- Electronic Data Interchange
EDI is used in some form by hundreds of
thousands of companies around the world to exchange business information with
EDI related topics on this
EDI is a term used to describe computer
to computer exchange of information - usually via private networks. Business
documents such as Purchase Orders and Invoices are sent and received in a
standard electronic format. This lets other computers understand and use the
content included in EDI documents.
XML is also about computers exchanging
information - but assumes that the exchanges are taking place via the Internet.
The benefits of using EDI
EDI benefits include:
Companies using EDI enjoy a competitive
advantage over non-EDI companies because of:
- Fast, accurate, and dependable
- Shorter order-to-payment cycles
- Increased opportunities through
quicker and wider spread of information related to buying/selling
- Better record-keeping,
fewer data errors, reduced information processing time, standardised
interpretation of data, and reduced unproductive time.
- Reduced inventory due to faster and more accurate
- Reduced communication costs due to -
less hard copy paper distribution time, no "lost" documents, and
reduced postage and handling costs.
- Reduced order time because orders
can be processed much faster.
- Improved customer satisfaction
because of faster response times and a reduced reliance on paper.
- Reduced billing cycles because orders are
delivered more quickly.
- More accurate information about
business processes to help identify efficiency improvement priorities.
EDI - Step by Step
The EDI process works as follows:
1 - A buyer completes an electronic
Purchase Order form on their computer. When the buyer completes all the information, it is saved in
a standard format that has been agreed to by the Buyer and the Seller.
2 - The
Buyer sends the Purchase Order to the Seller. The
Purchase Order is sent to the Sellers' mailbox. EDI documents often travel via
several networks, including the Internet, before they reach their destination mailbox.
3 - The
Purchase Order is held in the Sellers' mailbox until the mailbox receives a command from the
Sellers' computer. The Sellers' receive command downloads
all documents waiting in the mailbox.
4 - Once the
Purchase Order is received by the Seller, the Sellers' vendor's computer generates an
electronic receipt to let the Buyer know that their Purchase Order was received.
The receipt is generated
automatically. The next time the Sender sends/receives their mail, the receipt
is sent via the network to the Buyer.
5 - The Confirmation Receipt is
stored in the Buyers mailbox waiting for the next time the Buyer
sends/receives their mail. The Buyer's receive command retrieves
all waiting mail messages from their mailbox - including the Purchase Order
The overall process is simple, but the
simplicity depends on Buyers and Sellers using a common standard for different
types of documents.
Both parties need to agree on the types of documents that
they will send to/from each other. They also need to agree on naming conventions
for data fields within each type of document. Also, while some types of data are
useful to both parties, there are likely to be snippets of information that do
not overlap. What to do about or with these data fragments needs to be resolved
when they are sent/received also needs resolution - before error-free EDI
transactions can occur. XML technology is designed to minimise the problems
while still providing the same ease of use as a mature EDI system.
EDI and XML - how do they
is a well-established technology for automating order processing
and document interchange between computer applications.
XML is an emerging standard designed to simplify Web-based
e-commerce transactions between computer applications.
enables highly secure document exchanges.
XML documents typically need to be encrypted to maintain
documents are typically in a compressed, machine-only readable
XML is an open human-readable, text format.
documents are typically sent via private and relatively
expensive value-added networks (VANs).
XML documents are typically sent via the Internet - i.e.
a relatively low-cost public network.
|EDI traditionally requires customised
mapping of each new trading partners document format.
XML is designed to require one customised
mapping per industry grouping, so most companies will be able to
work to one format and use XML.
typically requires dedicated servers that cost from US$10,000
XML requires a reliable PC with an Internet connection.
|EDI can involve high on-going transaction
based costs keeping
up the connection to the EDI network and keeping the servers up
XML in Internet-based has low ongoing flat-rate costs using
existing Internet connections and relatively low-cost Web
|EDI-based transactions account for the bulk
of value of goods and services exchanged electronically.
XML processes relatively low transaction
|EDI is estimated to be limited to 300,000
companies worldwide and about 20% of their suppliers because of
operational costs and complexity.
XML appears to have no upper limit in terms
of numbers of users.
|EDI was traditionally built from the ground
up in semi-isolation without being able to share resources with
XML is being developed in a world of shared
software development populated by many low-cost tools and open
See Also: XML
- What's involved?
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