b2b white paper - edi
TRANSCRIPT
Institute of Management, Nirma University, Ahmedabad
White Paper On
Electronic Data Interchange [EDI]
In partial fulfillment of course
Business to Business Marketing
SUBMITTED TO
Prof. Prabhat Yadav
on
31/12/2007
SUBMITTED BY:
Hiren Haria (061114) Joe Koshy (061115)
Jyoti Kumar (061116) Kriti Goyal (061117)
Kiran Ekbote (061118)
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Table of Contents
1. Introduction 3
2. Literature Review 7
3. EDI Industry 8
4. Applications of EDI to Industry 14
5. Benefits of EDI to industry 22
6. Issues with EDI 24
7. EDI-Best Practices 26
8. Indian Scenario 37
9. Conclusion 44
10. References 46
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1. Introduction
Electronic Data Interchange (EDI) can be formally defined as 'The transfer of structured
data, by agreed message standards, from one computer system to another without human
intervention'. It is simply a set of data definitions that permit business forms that would
have been exchanged using paper in the past, to be exchanged electronically. This has
resulted, in some cases, in the establishment of an EDI environment, which arguably
represents the most advanced state of electronic commerce today. As such, EDI provides
an excellent example of a working electronic commerce environment and is a good
starting point for examining electronic commerce. Since transfer of data takes place
between different companies using networks, such as VANs or the Internet, with the
increasing number of more and more companies get connected to the Internet, EDI is
becoming increasingly important as an easy mechanism for companies to buy, sell, and
trade information.
History of EDI
The early applications of EDI were undertaken in the United States, being traceable back
to the 1948 Berlin Airlift, where the task of co-ordinating air freighted consignments of
food and consumables (which arrived with differing manifests, languages and numbers of
copies) was addressed by devising a standard manifest. Electronic transmission
commenced during the 1960s, initially in the rail and road transport industries. The
standardization of documents was a necessary concomitant to that change. In 1968 the
United States Transportation Data Coordinating Committee (TDCC) was formed, to
coordinate the development of translation rules among four existing sets of industry-
specific standards. A further significant move towards standardization came with the X12
standards of the American National Standards Institute (ANSI), which gradually
extended and replaced those created by the TDCC.
At about the same time, the U.K. Department of Customs and Excise, with the assistance
of SITPRO (the British Simplification of Trade Procedures Board), was developing its
own standards for documents used in international trade, called Tradacoms. These were
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later extended by the United Nations Economic Commission for Europe (UNECE) into
what became known as the GTDI (General-purpose Trade Data Interchange standards),
and were gradually accepted by some 2,000 British exporting organizations.
By the time of the 1991 EDICA Conference in Sydney, it was claimed that there were
1,500 corporations using EDI in Australia and New Zealand. This would have compared
favorably with the populations variously claimed for the U.S. (5,000-12,000), but less so
with the U.K. (12,000) and Singapore (2,000). The transaction volumes in Australia to
date were, moreover, small compared with those countries.
Objective
The basic documents for transaction of business will be taken only once by one agency
and other agencies will take the information from that agency, electronically, avoiding
the need to either physically take the document from one office to another or keying in
the data again and again involving the attendant problems of manual labor and errors
creeping in at each stage of data entry.
How does EDI work
For a better understanding and a practical example of How EDI works - Let's presume
that a buyer is sending a purchase order to the supplier.
a. Most likely the information contained in the purchase order resides in a
computer application (for example, an inventory package) on the buyer's
PC. As long as it is possible to import and export files from the
application, pertinent information can be extracted and mapped into a file
for the EDI translation software.
b. The EDI translator will do compliance checking to ensure that the
mapping complies with EDI standards and the trading partner's
implementation guide. Afterward, it will translate the message into an EDI
format.
c. A communications connection is established in order to transmit the EDI
purchase order. The EDI translation software controls the communications
software.
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d. The file is sent to either a mailbox, FTP site, or directly to AS2 recipients
to be picked up.
e. The computer software receiving the EDI purchase order will reformat the
incoming data so that it can be readily imported into an existing
application's data files. For instance, a PO received via EDI could be input
into the Order Entry module.
f. When the order is received, the software generates a Functional
Acknowledgement back to the buyer. The FA indicates that the message
was received and was/was not compliant with the EDI standard. It does
not address the actual data in the message.
Architecture for EDI
The essential elements of EDI are:
• the use of an electronic transmission medium (originally a value-added
network, but increasingly the open, public Internet) rather than the despatch of
physical storage media such as magnetic tapes and disks;
• the use of structured, formatted messages based on agreed standards (such
that messages can be translated, interpreted and checked for compliance with an
explicit set of rules);
• relatively fast delivery of electronic documents from sender to receiver
(generally implying receipt within hours, or even minutes); and
• direct communication between applications (rather than merely between
computers).
EDI depends on a moderately sophisticated information technology infrastructure. This
must include data processing, data management and networking capabilities, to enable
the efficient capture of data into electronic form, the processing and retention of data,
controlled access to it, and efficient and reliable data transmission between remote sites.
A common connection point is needed for all participants, together with a set of
electronic mailboxes (so that the organizations' computers are not interrupted by one
another), and security and communications management features. It is entirely feasible
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for organizations to implement EDI directly with one another, but it generally proves
advantageous to use a third-party network services provider.
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2. Literature review
Why should management invest time and resources into developing EDI?
The answer lies in the benefits it is providing, arguing that EDI may become a
prerequisite for conducting business. It can force through a change in market conditions,
improve the organizational information flow within a company, and enhance the
communication flow with external companies.
The need to hasten the exchange of business information over the years has resulted in
ever-changing business practices culminating in the advent of electronic data interchange
(EDI). Looking at the progress of EDI, the evolution of the syntax used for EDI messages
and the services available for the electronic transmission of EDI data, as EDI software
has become more sophisticated so have its applications and these trends are illustrated by
a series of case studies involving large multinationals with dedicated IT departments as
well as small organizations, often with no computer knowledge at all. The automotive
industry is one sector which is earnestly implementing EDI to maximize its full potential.
There is an increasing trend towards the formation of EDI communities to keep costs
down and for the mutual benefit of community members. Opportunities available to
future generations of EDI users include continuous dialogue simulating conversation
between computers.
On the other hand as Electronic Data Interchange (EDI) is rapidly becoming integrated in
a wide range of businesses, EDI usage is expected to increase in the immediate future.
This high growth in a potentially paperless environment presents a variety of security
risks, such as disclosure of messages, tampering with messages, etc. Current legal and
contract-related literature dealing with paper documents is not equipped to deal with such
problems. Identifies different types of security risks and EDI agreements, and examines
potential security risks under these agreements.
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3. EDI industry
The increasing competitive pressures from both global and domestic markets are forcing
nations to adopt new trade practices and standards. Nations need to adjust to new
methods of trade information exchange, open up their telecommunications systems and
learn to take full advantage of harmonized procedures, standards, and practices for trade
documentation. The role of electronic commerce and electronic data interchange (EDI) in
particular, is rapidly evolving in the face of increasing pressure from global markets to
provide standardized methods and practices for international trade.
The general term for these changes in international trade administration is “trade
facilitation”. A World Bank study conducted in 1995 endorsed the use of EDI and
electronic commerce as critical components of a trade facilitation strategy (Schware and
Kimberley, 1995).
EDI and changing trade requirement
With the gradual removal of international trade barriers and the increasing
interdependence between international organizations and markets, electronic data
interchange (EDI) is expected to play a significant role in facilitating international trade
(Farhoomand & Pace, 1995). EDI is the most prevalent form of electronic commerce
supporting trade transactions across various industry sectors on a national and
international level. EDI, as a system of exchanging standardized trade related
information, is not only a fundamental IT business process reengineering tool (Benjamin
et al, 1990; Fowler et al, 1994; Swatman, 1994; Swatman et al, 1994; Venkatramann,
1991), but also a key electronic commerce technique for thereengineered trade facilitation
process (Schware and Kimberley, 1995), especially with respect to customs and excise
applications.
Industry players
EDI services are provided by many players cross over the world and small players are
serving their niches but on the global level there are few significant players who are
providing EDI services and solutions.
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Companies Market share
Sterling 30%
GE Global Exchange 17%
IBM Global Services 17%
Peregrine 8%
EDS 5%
Easylink 4%
QRS 4%
SPS Commerce 4%
(Source: http://edi.stylusstudio.com/msg02906.htm)
ANSI X12 standards for EDI
The American National Standards Institute (ANSI) chartered a committee to develop
inter-industry EDI standards. This committee, known as the x12 Business Data
Interchange Committee, is using the TDCC standards as their base structure. The x12
committee has added many transactions to the list provided by the TDCC. The most
common transactions are the purchase order and the invoice.
Industries working with X12 standards include: Telecommunications, electronics,
chemical, auto, metals, textile, and aerospace. Individual industries may use a subset of
the overall X12 standard. The format and meaning of the individual data elements
remains constant, but different industries have chosen to implement some fields in a
different order, or to exclude certain information not appropriate for their industry.
Private industry standards – many industries are developing their own standards for EDI
for example:
• Voluntary Interindustry Commerce Standards (VICS)
• American National Standards Institute (ANSI)
• Uniform Code Council (UCC)
• Automotive Industry Action Group
• General Trade Document Interchange
• National Automated Clearinghouse Association
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• National Wholesale Druggist Association
• Transportation Data Coordinating Council
Private company standard- A few major companies, such as General Motors and Kmart,
charged into the EDI arena and developed their own standards. GM’s EDI involvement
was an outgrowth of their “Just-in-time” plant inventory approach.
Some successful EDI implementation stories in industry
Wal-Mart
An EDI link between Wal-Mart and one of its suppliers, Seminole Manufacturing Co. cut
the delivery time of Seminole slacks by 50%. This resulted in a 31% sales increase of
these slacks in the first 9 months after the link was established.
General Motors
General Motors has integrated EDI Electronic funds transfer at 30% of its assembly
plants. Shipping receipts are sent electronically from the GM plant to an Electronic Data
System (EDS is subsidiary of GM) computer center where they are matched against
electronic invoices and purchase orders. Suppliers group the shipping receipts, and one
payment is made. This single payment may represent dozens of different shipments to
different plants. These payments are also performed electronically via Electronic Funds
Transfers.
JC Penney
Sales of Stafford suits jumped 59% after JC Penney linked up with their supplier Lanier
Clothes. EDI allowed Penney to quickly replenish stock fast enough to meet demand
while cutting their overall inventory of suits by 20%.
Rockwell
Rockwell, a major automotive supplier received design change notifications directly from
the automakers via EDI. Rockwell has been able to react faster to their customer’s
constant design changes while reducing their inventory of finished goods. Parts now
bypass their warehouse and go directly from their production lines to their shipping
docks.
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Market outlook and growth
Experts forecasted a million users of EDI by the end of the year 2000. Recent statistics
suggest that EDI users (excluding financial EDI users) are estimated to be in the region
170,000 users, seventy percent of whom are in the United States and Europe (Kimberley,
1998).
The Yankee Group, a Boston based market research group, estimates that 4/5 of all
business transactions will be electronic by 2010. The EDI survey, published by Input,
found that 70% of Fortune 1000 sized businesses; universities, and Public companies are
currently using EDI. An additional 20% are planning EDI implementations.
Input also forecasts that the EDI service market will grow to $28.2 billion by 2010.
That’s an annual 25% per year growth rate from the 2000 market size of $3 billion
Analysts at Gartner, the world's leading provider of research and analysis about the
global information technology industry, predict that at least 35% of all new VAN revenue
will be from bundled network and application hosting services by 2005, up from less than
10% in 2004.
1 Network World, November 1, 2004
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At the national level the simplifying and speeding up of trade information flows offer
significant national benefits. Singapore claims that properly applied trade facilitation is
already saving it in excess of one percent of its gross domestic product (US$ 700 million
in 1994) each year. As a result, reengineered trade processes based upon trade facilitation
principles and EDI have become a global phenomenon (Schware and Kimberley, 1995).
Therefore, an increasing number of nations are in the process of developing their EDI
industry and there is an increasing requirement for the development of national
frameworks and implementation guidelines.
Developing nations, therefore, find themselves in the position of having to rapidly adapt
their traditional trading practices in order to participate in international free trade. For
many of these countries the barriers to achieving this are different and more complex than
in more developed nations.
Although Western countries have expended much energy in recent years defining
international trade standards and founding the EDI and electronic commerce
infrastructure, for developing nations, barriers to developing their national EDI industries
and electronic trading communities are more complex than in developed countries.
The reasons for growth
One of the main reasons for the explosive growth of the EDI service market is that the
business environment finally contains all the pieces to make EDI possible. Clearly,
standards are a major factor. By 1986, there were over 150 standardized transaction
types. Standard transaction development has a cascading affect. The Purchase Order
begat the Invoice, The Invoice begat the Shipping Notification. This Shipping Receipt
leads to the desire to make electronic payments, which spawns another batch of electronic
transactions.
The spread of computers and available software has been a factor in EDI growth. The
acceptance of the Personal Computer has been a stimulus to EDI. It is possible to develop
an EDI solution based on a Personal Computer with less than $1,000 hardware
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investment.
Another factor is what you could call the “Domino Effect” within industries, where large
companies in the center of an industry coerce their suppliers’ partners to adopt EDI.
Soon, the second tier suppliers require EDI links to the third tier suppliers. The
automobile industry is an example of the Domino effect.
Future of EDI
EDI is a must in today’s environment. By the end of the decade of the ‘90s, EDI was
affecting almost every business in the U.S. The amount of standard transaction will
steadily increase. All areas of business-to-business transactions will be increasingly
automated with EDI. You can expect your trading partner to exchange no less than three
documents (Purchase Order, Invoice, Advance Ship Notice). Other documents are
mandatory in various companies like the ones that relate to electronic transfer of funds,
PO automation, Inventory inquiries, shipment tracking, Item catalogs, etc.
Further expansion will occur in multi-industry standards because few companies really
operate in just one industry. The grocery stores, for example, sell many non-food items.
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4. Applications of EDI to Industry
EDI saves company money by providing an alternative to, or replacing information flows
that require a great deal of human interaction and materials such as paper documents,
meetings, faxes, etc. Even when paper documents are maintained in parallel with EDI
exchange, e.g. printed shipping manifests, electronic exchange and the use of data from
that exchange reduces the handling costs of sorting, distributing, organizing, and
searching paper documents. EDI allows a company to take advantage of the benefits of
storing and manipulating data electronically without the cost of manual entry or scanning.
Small, mid-size suppliers can exchange data with retailers as easily as their larger
competitors. Not long ago, powerful EDI systems were the province of industry giants.
These costly tools increased efficiency, while trimming costs and inventory by
maximizing communication among trading partners. Sold on benefits of these proprietary
systems, larger firms required EDI compliance from suppliers. For most small and mid-
size companies, EDI presented formidable implementation barriers. But smaller firms
found a viable solution in a low-cost, Internet-based EDI system. Unlike their high-priced
counterparts running on legacy systems, Web-based EDI tools only need a Windows-
based PC, a modem and an Internet connection. Using a standard Web browser,
companies can communicate with any EDI system, quickly sending and receiving
invoices, purchase orders and other documents. By relying on business-grade Internet
connections, transmissions aren't delayed by frequent busy signals or slow connections.
Once operational, companies quickly realize the advantages of being EDI-compliant. It
reduces costs across the board. It uses less paper than the traditional fax, which is
environmentally sound. Information is sent quickly, and there's no worrying about
whether your customer received a faxed document. The systems also require less
attention. In addition to savings on software purchases, implementation efforts and
system maintenance, Web-based EDI users also reap benefits from reduced transaction
costs.
While most Web-based systems can communicate with popular accounting software,
connecting Web-based EDI to accounting packages remains uncharted ground. By using
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a system in stand-alone mode, a company never realizes the efficiencies of paperless
transactions and risks errors by re-keying data.
EDI system has applications in accounting, shipping/receiving, customer service,
manufacturing, marketing, purchasing and in sales. It pays benefits in all these aspects of
business. In fact, it's difficult to find an area or department within a company that is not
positively impacted by EDI.
Organization wide applications of EDI
First and foremost, EDI eliminates the manual preparation and transfer of business
documents. According to a study by INPUT, a leading technology research firm, the
average cost to generate, handle, store and send a single paper purchase order is $50
while an EDI purchase order costs just $4.90. That's a savings of more than 90% in
administrative costs. And it's faster and error-free.
An EDI system would automatically issue POs based on inventory thresholds. Further,
it could automatically source an item for the best supplier, using price and deliver ability
criteria. Whichever supplier offers the shortest lead time at the best price gets the PO--
automatically.
Electronic data interchange eliminates errors resulting from illegible handwriting and
manual data entry. Since EDI data is maintained within and transmitted directly to and
from the EDI system, human handling is reduced or eliminated entirely. Since the paper
document has been replaced, the requirement for direct data input by humans is not
necessary (or desired).
Since EDI replaces paper, it significantly reduces or eliminates expenditures on forms,
postage, reproduction, storage and administrative overhead such as filing and retrieval.
Records management, as we understand it today, will be a thing of the past tomorrow.
EDI helps improve customer service by increasing the amount of current information at
disposal. One will have the ability to notify its customers in advance that their order is on
its way. That gives them more time to prepare for the incoming shipment. Further, they
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can initiate a direct electronic inquiry into your order status system and get an immediate
response.
EDI improves relationship with trading partners, which usually results in more business.
As customers realize that it's easier and cheaper to do business with you than their non-
EDI suppliers--your competitors-they will send more orders your way. Of course, the cost
of doing business is just one part of the whole picture. Doing business with you also
means fewer mis-shipments, high end-product quality and shorter lead times. Also, as a
result of implementing EDI, one can discover and eliminate supplier redundancy, which
translates to even less administration.
EDI also helps improve the quality of products and services through better data
collection, handling and testing capabilities.
EDI will begin generating an incredible wealth of historical data that can be invaluable in
forecasting materials requirements, sales cycles, etc. Not only is that data more accurate,
but it is also already in your computer, ready for quick and easy analysis.
Further, implementing EDI will create a clearer understanding of what is an acceptable
level of quality and what is not. It requires that you and your trading partners agree to
what the EDI system will entail and how your organizations will be integrated.
Remember, quality is a perception, not a tangible thing. Translation: "Beauty is in the eye
of the beholder." It's unwise to try to second guess your trading partners' expectations
without working together as a team. With EDI, you'll know precisely what your
customers expect from you in terms of quality, deliverability and price. The same is true
regarding the relationship between you and your suppliers. Having these details on the
table will help keep all parties on track.
In an EDI environment, the trading partners jointly own the data passing between them.
This common interest creates a shared goal in maintaining the highest level of data
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integrity. Since EDI is synonymous with standard data formats, it's easier to detect
irregular or suspicious data. Traditional threats such as computer viruses and hackers can
be eliminated. The EDI system detects and either corrects or reports these anomalies,
resulting in a more secure environment.
An indirect, and usually unexpected, beneficial side effect of EDI is that it automatically
captures data that are useful to existing non-EDI applications. Also, EDI's structured data
environment provides MIS with insight into the design of new non-EDI applications and
databases, including the incorporation of software "hooks" for future integration with the
EDI system.
And of course, EDI drastically reduces the time element traditionally required to convey
business documents from one company to another.
Departmental applications and benefits
Each department in the organization, from accounting to sales, can enjoy specific benefits
from EDI based on its own unique applications.
Accounting
Since EDI transactions take place in minutes instead of days or weeks, accounting will
obviously see a greatly improved cash flow. Also, since both trading partners are
benefiting from the EDI link, more favorable payment terms and conditions can be
established.
In an evaluated receipts settlement (ERS) environment, the invoice can be eliminated
entirely. First, the price is established by a purchase order. Next, a material release
advises the vendor the quantity to deliver. Finally, an advance ship notice (ASN)
confirms the quantity actually being delivered. Payment is triggered upon physical receipt
of the goods.
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The ASN does exactly what it says--it notifies the consignee in advance what was or will
be shipped by the supplier. This ASN describes exactly what merchandise is in the
shipment, with the level of detail found in an invoice.
With ERS, the supplier assures the consignee the ASN will contain 100% accurate
information about the shipment. In return, the consignee will issue payment based on the
ASN information. Both parties win. The customer gets extremely accurate shipment
information for his just-in-time (J1T) manufacturing system, and the vendor receives
payment sooner than he would if an invoice was required.
Customer service
With the EDI system being continuously updated throughout the day, customer service
will have access to more timely information for responding to customer telephone
inquiries. In fact, in a more sophisticated environment, the EDI system itself will
automatically respond to customer inquiries.
Manufacturing
With EDI, manufacturing can achieve a true JIT environment. With a Quick Response
(QR) strategy in place, a manufacturer will issue more frequent orders with fewer units
instead of the traditional habit of ordering large quantities at one time. This process
allows for smaller inventory levels, more frequent inventory turns and dramatically
reduced carrying costs.
EDI also allows for transmission of complete technical specifications so engineers can
evaluate component information. This capability provides virtually instantaneous
exchange of very accurate data.
Marketing
Marketing has a variety of EDI transactions at its disposal for announcing new products
and promotion plans to the sales force in the field. The benefits, of course are faster and
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less expensive dissemination of product information. The sooner the sales department
knows about a product, the sooner they can begin selling it.
Purchasing
The purchasing component of the EDI system can issue a purchase order automatically,
based on inventory thresholds. Order entry errors are eliminated on the seller's end
because EDI removes the need for re-keying order information.
Further the EDI system can automatically source a particular item from the supplier
offering the best quality, price and deliverability. Eventually, historical performance data
will point to a select few preferred vendors and eliminate the rest.
Receiving
The EDI ASN transaction set received from the supplier allows the customer to better
prepare his personnel, material-handling equipment and storage space for the incoming
shipment. And, of course, it is used to confirm orders previously placed to replenish JIT
production lines. The ASN describes in great detail what is included in a particular
shipment, including product item numbers, quantities and the actual loading
configuration of the goods in the trailer.
Sales
Many EDI-capable manufacturers are converting their sales catalogs into electronic
media. Sales representatives in the field--and even customers--can retrieve this catalog to
get up-to-the-second product updates and pricing or to place orders. The primary benefits
are quicker order turnaround and more accurate order fulfillment. And we all know that
salesmen, in particular, will approve of any process that reduces paperwork.
Shipping
The ASN is created from data captured (usually via bar code scanning) at the shipping
dock and serves as an electronic snapshot of the shipment. Since it is to represent
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precisely what goods are leaving the dock, procedures are put in place to handle last-
minute order adjustments such as back orders and substitutions.
The result is a more accurate (electronic) bill of lading, which translates to more accurate
billing, eliminating the need for a freight auditor. The likelihood of rerouting the
shipment while it's in transit is costly in both time and money and is minimized.
Additionally, the ability to generate EDI bills of lading can earn a discount from the
carrier.
The shipper can also use the bill of lading to query several carriers to determine which
one can best meet delivery needs. This can be thought of as an electronic RFQ. This
query contains sufficient information about the shipment (destination, number of pieces
and weight) to allow the carrier to respond with a routing schedule. Armed with this
information, the shipper can determine the best routing schedule to meet his customer's
needs, without making numerous phone calls.
How has EDI contributed to the bottom line?
• 99% reduction in paper processed by the Commerce Department's Bureau of
Export Administration in the issuance of export licenses.
• 200% explosion in sales experienced by some retailers using Levi Strauss &
Company's LeviLink, a Quick Response environment. The average sales increase
ranged from 26% to 30%.
• 100 inventory turns a year, up from eight per year, and the elimination of one full
acre of warehouse space at General Electric's Transportation Systems, which
builds locomotives.
• 99% accuracy rate achieved in the exchange of 65,000 trade documents per year
between Data General and Burlington Air Express.
• 84% reduction from the cost of a manual PO to that of an EDI PO at Kmart.
• More than $1 million saved in postage costs annually at JC Penney.
• $4.5 million saved as a result of a 99.5% reduction in cost of purchase orders at
R.J.Reynolds.
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These companies and thousands of others have become more competitive by offering a
higher quality product at a better price. They've done it by implementing electronic data
interchange as the way to conduct business.
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5. Benefits of EDI to Industry
The benefits and advantages are shared by both the trading partner submitting EDI
information. Some of the benefits derived by industry by using EDI are:
• Improved reporting performance
• Time savings
• Eliminates manual preparation and transfer of paper documents.
• Cost savings Reduces paper costs, storage requirements and handling overhead.
• Improved accuracy
• Improves customer service.
• Enhanced flexibility
• Improves quality of products and services.
• Improves relationships with suppliers and customers.
• Reduces order lead times.
• Improves cash flow
• Creates better procedures
• The elimination of data re-entry, resulting in reduced errors
• Reducing days in accounts receivable
• Increasing staff productivity
a. Improved reporting performance: Typically, the electronically submitted EDI
data will be received, processed and acknowledged within hours of when it was
submitted, rather than the multiple days it would take through the postal system.
Thus EDI allows the trading partners to meet their reporting deadlines in a timely
manner.
b. Time savings: EDI saves time by eliminating the overhead of the paper handling
that is required and is otherwise necessary for both the trading partner. The use of
EDI for also streamlines the process of error reporting by eliminating the phone
calls that might otherwise be necessary to ensure accurate information is being
reported.
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c. Cost savings: Although there are initial costs involved with designing,
developing and implementing a new EDI system, these costs can be recouped and
the system can pay for itself many times over by the efficiencies garnered by the
use of EDI. The cost of mailing and handling paper documents is completely
avoided when the documents are sent electronically. Personnel at both ends of the
electronic transaction that would otherwise be involved in the handling of paper
generated claim information can be redeployed to other tasks. There are fewer
people required to monitor and administer the EDI system than is necessary to
process paper documents.
d. Improved accuracy: EDI reduces the number of times the same data needs to be
redundantly entered into multiple computer systems. There is also the inherent
efficiency and improved accuracy from the electronic acknowledgment process
that allows for the senders’ transactions to be verified and validated immediately
upon receipt. The acknowledgment process allows the trading partner to submit
more timely and accurate information while, at the same time, reducing the
amount of time it takes to correct invalid or inaccurate claim information.
e. Enhanced flexibility: Electronic data can be sent anytime, day or night, to ensure
the most accurate and timely information is delivered in an efficient manner. The
EDI submission of first report transactions can be scheduled to run when the
computing resources are at a lower demand (i.e. during no peak utilization
periods).
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6. Issues with EDI
There are a few barriers to adopting electronic data interchange. One of the most
significant barriers is the accompanying business process change. Existing business
processes built around slow paper handling may not be suited for EDI and would require
changes to accommodate automated processing of business documents.
Another significant barrier is the cost in time and money in the initial set-up. The
preliminary expenses and time that arise from the implementation, customization and
training can be costly and therefore may discourage some businesses. The key is to
determine what method of integration is right for your company which will determine the
cost of implementation. For a business that only receives one P.O. per year from a client,
fully integrated EDI may not make economic sense. For other businesses, the
implementation of an integrated EDI solution may be necessary as increases in trading
volumes brought on by EDI force them to re-implement their order processing business
processes.
The key hindrance to a successful implementation of EDI is the perception many
businesses have of the nature of EDI. Many view EDI from the technical perspective that
EDI is a data format; it would be more accurate to take the business view that EDI is a
system for exchanging business documents with external entities, and integrating the data
from those documents into the company's internal systems. Successful implementations
of EDI take into account the effect externally generated information will have on their
internal systems and validate the business information received. For example, allowing a
supplier to update a retailer's Accounts Payables system without appropriate checks and
balances would be a recipe for disaster. Businesses new to the implementation of EDI
should take pains to avoid such pitfalls.
Increased efficiency and cost savings drive the adoption of EDI for most trading partners.
But even if a company would not choose to use EDI on their own, pressures from larger
trading partners (called hubs) often force smaller trading partners to use EDI.
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The issues can be divided onto two parts:
Technological issues
The technological issues are basically related to the systems in place at the various
partners in the business. The nature of the systems in place, the versions etc. and also the
interoperability of the systems.
As we know that all organizations have some kind of IT systems in place today. When
multiple organizations come together to form an alliance to work together in tandem to
achieve efficiencies, they need to transfer information / data from and to one another.
This is where EDI comes into picture. It provides a faster and cheaper way to get the data
across. For this to work all the partners must be working on systems which are
compatible with each other. The companies need to upgrade their legacy systems. Put in
place the infrastructure both the hardware and the software part of it, the applications to
get the EDI systems running and deliver the promised efficiencies.
This up gradation and getting the systems inter operational costs a lot, and as such is a
major hindrance to EDI implementation.
Organizational issues to change
A truly cross functional innovation such as EDI requires radical change to organization.
This enterprise wide application leads to high levels of overall resistance to change from
within the organization. A cross functional innovation such as EDI will cause an
organization wide change in structure and work process. This opposition to change is a
major hurdle in implementation of EDI.
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7. EDI - Best Practices
The International Association of Industrial Accident Boards and Commissions (IAIABC)
has developed best practices for the entire span of the roll out of Electronic Data
Interchange Sytems. Starting from the very beginning which is the discussion of the EDI
solution with the company’s trading partners we have,
How does one get started?
Potential trading partners are required to execute a trading partner agreement with the
jurisdiction, which includes testing the reporting system to determine whether the
proposed transmission mechanism is acceptable. Whichever technology option is
selected, it must be adequate to ensure that trading partners can reach and maintain the
agreed-upon level of accuracy of data specified in the trading partner agreement and can
track and re-send any data that is incorrect. There are a number of ways to transmit
electronically and a variety of technologies for using EDI. Trading partners may elect to
use their existing technology, to buy "off-the-shelf" software and/or hardware, to design
an entirely new system or to contract with a third party to transmit the required data.
Vendors whose products are IAIABC EDI Standards compliant, and software developers
or Counciltants who have experience submitting IAIABC EDI data to other jurisdictions
can assist you in obtaining technology or business solutions.
In addition, it is important to seek legal advice regarding what constitutes reporting in
your jurisdiction. For example, if a Trading Partner sends you an EDI report that is
rejected, is it considered “filed” for statutory timeliness purposes, or not?. Do rules
and/or statutes need to be changed?
Preparation for EDI
� Suggested Review of Business Processes
• Select or hire an EDI coordinator
• Examine and evaluate business processes and how EDI will affect them.
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• Conduct an in-depth review of all data elements to be transmitted using the data
elements list and definitions in the IAIABC EDI Implementation Guide and Any
State's Element Requirements Table.
• Review the definition of each element.
• Note the difference between these definitions and those of your firm.
• Note those elements not statutorily valid on the Edit Matrix.
• Note those elements not captured by your database that you may wish to add as
enhancements.
• Determine if changes to paper (hard copy) forms are needed to become in
alignment with the national standards.
• Identify state reporting requirements for each data element using the Edit Matrix,
Event and Elements Requirements Tables.
• Conduct an in-depth review of the Standard Maintenance Type Codes (MTCs) or
Triplicate Codes, and compare them with your reporting requirements.
• Determine which MTCs (claims) or Triplicate Codes (POC) are valid for the
jurisdiction and which are not.
• Once you have an understanding of the MTCs, you can review or complete the
Claim Event table.
• Review the example scenarios and sample data in the Implementation Guide.
• Determine those scenarios that are valid for the reporting in your state.
• Determine the Data elements and MTCs or Triplicate Codes that are required for
each scenario.
• If using in-house system, draft sample hard-copies of the example scenarios using
the sample data and the jurisdiction’s approved forms for test validation or key
sample data into on-line forms in network system and print out hard-copy form.
(Hard-copies are now ready to use in trial of system)
• Begin storing live claim data as soon as capable for later testing.
• Return to Element Requirement Table.
• Determine which data elements should be utilized as primary and secondary
“match” data elements. (Match elements will generally be mandatory on the
Element Requirement Table.)
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• Complete or review Match Data Table.
• Review each data element by MTC or Triplicate code. Decide which elements
are mandatory (M), conditional (C), and which are optional (O) for each MTC or
Triplicate Code.
• Complete or review the Element Requirements Table. There should be no
indicators for those elements that are not valid for the jurisdiction, but they should
remain on the table.
• Return to the Edit Matrix Table.
• Remove other indicators for those data elements that are not statutorily valid for
the jurisdiction.
• Indicate those elements that are mandatory anywhere on the Element Requirement
Table.
• Review all data elements by “Error Message”. In other word, review all the data
elements for the “001-Mandatory Field Not Present” error message, then continue
through the next error messages.
• Review criteria for moving from “test status” to “production status”. It is
common to require 90% or more acceptance (10% or less rejected) on three
consecutive batches of at least ten (production data) unique transactions, each
with a minimum of 10 paper reports, for a cross match.
� Suggested Review of Technology Solutions
• Examine and evaluate current hardware and software and available vendor
software packages or services. (IAIABC can provide a list of previously certified
vendors or you can search the Internet to find vendors. Remember, not all
vendors are experienced in this technology or workers' compensation
requirements.)
• Decide whether you will need to upgrade your system, to acquire new software or
not to enhance your internal technology. If you have an existing database or
internal reporting system that you will continue to use, you will need to be able to
perform data extraction from your internal system, data translation from flat file
to ANSI X12N, UNEDIFACT, or flat file and transmission of reports over an
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external electronic network. Your company may have existing transmission
agreements with Value Added Networks that are acceptable to the jurisdiction.
You may elect to simply outsource the entire electronic aspect of the reporting
process.
• Either purchase or develop in-house software or use third-party services to
convert your paper reports to electronic files or transmit the information to the
jurisdiction.
• Verify Choice of format on Trading Partner Profile and Trading Partner
Agreement: many states will not accept electronic files on tape or diskettes, or
UNEDIFACT protocols. You may be able to transmit ANSI ASC X.12 or
IAIABC Standard flat file, depending upon the Release or Version.
• Verify Choice of transmission options on Trading Partner Profile and Trading
Partner Agreement: VAN, Direct Connect, Internet or Third Party Administrator
� Common Programming Requirements
• Develop an interface to load EDI information into your database
• Develop edits on EDI information
• Develop method of extracting the proper transactions to send per the rules and
triggers in the Trading Partner Table.
� Education
• Educate your claims managers, claims administrators and data processing staff on
new compliance requirements, timetables and definitions or specifications for data
elements to be captured and reported.
• Educate your information systems and claims management staff on cooperative
business processes.
• Educate the state personnel on your internal organization and contacts.
� Implementation Scheduling
• If the jurisdiction you will be trading with has implemented a phased schedule,
identify whether you are a tier one, two or three partner and when you are
scheduled to begin transmitting electronically.
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• Contact the state Workers' Compensation Division to obtain documents and tables
to advise you on the state’s requirements for electronic reporting, such as event
reporting triggers, rules and data elements.
• Review attachments to trading partner documents and internal business processes
(See above).
• Begin internal employee education.
• Execute authorization process.
• Review Trading Partner Agreement.
• Obtain authorization from internal legal bureau for use of Trading Partner
Agreement.
• Review and draft Master Trading Partner profile.
• Review and draft internal/external transmission specifications.
• Review and draft internal/external Events processes & tables.
• Review and draft internal/external Element requirements documents.
• Review and draft internal/external Edits processes & matrices.
• Complete Trading Partner Agreement and attachments and return.
• Obtain technology enhancements or contracts with service vendors (See above).
• Internal test status.
• External test - transmit first MTC or Triplicate Code in test status.
• Review test data.
• Provide feedback.
• Repeat until 90% accurate (or according to trading partner agreement).
• Send test for additional MTCs or Triplicate Codes, repeat steps.
• Production status.
• Receive letter from Jurisdiction granting production status.
• Stop sending hard copy on the date agreed upon with Jurisdiction.
� Programming
The jurisdiction you are reporting to may accept Flat File or ANSI X12 EDI
transmissions for EDI reporting. The reporter must, however, indicate on the Partnering
Agreement which standard they will be utilizing. The standard used may be changed
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after initial execution of the Partnering Agreement. For example, when a Reporter begins
sending transmissions, they may choose to send them by Flat File. They then may later
become capable of sending the transmissions using the ANSI X12 standard. Making a
simple amendment to the original Partnering Agreement will then change the standard
used.
� Flat File Transmissions
Flat File formats have fixed record lengths or record segments. Each data element has
assigned character positions within each record. Usually the fields and/or records are
expanded to the maximum length. Delimiters (special characters that separate data
fields) are not included in the Flat File transmissions, since the data is identified by the
position it occupies in the file.
� ANSI ASC X12 Transmissions
ANSI – American National Standards Institute
ASC – Accredited Standards Committee
ANSI is recognized as the National Standards setting body for the United States.
Traditionally, these standards have been used to set product design and safety
standards. These standards provide both manufacturer and consumer with confidence
and thus improve commerce. The ANSI standards are best known for approving
standards for items such as light bulbs, contractors’ levels and rulers, nuts and bolts,
etc. The X12 Committee for data interchange processes (electronic standards)
reviews ANSI standards.
The IAIABC EDI Committee has been working with the ANSI ASC X12 since 1991.
Both organizations provide different qualities that are needed for the EDI project to
be successful. Below are some benefits that are indicated in the IAIABC EDI
Guides:
1. Standards
Standards provide vendors with confidence that will attract them to produce
products and services that enhance EDI. The involvement of vendors reduces the
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individual effort required by companies and ultimately lowers implementation
and operation costs.
2. Translators
Are used to map sender and receiver data to ANSI designed transactions. This
simplifies participant involvement.
3. Connectivity
Provides more compatibility with Trading Partners and intermediaries who offer
data storage, forwarding, and inter-operability services.
4. Software
The standardization of transactions will attract vendors to develop the IAIABC
processes that support the transactions.
5. Cost Benefits
Off-the-shelf solutions cost less. This is especially true when these solutions
provide other business requirements, i.e. purchase orders.
6. Promote Projects
Lower buy-in costs and ease of implementation will attract other participants.
EDI volume reduces payback periods and justifies participation. It is expected
that soon our customers and vendors will request that we do business via EDI.
7. Technical Capabilities
ANSI transactions provide more capabilities, data set and size variations, and bulk
transmission savings by reducing repetitious data.
General EDI Systems
There are generally agreed to be three types of EDI system. These are:
(1) Batch EDI: This is still the most common and established approach for systems to
“talk” effectively to each other. It relies on a “fire and forget” approach to an electronic
mailbox or direct on a point-to-point communications link. This method is ideal for
regular flows of documents of a similar type. It can be set off as a nightly or even hourly
task, and relies on only a minimal amount of initiation on the part of the operator. This
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system is ideal when there are high quantities of repetitive information and the business
case relies on a reduction in volume.
(2) Event-driven EDI: Event-driven EDI takes the idea of batched messages a step
further and starts to integrate it with the other processes into the commercial
environment. It starts an elaborate cascade effect which (with specific controls) initiates
and automates other processes as a result of the request from a customer.
This could, for instance, be a MRP II system in a factory which can feed on information
from EDI and build production schedules from incoming information. The schedule
could alter as more information was received and could generate EDI requests for
components necessary to make the product. Last-minute changes could become last
second changes with EDI of this sort. In this sophisticated aspect of EDI the process can
truly said to be customer-driven as bottle-necks in information flow are reduced.
(3) Interactive EDI: One of the most exciting developments of EDI is that of interactive
EDI conversation (IEDI). Messages take the form of a whole series of pairs of
conversational messages, which allow a person with an EDI requesting system to
“interrogate” a host system for information in real-time. Unlike the batch EDI and event-
driven processes, IEDI works solely on a point-to-point basis with no store-and-forward
method such as electronic mailboxes offered by the VANs. The use of IEDI has
advantages over the medium from which it has usually evolved – the telephone. The
initial message may be composed off-line before the conversation starts. There is no
relaying of information to a third party at the host end. The reply is instant and can be
manipulated/stored/displayed in any way the requesting system wants.
The conversation continues until the request is satisfied. Another aspect of IEDI is that
the requesting system usually has a person controlling the information conversation. The
advantages are numerous for both parties. The host system can reduce telephone queries
and rekeying of information. The requesting system can make hundreds of queries and
orders; even ad-hoc cancellations are possible.
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It is not difficult to see the business advantages of EDI information dealing. Setting
reductions in line costs aside, what used to take minutes can now be done in seconds. By
using IEDI and application software to make use of it, an organization can change from
an information processor to a knowledge processor. IEDI enables instantaneous choices,
“shopping” for prices, aggressive tendering, a purchase order with last-minute changes,
goods with fluctuating prices, a holiday booking with fluctuating inventory, volatile share
dealing, etc.
IEDI is attractive to a company which relies on gathering tasks. For instance, within the
travel industry, computerized reservation systems (CRS) rely on IEDI to reserve space in
hotels, aircraft and ships, as well as purchasing other components such as insurance and
car hire.
Where is EDI Best Used?
EDI is best used in the following situations:
• Large volume transmitters - EDI is conducive to large volumes of data
• Self-programmers - e.g., businesses and software vendors who have committed
the resources to implement EDI
• Third party bulk filers - e.g., payroll service providers are highly automated and
are the largest single sources of tax filings.
• Batch applications - where real-time response is not expected
• Industry segments with a large investment in EDI - e.g., Motor Fuel taxpayers
• Application-to-application - e.g., from a business’ existing tax compliance
application.
Prior to the recent emergence of new electronic technologies to transact business, EDI
was the best way for a business to reduce its paper processing cost, as well as the costs,
errors and time delays associated with data entry. As large corporations and their smaller
customers and suppliers implemented EDI in the mid-1980’s and 1990’s, it seemed that
the use of EDI for tax filing was a natural extension of a major business trend.
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With the rapid increase in the use of other electronic commerce technologies for business
transactions, such as Interactive Voice Response (IVR) and particularly the Internet, EDI
is now seen as only one out of a number of valid alternatives. The emergence of these
electronic technologies has forced tax authorities to face the reality of providing and
supporting multiple electronic filing options to its tax filing population. In addition,
multiple electronic filing options are now necessary in order to reach the level of
electronic activity that tax authorities need to realize the cost savings and other
advantages associated with electronic filing.
Because specialized computer software is needed to translate business information into
EDI format before transmission, small to mid-size businesses are intimidated by the
investment of time, effort and costs that seem necessary to implement and maintain EDI
for tax filings. Electronic filing software developed by a software vendor or tax authority
can make EDI a viable option for small to mid-size businesses. With these electronic
filing options, businesses do not need to invest their own time, effort and costs in
implementing EDI, because the EDI technology is embedded in the tax filing software.
They do not need to know anything about the technical specifications involved in
creating an EDI-formatted data file. This group of filers, however, would also lend itself
to Internet and IVR filing applications.
Where Can One Get Help in Implementing EDI?
A convention is a set of rules created by an industry-related organization. Conventions
supplement EDI standards by providing specific implementation parameters in specific
settings (e.g., conventions related specifically to sales tax or employer withholding tax).
Conventions are enforced through peer pressure and mutual agreement on the business
advantages of consensus. Conventions are important to tax filers, tax authorities, software
vendors and value added networks. Conventions decrease taxpayer burden, exception
handling, and difficulty to software vendors and value added networks. All parties are
economically dependent on consistency of implementation across multiple taxing
authorities. Because the EDI standards themselves are so generic, the lack of consensus
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conventions can make the implementation of EDI across multiple taxing authorities as
diverse as proprietary data formats.
Links with other related systems
EDI is considered a solid foundation for implementing just-in-time (JIT) systems and
explains partly why the automotive industry is one of its leading sponsors. Cooperating
more closely with your suppliers is an essential part of both philosophies.
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8. Electronic Data Interchange – The Indian Scenario
The Government Initiative
The Ministry of Commerce is the nodal agency for the implementation of Electronic data
Interchange (EDI) in India. India joined the EDI movement in early 1992, when it
obtained the observer status in the Asia EDIFACT Board (ASEB). India became a
member of ASEB in August 1992. In order to promote the use of EDI in India the
Ministry of Commerce has taken initiatives to develop EDI infrastructure. Below are
some of the initiatives taken by the government to facilitate the development of EDI in
India.
EDI Council of India
Chairman : Secretary
Ministry of Commerce
Secretariat : EDI Division
Ministry of Commerce
Udyog Bhawan,
New Delhi - 1100011
EDI council is the apex body consisting of all the key government departments and
representatives of trade and industry. It is responsible for laying down the policy frame
work and direction for -
• Promotion and propagation of EDI and Electronic Commerce.
• Creating awareness and education among the potential EDI functionaries and
users
• Streamlining procedures and practices
• Attending to legal issues
• Human resource development
• Any other issue connected with EDI and Electronic Commerce.
EDIFACT Committee
Chairman : Additional Secretary
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Ministry of Commerce
Secretariat : EDI Division
Ministry of Commerce
Udyog Bhawan,
New Delhi – 1100011
The India EDIFACT Committee (IEC) is responsible for formulating standards,
streamlining the procedures in line with UN/EDIFACT and maintain liaison with
UN/EDIFACT bodies.
To address all the information needed on different sectors and its interface with
UN/EDIFACT standards following Message Development Groups are working -
• Ports Message Development Group under Indian Ports Association (IPA)
• Airports Message Development Group under Airports Authority of India (AAI)
• Financial Message Development Group under Indian Banks Association (IBA)
• Customs Message Development Group under Central Board of Excise & Custom
(CBEC)
• Private Sector Message Development Group under Federation of Indian Export
Organisations (FIEO)
A Technical Support Group is also working under National Informatics Center (NIC)
which is responsible for helping users in EDI related software development and for
providing technical support.
Education and Awareness
Federation of Indian Export Organisations (FIEO) is organizing regular workshops and
seminars throughout in India. FIEO has identified large automotive, chemical, textile and
engineering concerns that had already implemented EDI. These organizations would
perform as model organization for the EDI implementation in their own sectors.
The All India Management Association (AIMA) of New Delhi is offering courses on
EDI, including a Masters program.
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An HRD group is also working to investigate the needs for EDI related human resource
development.
VAN Service Providers
The two major VAN operators in India providing EDI services are NIC and VSNL.
National Informatics Center (NIC) has set up a nationwide computer communication
network with over 600 nodes connecting the national capital, the state capitals and district
headquarters. NICNET provides high speed information highway nodes within the
country and connectivity to internet as well as to other foreign networks outside the
country.
Videsh Sanchar Nigam Ltd. (VSNL) has established the GEDIS TradeNET Network
service for EDI. It is connected to two international EDI VAN operators, GEIS and INS
UK.
EDI Implementation in Government's Regulatory Agencies
The Ministry of Commerce has selected government regulatory and facilitatory
organisations for coordinated EDI implementation. These organizations are Customs,
Directorate General of Foreign Trade (DGFT), Regional Licensing Authorities, Airports
Authority of India (AAI), Scheduled Banks, Airlines, Reserve Bank of India, Directorate
General of Commercial Intelligence & Statistics (DGCI&S), Chamber of Commerce,
Inspection Agencies, Export promotion organizations, Port Trusts, Container Corporation
of India Ltd. (CONCOR), Insurance Agencies.
The Corporate Scene
In the year 2000, As very few companies were ready to re-engineer their internal
processes and the infrastructure was non-existent, EDI didn't find a toehold in India.
However, its growing acceptance in the US and Europe presents considerable
opportunities for Indian systems integrators and firms offering software services.
In the B2B arena, simply put, B-to-B E-commerce is the smooth flow of information
between an enterprise and all its business partners. Last decade saw the complete
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automation of flow of data and information between different processes within a
company. This had enabled the ERP revolution. In the absence of high bandwidth and
availability of smart networks, it wasn't possible to seamlessly expand this information
flow to include business partners, that is, the suppliers and the distributors. Meanwhile,
VSATs (very small aperture terminals), cellular technology, ISDN, cable and other media
offered rapid connectivity between computers across geographical locations. Thus, it
became possible to get rid of the human intervention in the voluminous data and
information that needs to flow between business partners to make any big enterprise cost-
competitive in the marketplace. This gave birth to the concept of Electronic Data
Interchange (EDI).
EDI is yet in its infancy. As we said only seven per cent of businesses in the US use EDI
effectively. This translates itself into a big business opportunity for the Indian infotech
companies. While a number of EDI tools are now available, there is still a requirement of
major systems integration.
This is where India can emerge as a major player. A large number of companies in
America are in the process of integrating with their business partners over a value-added
network (VAN) using EDI tools. This means integrating a number of legacy systems
spread across the entire continent.
Also, data is embedded in proprietary application and system software. All this will
require good understanding of not only EDI tools but also the different systems involved.
Given varied software talent available in the country, India is uniquely poised to
effectively tap this opportunity. EDI implementations essentially need extraction of data
from different databases, translating this data into a standard EDI format, transmitting
this transformed data over a network to a specific destination, extracting the data from the
standard format at the destination and loading this data on to databases at the receiving
end. This implementation cycle leads to requirements of EDI tools.
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Also, consider the following facts:
• Amazon.com, the pioneer of business-to-consumer (B-to-C) commerce, is yet to
break-even after more than three years of operation.
• The penetration of PCs and the Net in India is still so minuscule that it will take
some time for B-to-C commerce to become viable
• Stickiness of Web sites is so low that if a visitor stays at a site for more than seven
seconds, it is considered to be good.
• To attract customers to your site you need to invest heavily in physical
advertisement. Look at the big billboards of Rediff.com, Jaldi.com and others
dotting the roadsides in all major metros of the country.
Do not go by the sale of IndiaWorld.co.in to Satyam. Such transactions are investments
made by major players in line with their strategic moves. A small company will need to
tread a very difficult path and will have to work hard for years before it can start earning
handsomely from the Net. There are about 8 lakh Internet connections in the country
today as against an installed cable base of 30 million users. The Internet penetration is far
too minuscule for B-to-C E-commerce to become a viable proposition here. One is so
busy musing about the B-to-C commerce activities in India that the business-to-business
(B-to-B) E-commerce revolution that is taking place in America and Europe is going
unnoticed in this part of the world. It is believed that just seven per cent of the B-to-B
commerce in the USA has been tapped as yet. Nearly $40 trillion worth of business is
waiting to be tapped by Indian IT companies.
Opportunities for Indian Companies
It is not that India was untouched by the advent of EDI. In fact, a few years ago before E-
commerce became the buzzword, corporate houses deliberated about adopting EDI.
While National Informatics Centre (NIC) was given the charge of boosting EDI within
the country, Videsh Sanchar Nigam Ltd. (VSNL) was given the responsibility for such
transactions worldwide. A few port authorites like the Kochi Port Trust started a pilot
project in EDI, while Satyam Computer Services planned to integrate all automobile
companies on a single value-added network. These attempts were essentially made to
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exchange data pertaining to procurement, inventory and sales. However, these attempts
did not succeed in their endeavour and after initial trials, most were put on the
backburner.
There were many reasons for these failures. The necessary communication infrastructure
did not exist. The participating companies refused to adhere to the EDI standards, while
internal processes were not re-engineered to cater to the EDI norms. All these resulted in
the failure of initial EDI attempts in the country.
However, given the fact that the market for all commodities is increasingly becoming
global and MNCs are arriving in India by hordes, it is imperative for Indian companies to
start using EDI tools. In the absence of value-added network, use will have to be made of
the Internet.
Integration of businesses over VAN using EDI software is making waves in the USA and
Europe. This should present itself as a big business opportunity to for the Indian IT
companies. These companies must upgrade from systems development environment to
systems integration environment. They should also invest in understanding the entire B-
to-B commerce systems integration life cycle. If tapped correctly, EDI can herald India
into the super league of the world IT market.
Indian Banks too have been very successful in adapting EC and EDI Technologies to
provide customers with real time account status, transfer of funds between current and
checking accounts, stop payment facilities. ICICI Bank, Global TRUST BANK and UTI-
Bank also have put their electronic banking over the internet facilities in place for the up-
coming e-commerce market. Speed post also plans to clone the federal express story with
online package status at any moment in time. The future does look very bright for e-
commerce in India with even the stock exchanges coming online providing a online stock
portfolio and status with a fifteen minute delay in prices. The day cannot be far when
with RBI regulations we will able to see stock transfer and sale over the Net with
specialized services like schwab and e-trade. Though with security and encryption being
proven technologies for transfer of funds over the Internet, the Indian Government still
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has problems with 'Digital signatures' and verification processes over the Internet. This
combined with RBI norms and regulations has proved to a major handle for e-commerce
even though VSNL India's monopolistic ISP does want to jump on to the electronic
transaction bandwagon with the advent of private ISP's and India new and positive
attitude towards IT and the prime ministers new 'IT policy " the future is very positive in
India for doing commerce with a-e
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9. Conclusion
With the explosion in the Internet, we are getting a vague idea of what the world will
look like when the Information Superhighway is a reality. The role of EDI in this world is
crucial. Electronic Commerce will only be significant for business-to-business when EDI
is an integral part of it. EDI is really the backbone of Electronic Commerce, though this
appears to be not yet clear to the Internet world. EDI organizations have the mission to
make this clear at all levels in our society. For companies, it means they must grab the
opportunity now to become familiar with EDI, in order to be ready for the arrival of the
Information Superhighway. The investments that have already been made in setting up
EDI relationships will pay off in the future. The introduction of ideas such as CAB-EDI
will enrich efforts already made in EDI with an untold number of attractive applications
which will lead sooner to an enormous increase in the importance of EDI than to its
demise.
Competing technologies to EDI exists in the form of RosettaNet, ebXML, etc. RosettaNet
standard is widely accepted in electronics industry by leaders like Intel, Dell, National
Semiconductors. ebXML on the other hand is trying to solve too many challenges. It is a
complex set of standards. There hasn’t been any real implementation of ebXML. In terms
of vendor backing, it is only backed by standard committee like Oasis. It is not backed by
any big vendors (IBM/Oracle/SAP).
In the background is the development of emerging web services technologies like Radio
Frequency Identifier (RFID) and Electronic Product Code Information System (EPCIS)
standards emerging around Web Services for product tracking in the supply chain space,
Business Process Execution Language (BPEL) for process execution, Enterprise Service
Architecture (ESA) for hooking up SAP into BPEL’s process execution and frameworks
like Web Services Invocation Framework (WSIF).
Hence, in conclusion, EDI will continue as the backbone of BI. All new developments
will revolve around Web Services. EPCIS complements static/push/batch EDI with
dynamic capabilities and reduces errors. Along with these developments the below would
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also aid in keeping EDI has one of the preferred business to business communication
channels in the future:
• Locked up investment in EDI
• Backing by big guys:
� WalMart, Novartis and Addison Wesley
� Big guys drive partners to adopt it as well
• Support from powerful vendors:
� GE, Sterling Commerce
• Critical mass of usage resulting in Return on Investment (ROI) for the big guys.
• AS2 (EDI over HTTP) has reduced cost by eliminating VAN. Also, Walmart has
driven the adoption of AS2.
• No real solution is in sight given the wide variations in processes, vocabularies
and practices around the world.
Institute of Management, Nirma University, Ahmedabad
10. References
Hodgson Robert (1995), Cutting the paper chain with EDI, Industrial Management & Data
Systems,: MCB University Press Limited
Angeles Rebecca, Nath Ravi (2007), Business-to-business e-procurement: success
factors and challenges to implementation, Supply Chain Management: An International Journal:
Emerald Group Publishing Limited
Leon A. Kappelman,Thomas C. Richards, Ray J. Tsai (1996), A manager’s guide to electronic
data interchange: doing business on the information superhighway, Logistics Information
Management: MCB University Press
Hseih Chang-Tseh, Lin Binshan (2004), Impact of standardization on EDI in B2B development,
Industrial Management & Data Systems: Emerald Group Publishing Limited
Cox Benita, Ghoneim Sherine,” Electronic Data Interchange (EDI) and Trade
Facilitation: Best practice and Lessons from experience”, The management school,
Imperial college for science, Technology and Medicine, www. worldbank.org
Robson Linda,” Changing Business Practice”, Journal: Logistics Information system,
year-1994, Volume:7, Issue:4, Page: 35-40
Banerjee Snehmay, Damodar Y. Golhar,” Security issues in EDI environment”, Journal:
International journal of operations & production management, year:1994, Volume:14,
Issue:4
Whiteley Dave,” EDI maturity and the competitive edge”, Journal: Logistics information
management, Year-1996, volume :9, Issue:4
Sacrich Alfredo,”An update on EDI”, Journal: Logistics information system, year:1991,
volume:4, issue:1
47
Databases
EBESCO
EMERALD XTRA
Websites
http://www.iaiabc.org
http://www.informationweek.com/797/commerce.htm
http://archives.nic.in/edifact/
http://www.india-today.com/ctoday/20000416/network.html
http://www.matrixnetonline.com/ecommerce.html
http://www.worldbank.org/mdf/mdf2/papers/benefit/trade/cox.pdf
http://www.123edi.com/edi-101.asp
http://research.pcpro.co.uk/rlist/term/EDI.html
http://researchlibrary.theserverside.net/rlist/term/EDI.html