Business thrives on information - the more efficiently information is communicated and accessed, the healthier the organization.

We are all aware of our presence in the "Information Age" and it has unquestionably had a significant effect on all our lives. It was once said "time is money." We now know that "information is money" and the efficient, effective flow of information within a company is critical to its success. From taxi drivers and policemen to the Wall Street market makers, we all need access to information to carry out our responsibilities

The exchange of information between companies was generally limited to traditional means such as mail, telex, facsimile transmissions, and the physical sending and receiving of magnetic tape.

Business Environment o Business only moves as fast as the documents that support its cycles o Redefining boundaries as companies acquire, merge and develop alliances o Attention to the demands of global trade o Streamlining to improve cash flow, customer service, and costs

Business Strategy o Very dynamic o Combining applications and communications o Incorporating various technologies

Definition: The process of electronically exchanging business documents in a standard format.

EDI formally started in the 1960s but is traceable back as far as the 1948 Berlin Airlift.

Sometimes the definition of EDI specifies "the application to application electronic exchange of business documents in a standard format." Ideally, applications communicating directly is the most efficient means of conducting electronic commerce, but today's definition does not insist that the process be automated. The essence of EDI is the standard format of the data.

With EDI, documents could be sent electronically, eliminating time delays inherent in the physical transmission of paper documents. But a FAX machine could also accomplish rapid transmission of documents between enterprises.

It is the common electronic format of those documents that provided the real benefit. With a common document language (EDI standards) applications could send and receive documents among numerous enterprises with less human intervention, resulting in higher throughput with fewer errors and associated costs.

The standard now appears to be the key to identifying EDI. It is a specific standard syntax that defines EDI rather than the function. These syntaxes are primarily defined by the American National Standards Institute (ANSI) X12 committee and the UN/EDIFACT Board. EDIFACT is an acronym for "EDI For Administration, Commerce, and Transport".

Those standards as well as industry subsets and related standards define business documents as "transaction sets" (ANSI X12) or "messages" (UN/EDIFACT). The records comprising those documents are "segments" that are composed of "elements" (and sometimes "sub-elements") that may vary in length.

There are then pairs of segments, identified as "envelopes", that enclose transactions, groups of transactions, and "interchanges" or sets of groups destined for a particular trading partner.

We will look at this structure in more detail later, but, for now, let it suffice to say that this structure (interchanges, groups, transactions (or messages), segments, and elements) is the characteristic that defines EDI.

EDI automates the exchange of standard business data, regardless of the type of computer, location of the company, or the original application format of the data.

EDI changes the way you do business. EDI streamlines cumbersome proprietary files and/or manual paper documents. EDI accommodates rapid response to customer demands. EDI can be implemented numerous different ways.

o The 1960s offered one standard and one method of doing EDI. o This millennium offers multiple standards and methods of doing EDI.

Some Common EDI X12 Transactions

Transactions that could be used to implement previous example: o 840 - Request for Quotation o 843 - Response to Request for Quotation

o 850 - Purchase Order o 855 - Purchase Order Acknowledgment o 856 - Ship Notice/Manifest o 810 - Invoice o 820 - Payment Order / Remittance Advice

Other common ANSI X12 transaction sets: o 811 - Consolidated Service Invoice/Statement o 813 - Electronic Filing of Tax Return Data o 832 - Price/Sales Catalog o 857 - Shipment and Billing Notice o 880 - Grocery Products Invoice o 997 - Function Acknowledgment

The transportation industry was one of the first to use EDI concepts.

Virtually all industries have adoped some form of EDI today. Examples of EDI documents include purchase orders, invoices, power of attorney, and price information. Many industries use specific EDI documents such as motor carrier rates, student records, tax returns, vehicle shipping orders. Companies want to achieve 100% electronic transaction volumes.

What Does EDI Involve?

Application o "Business documents"

Translator o "Standard format"

Communications Vehicle o "Electronic Exchange

EDI is the electronic exchange of business documents in a standard format

EDI is one of many Electronic Commerce technologies The overall goal of EDI is to improve business performance EDI may be implemented using many different methods The three primary components involved in EDI are:

o Application o Translator o Communication product

A standard is a usable, well defined, generic language format that enables organizations to communicate documents without human interpretation or intervention. The term standard is used broadly by those discussing EDI to sometimes refer to a message or transaction, at other times to refer to a particular version and release of a standard, but most appropriately to refer to the definition of control structures, syntax, and documents such as ANSI X12 or UN/EDIFACT

EDI standards organize documents as transactions or messages. The ANSI X12 standard applies the term "transactions" and the UN/EDIFACT standard uses the term "messages." In either case the reference is to one document. Each record in a standard transaction or message is a "segment." Each segment is identified with a two or three character identifier at the beginning of the segment. Individual data fields within each segment are called "elements." Some elements are defined as "composite elements" consistent of "component elements" or subelements