EDI provides a technical basis for automated commercial "conversations" between two entities, either internal or external.

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2 Electronic data interchange (EDI) is an electronic communication method that provides standards for exchanging data via any electronic means. By adhering to the same standard, two different companies or organizations, even in two different countries, can electronically exchange documents (such as purchase orders, invoices, shipping notices, and many others) without human intervention. In 1996, the National Institute of Standards and Technology defined electronic data interchange as "the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. EDI implies a sequence of messages between two parties, either of whom may serve as originator or recipient. The formatted data representing the documents may be transmitted from originator to recipient via telecommunications or physically transported on electronic storage media." Its development was inspired by military logistics for the 1948 Berlin Airlift. Among the first integrated systems using EDI were Freight Control Systems in the seventies and eighties. 2

3 EDI provides a technical basis for automated commercial "conversations" between two entities, either internal or external. The term EDI encompasses the entire electronic data interchange process, including the transmission, message flow, document format, and software used to interpret the documents. However, what EDI standards describe are the rigorous format of electronic documents, as they were designed by the implementers, initially in the Automotive industry, to be independent of communication and software technologies. EDI can be transmitted using any methodology agreed to by the sender and recipient. The data exchanged when using EDI must be in a format compatible with all involved computers and must have a route assigned between them. The communication must be without any human intervention. 3

4 EDI documents generally contain the same information that would normally be found in a paper document used for the same organizational function. For example an EDI 940 ship-from-warehouse order is used by a manufacturer to tell a warehouse to ship a product to a retailer. You have a set of messages between sellers and buyers, such as Request for Quotation (RFQ), bid in response to RFQ, purchase order, purchase order acknowledgement, shipping notice, receiving advice, invoice, and payment advice. However, EDI is not confined to just business data related to trade but encompasses all fields such as medicine (e.g., patient records and laboratory results), transport (e.g., container and modal information), engineering and construction, etc. In some cases, EDI will be used to create a new business information flow (that was not a paper flow before). 4

5 The standards prescribe formats, character sets and data elements used in the exchange of business documents and forms. The EDI standard used depends on the location and the kind of company. Some major sets of EDI standards are: The United Nations-recommended UN/EDIFACT is the only international standard and is predominant outside of North America. The US standard ANSI ASC X12 is predominant in North America. The TRADACOMS standard developed by the ANA (Article Number Association now known as GS1 UK) is predominant in the UK retail industry. The ODETTE standard used within the European automotive industry The VDA standard used within the European automotive industry mainly in Germany The HL7 a semantic interoperability standard used for healthcare administrative data. 5

6 EDI is independent of the technology used to transmit the electronic documents. They can be transmitted over any electronic network using any transmission protocol agreed by sender and receiver. This includes transmission technologies as modems for point to point connections, local area networks, wide area networks, value added networks or Virtual Private Networks over the Internet that we will explain later. A lot of different protocols can be used to transmit EDI messages, and some protocols have been specially created to adapt EDI documents to existing technologies. For example, we can find the AS protocol family to transmit EDI messages using (with AS1), HTTPS (with AS2), FTP (with AS3) or Web services (with AS4). Or the protocols to transmit Odette messages over a file transport protocol (OFTP and OFTP2) It is important to differentiate between EDI documents and the methods for transmitting them. 6

7 Traditionally companies have elected to implement mission-critical applications like EDI utilizing in-house resources. Typically, the approach is to license a core do-ityourself solution and to invest additional resources into customizing and integrating that solution into a new or existing licensed ERP environment. Nowadays we can find EDI solution providers that include integration with existing ERPs in their packages, giving the company the possibility to outsource this task and concentrate on its core competencies. 7

8 To achieve the true advantage of implementing EDI in a company it is very important that the solution adopted is completely integrated with the company s ERP, so the whole process is automated. Most EDI advantages are lost if we have an EDI system to transmit documents without human intervention but at some point we have to manually incorporate the documents received into our ERP system. 8

9 We are going to see different types of networks that can be used to configure an EDI solution. EDI can be used inside a company using its private Intranet, that is a network based on the same protocols as Internet but created for internal use. 9

10 EDI can also be implemented using an extranet, that is an intranet that has granted access to some outside individuals, such as customers or suppliers. This extranet can be created establishing one to one dedicated communication links with every participant or connecting both parties to an existing network and establishing a point to point link between them. This has been called Direct EDI 10

11 If we want to connect an EDI sender and receiver to a public unsecured network, the most common solution will be by using a Virtual Private Network or VPN. A Virtual Private Network is a network that uses the internet encrypting the data beforehand, so only an authorized receiver will be able to access the information. 11

12 We can also deploy an EDI solution using the services of Value-Added Network (VAN) providers, that, for a periodic fee, provide data security and transaction services as authentication, message notification, synchronization, non-repudiation (that is the ability to confirm that a document was actually sent by the sender indicated), audit trail or data stamping. They also provide message formatting and translation and other value added services. The connection to these networks in the past required establishing a dedicated leased communication link with a network node, but today some of these providers also offer their services using Internet, which simplifies the connection. 12

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