avoid a company stock-outs and / or obsolete
Inventories, shorten lead times on order fromSuppliers to reduce inventory and
Storage costs. Whether the implementation of a subset or all of the JIT process
Methodology is to make EDI Just-In-Time and permits to be feasible.
With the proper agreements between trading partners, a manufacturer may
Determine the current sales of their current buyers and their buyers' inventory
Levels. Therefore, the manufacturer can forecast likely future sales and plan
Production and their own purchasing accordingly.Of course, it is sometimes
be wild swings that this scenario is disturbing, but it needs to help the manufacturer
exactly to plan production, and the buyer know that their needs more
are likely to be met by their suppliers.
Just-In-Time helps the manufacturer to communicate quickly and inexpensively with
their suppliers, which can run on the same predictions for the requirements of
their customers.
Disadvantages of EDI
Themain disadvantage of implementing EDI, it is revealed inefficient firms
Practices. If inefficient a company's business process with EDI, they will
Multiply in the implementation of EDI. The original purpose of the EDI has been saved
Money and time. When used improperly, has neither EDI and waste actually both.
The cost for EDI
The prices for EDI applications range from free (for a very simple single-function products)
several thousand dollars forFull-function applications. The final price that you
depends on several things:
The expected volume of electronic documents. In general,
cost EDI packages handle only a few documents and trading partners. Midrange
EDI packages can be a little more expensive, but handle a much larger volume of
EDI. If you anticipate multiple documents or trading partners, a mid-EDI
System is a much better choice.
The amplitude of the EDI translationSoftware. Some products search
seem like a bargain, but as your EDI needs to grow, hidden costs (such as to
Buy new transaction sets) suddenly appear. You can pay more, for a program
with an integrated mappers, but you avoid the purchase card and overlays in
Future.
Implementation time. Some applications are simpler to learn and use
than others. But as above, can easily reject the less the software package
handle. The more time you spend in training,the more time it takes to be in
Production mode. If your time frame is tight, and you are sure the documents you
will come with static, you are looking for in a translator who is not required training
Implementation.
The fees vary from software companies, Software Company. Ignore
The hidden costs already mentioned, you can expect that the following current charges:
Charges. Most of the companies an annual maintenance
Fee, which is usually a percentage ofTranslator's list price. This fee should include
Software updates, standards updates, technical support and customer service.
VAN charges. If you use a Value Added Network (VAN), you will
Account for the transmission of data similar to a long distance call. Some also
Invoice you enter for the time connected. A fast modem helps reduce the transmission.
Mailbox Fee. Most VANs charge a monthly fee for maintaining a
Mailbox on their network. Some settlement on the basis ofDocument (25 cents per
Transmitted document.) Others charge by the number of characters in each basis
Document.
EDI can sometimes take much longer than expected. Remember, you are working with
another company, and you have no control over their priorities and business practices.
Her priority mart can implement an order (850) with whale, but their
Priority, the implementation of the Advance Ship Notice (856). You must
Implementation of a Remittance Advice(820) with Wachovia but their Remittance Advice
Specialist is on maternity leave and her replacement only know Lockbox (823).
Despite the few drawbacks, DHA showed that a high performance backbone that today's e-commerce support. Companies around the world use EDI
Versatility and flexibility to communicate with each other. And with the promise
on the Web, which offers much lower costs of connectivity, and the lower cost of PCs and
simpleEDI Software is opening its doors for smaller companies. Moreover, XML, a
open standard for the exchange of data will appear momentarily as a method of encoding EDI
Provide standards, technical clarity about the industries and nations could
around the world.
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