Electronic Data Interchange

EDI stands for Electronic Data Interchange. EDI has been developed by the United Nations/ECE Working Party in the 60s as a standard to simplify and standardize external trade documents.1) It became more important with the internet boom in the mid- and late-nineties. However, EDI is not depending on any special technologies.2) The three essential elements of EDI are

  • an electronic transmission medium (e.g. a peer-to-peer network or the internet)
  • an agreed standard for structuring and formatting messages
  • a fast delivery of electronic documents from sender to receiver.

EDI is a concept to transform specific content of e.g. invoices, delivery notes, purchase ordes and other trade documents into standardized content and back into specific content. It is regularly used to interchange data between two or more information systems without any human intervention.3) Based on the concept of EDI EDIFACT is the only international and interdisciplinary standard.4) Different Workgroups are creating EDIFACT-subsets for use in different branches.

Example

The concept of EDI is comparable to the concept of Esperanto (the international language). Two speakers from different countries (with different languages) translate their native language into the standardized Esperanto language. Both parties are able to retranslate the Esperanto into their native language without knowledge of the foreign language. EDI does the same. Regardless of the native information system of the one company (e.g. SAP) and the information system of the partner (e.g. MS Dynamics) it is possible to interchange data between these systems by translating the native code of SAP into EDI-based code and then into native code of MS Dynamics.

Advantages

The main goal of EDI is to eliminate paper based trade documents and to create a standard for interchanging these documents in a digital way. According to that main goal a list of various advantages could be made:

  • reducing overhead and transaction costs (e.g. by saving unnecessary re-capture of data)
  • optimization of process quality (e.g. by reducing interfaces and media disruptions)
  • optimization of process time (e.g. by changing the transmission from the postal service to electronic data interchange)
  • higher customer satisfaction and loyalty (e.g. by faster reaction on requests)
  • improvement of supplier partnership (e.g. by faster payment)
  • “comparative competition advantage” by a better service level5)(as a result of the previous bullet points)

Disadvantages of EDI/ Barriers

By all advantages of EDI there are some barriers of implementation either. The implementation of the infrastructure will cost a lot of time, money and man power (e.g. for training and integration). EDI does not make sense for only one partnership. It is necessary to have some more customers and suppliers using the EDIFACT standard. Another possible disadvantage is the result of one of the advantages. In case of sending an invoice on time with the delivery of goods, via EDI the invoice is faster than the goods on their “analog” transportation routes. That will increase the overhead e.g. in case of reclamation.

Conclusion

EDI is a concept to electronically interchange of trade documents. EDI can save a lot of money if an effective number of partners is identified. If this number is too small EDI can although be inefficient. The investment will be “money thrown down the drain”.

1) “Text D100.” United Nations Economic Commission for Europe. Web. 14 Jan. 2011. <http://www.unece.org/trade/untdid/texts/d100_d.htm>.
2) “Was Ist EDI?” EDI Leitfaden – Schritt-für-Schritt-Leitfaden Zum Elektronischen Datenaustausch (EDI). Web. 14 Jan. 2011. <http://www.edileitfaden.de/getting_started/gettingStarted_p1.html>.
3) “Roger Clarke's 'Introduction to EDI'” Roger Clarke's Home-Page. Web. 14 Jan. 2011. <http://www.rogerclarke.com/EC/EDIIntro.html>.
4) “Was Ist EDI?: DVGW.” DVGW - Deutscher Verein Des Gas- Und Wasserfaches: DVGW. Web. 14 Jan. 2011. <http://www.dvgw.de/gas/netze-und-anlagen/netzsteuerungdispatching/allgemeine-einleitung/was-ist-edi/>.
5) “Elektronischer Datenaustausch (EDI).” Prozeus - eBusiness-Praxis für den Mittelstand. Web. 11 Jan. 2011. <http://www.prozeus.de/eBusiness/themen/edi/index.htm>.
fundamentals/electronic_data_interchange.txt · Last modified: 2012/05/09 18:56 by Stefan Müller
 
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