Office Supply

This piece is meant to give a primer on EDI and the VAN (Value added network or Public Interconnect) to the novice business analyst or interested party. It is meant only to provide a high-level view of b2b transactions. I have written it with as many layman's terms as possible so it is suitable for those who are perhaps not very tech-savvy, or do not require an in depth look at B2B transactions involving EDI

Traditional B2B (Business to Business) Information Exchange

As companies continually strive to improve and streamline business processes, the use of handwritten forms becomes less common place. Many pre-defined or pre-printed forms are recreated as desktop or web-based computer applications. However, the procedures for the actual processing of these documents remain the same. Take for example a Retail Merchant, most Retail establishments maintain some form of a Purchasing System. When a purchase order is created it is then printed and mailed, printed and faxed or simply called in via the telephone. Once the supplier has received the purchase order the supplier then enters the information into their ERP (Enterprise Resource Planning) System. A simple purchase order can contain many pieces of data, such as: Customer name and address, order date, items ordered, quantity of items, required delivery date, price per item, payment method and so on. Once the items have been prepared an accompanying invoice is sent along with the items to the Retailer. As we see from this simple example, the cycle time for ordering and receiving an item from a supplier can take up to several days.

Figure 1 shows the traditional method of exchanging information between a Retail merchant and Supplier. This transactional model will undoubtedly result in one or more of the following problems:

• Longer Processing Times -

  The physical delivery of documents between the trading partners causes an increase of processing time. In addition the document?s data is entered by hand by the Retailer, then again by the Supplier. (In manufacturing processes this data may be reentered an even greater number of times).

• Unacceptable Accuracy -

  Since data must be handled repeatedly, the chance of error is greatly increased.

• High Labor Cost ?

  The traditional flow of information requires data to be entered manually at each step of the processing cycle, creating a labor intensive process.

• Process Uncertainty ?

  Without implementing expensive methods it is difficult to confirm the intact and reliable delivery of mail and fax documents. It is not uncommon for a trading partner to send information via one of these methods only to find out at a later date that the information was never received by the supplier.

The Electronic Data Interchange Method The implementation of EDI processing can eliminate or significantly reduce the problems associated with the traditional method of information exchange.

Figure 2 shows the same Retail Merchant and supplier after the implementation of EDI.

As it?s name states, the EDI process is electronic. Therefore transactions are delivered in near real-time. With use of proper checksums accuracy is guaranteed. Labor time is dramatically reduced and an acceptable amount of certainty is brought to the entire process. Greatly improving productivity, and greatly reducing costs.

The Value Added Network

Although implementing EDI can greatly reduce the transaction process, it still may not be its greatest strength. In addition to being a method of data processing, EDI is also a standard. This standardization, along with the use of Value Added Networks or Public Interconnects (Referred to as VANs henceforth) such as EC/EDI LTD. allows a business entity to implement EDI with virtually an unlimited number of Trading Partners.

This demonstrates how a VAN allows you to send data to any trading partner through a single connection. Because of its status as a Public Interconnect a VAN can connect and maintain connections to all other Public Interconnects effectively shielding the Business Entity from numerous, complex connections. This provides a single path for the Business Entity to send and receive all data, streamlining Business Processes and saving valuable resources.

The EDI Standard

In the traditional data exchange example above, several factors were taken for granted. For instance, we assumed that the purchase order sent to the Supplier met that supplier?s requirements for an acceptable Purchase Order. Many Suppliers require different pieces of information on a specific document. Also, using the example of a Retail Merchant, the Merchant may have literally hundreds of Trading Partners not just a single supplier. Furthermore, we used only a Purchase Order in our example. The Purchase Order is of course only a single document in the long list of documents exchanged by Business Partners. In reality almost all Businesses must communicate with more then one entity or Trading Partner. It would be extraordinarily expensive to implement, maintain and manage separate dedicated connections and standards for each Trading Partner. EDI makes this possible through it?s standardization of business transactions. The American National Standards Institute (ANSI) developed a subcommittee known as the Accredited Standards Committee (ASC) for the purpose of developing a uniform standard of electronic communication.

This subcommittee established the ANSI ASC X12 Standard, referred to simply as X12. This standard created an entire set of Electronic Documents. The standard also defined the content of these electronic documents, established how the content of each document should be ordered and structured, and provided codes and methods for document destination routing and identification. This set of Documents is referred to as the EDI Transaction Sets, providing EDI users with a full spectrum of pre-defined Documents with the sole purpose of facilitating Electronic Commerce. Each of the Transaction Sets has been given a numeric Identifier. The Purchase Order in the example above is often identified as an 850. While too numerous to mention in their entirety, (there are hundreds of transactions.