E-Commerce Unit-3: Electronic Data Interchange

(EDI)

NOTES ON:

E-COMMERCE

Er. Sanjay Kumar Sah

Email: [email protected]

UNIT-3:
ELECTRONIC DATA INTERCHANGE
(EDI)
3.1 Basic Concepts
3.2 Types of Data to be interchanged
3.3 EDI Vs E-mail
3.4 EDI Benefits
3.5 How EDI works
3.5 Applications of EDI
3.6 Security and privacy issues of EDI
3.7 EDI for E-Commerce 2

Er. Sanjay Kumar Sah 1

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

ELECTRONIC DATA INTERCHANGE

 Electronic Data Interchange (EDI) can be defined as the exchange of
information (or business documents) between computers in a
standardized format.
▪ documents such as purchase orders, invoices, shipping bills,
receiving advices and other standard business correspondence
etc.
▪ either in an organization internally between its various
departments or externally with suppliers, customers or any
subsidiaries.

 In EDI, paper documents are replaced with electronic documents

such as word documents, spreadsheets etc.

 EDI is the most commonly used B2B e-commerce technology today.

 The Electronic Fund Transfer (EFT) systems used by the financial

3
institutions are a prime example of the application of EDI in banking
and financial sector.

ELECTRONIC DATA INTERCHANGE

 Traditional models for exchanging business exchange is
outdated and time-consuming.

 EDI is the automated, computer-to-computer exchange of

standard electronic business documents between business
partners over a secure, standardized connection.

 By moving from a paper-based exchange of business document

to one that is electronic, businesses enjoy major benefits such
as:
▪ cost-effective – reduced cost,
▪ fast – increased processing speed,
▪ accurate system – reduced errors,
▪ reliable – system accuracy,
▪ paperless alternative – electronic document, 4

▪ improved relationships with business partners.

Er. Sanjay Kumar Sah 2

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

ELECTRONIC DATA INTERCHANGE

FOUR TERMS USED IN EDI

1. Computer to Computer:
 EDI replaces postal mail, fax and email.
 While email is also an electronic approach, the documents exchanged
via email must still be handled by people rather than computers.
 Having people involved slows down the processing of the documents
and also introduces errors.
 Instead, EDI documents can flow straight through to the appropriate
application on the receiver’s computer (e.g., Order Management
System) and processing can begin immediately.

2. Business Documents:
 These are any of the documents that are typically exchanged
between businesses.
 The most common documents exchanged via EDI are purchase
orders, invoices and advance ship notices.
 But there are many others such as bill of lading, customs documents,
6
inventory documents, shipping status documents and payment
documents.

Er. Sanjay Kumar Sah 3

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

FOUR TERMS USED IN EDI

3. Standard Format:
 Standards eliminate company-to-company variations, allowing each
business partner's computer system to speak a common language.
 Because EDI documents must be processed by computers rather
than humans, a standard format must be used so that the computer
will be able to read and understand the documents.
 Without standard format, a company specific format may not be
supported by another company.
 Popular standards include ANSI X12 in the U.S., UN/EDIFACT
globally and industry-specific standards such as HIPAA.

4. Business Partners:
 The exchange of EDI documents is typically between two different
companies, referred to as business partners or trading partners.
 For Example: Company A may buy goods from Company B.
Company A sends orders to Company B. Company A and Company B
7
are business partners.

TYPES OF DATA TO BE INTERCHANGED

 It is the computer-to-computer exchange of business
documents, such as purchase orders and invoices, in a
standard electronic format between business partners.

 Following are the few important types of documents to be

interchanged using EDI:
▪ Invoices

▪ Purchase orders

▪ Shipping Requests

▪ Acknowledgement

▪ Business Correspondence Letters

▪ Financial Information Letters

8

Er. Sanjay Kumar Sah 4

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

TRADITIONAL MANUAL PROCESS

 The buyer either receives a notification in their system to
place an order, or after querying the inventory, determines
they needs to place an order.

 The buyer enters data onto the screen of a purchasing system

to create the PO, prints and mails it or emails it to the vendor.

 The vendor receives the PO, either days later or via email
(along with a long list of other communications) and manually
enters it into the sales order system.

 The vendor prints an invoice and encloses it with the shipment

and/or sends it separately by mail or email.

 The buyer manually enters the invoice into the accounts 9

payable system.

TRADITIONAL MANUAL PROCESS

 A typical manual process looks like this, with lots of
paper and people involvement:

➢ In this example, a paper system can add a week of back-

and-forth shipping time to the process.

➢ Both email and paper are susceptible to manual data 10

entry errors, lengthening order time.

Er. Sanjay Kumar Sah 5

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

AUTOMATED EDI PROCESS

 The buyer's procurement system, which uses EDI, auto-
generates and sends an EDI-formatted PO when inventory
reaches a pre-specified level.

 In minutes the vendor's sales order system, using EDI

software, receives the EDI PO.

 The supplier's system automatically notifies their shipping

department to send goods.

 Once the goods are packed and ready to ship, the shipping
system generates an Advanced Ship Notices (ASN) to send to
the buyer's receiving department

 The vendor's ERP system then generates an EDI invoice to 11

transmit to the buyer's accounts payable system.

AUTOMATED EDI PROCESS

 The EDI process looks like this – no paper, no people involved:

 The entire EDI process can be completed in an hour.

 Automating EDI workflows can bring a variety of benefits,

such as saving time and resources by eliminating manual
12
tasks and reducing errors and rework.

Er. Sanjay Kumar Sah 6

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

EDI DOCUMENTS FORMAT

 An EDI document is comprised of three core pieces formatted
to follow a specific EDI standard:
1. Data Elements,
2. Segments and
3. Envelopes,

 EDI documents must adhere to strict formatting rules that

define exactly where and how each piece of data in the
document goes.
▪ So the EDI translator on the receiving computer can
instantly find all key data such as the buyer's company
name, PO number, items purchased and price.

 Then, the data will be fed into the supplier's order entry
system in the proper internal format without requiring any 13
manual entry.

1. DATA ELEMENT
 The data elements in an EDI transaction set are the
individual data items information in the document.

 For example: within many documents such as purchase

order and invoice, we will find data elements such as
item being purchased, quantity of items, price, city, state
and country etc.

 Each data element in a transaction set is defined in the

EDI Standard by the type of data it represents.

 For example, it would be important to distinguish

numeric data from text data or calendar dates. 14

Er. Sanjay Kumar Sah 7

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

2. SEGMENT
 A segment in an EDI transaction set is a group of like data
elements.
 In an EDI document, each section is described by a particular
segment.
 Each segment begins with a segment ID (e.g., ST, BEG, N1)
that describes the type of data elements which are separated
by a data element separator, in this case the ‘*’.

15
Fig. Paper Purchase Order Fig. EDI Document ANSI Standard

3. ENVELOPES
 Next, the transaction sets must be put into envelopes in
preparation for transmission to your partners.
 EDI document transmission uses a system of three envelopes
to house transaction sets: Message envelope, Group envelope
and Interchange envelope.
 An envelope is formed by a pair of segments that define the
beginning and end of the appropriate section.

16

Fig. Paper Purchase Order Fig. EDI Document EDIFACT Standard

Er. Sanjay Kumar Sah 8

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

EDI COMPONENTS
 An EDI system consists of all of the components necessary to
exchange EDI transactions with trading partners who are EDI
capable.

 The major components are:

1. EDI Transaction:
 It provides the ability to translate EDI data into a usable file format
that can be interfaced.

2. Software:
 It supports the development and maintenance of EDI maps.
 Maps are required to manipulate each transaction type and every
transaction type with every partner will be formatted differently.

3. Hardware:
 It is required to run EDI translation software.
 Hardware must be sufficiently powerful and reliable to support
17
exchange of EDI transactions.

EDI COMPONENTS
4. Trading Partners:
 These are business organizations that agree to exchange business
information, data and documents via EDI.
 Small, medium and large organizations that are involved in various
types of business activities are part of this group.

5. Communication Network:
 It is necessary to send and receive EDI transactions.

6. EDI Guides:
 These are provided by EDI trading partners to communicate how
each transaction type will be formatted.
 The EDI guides must be followed exactly in order to be EDI
compliant with a particular EDI partner.

7. EDI Standard:
 A set of rules, agreed upon, accepted, and voluntarily adhered to, by
18
which the data is structured into message formats for exchange of
business and operational information.

Er. Sanjay Kumar Sah 9

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

EDI VS. EMAIL

 EDI replaces manual B2B communications, such as postal mail, fax
and email.
▪ Documents flow directly from the sender's computer application
(e.g., a logistics system) to the receiver's computer application
(e.g., an order management system).

 While email is also an electronic approach, the documents exchanged

via email must still be handled by people rather than computers.
▪ Having people involved slows down the processing of the
documents and also introduces errors.

 Although email is faster than standard mail and eliminates paper, it

differs greatly from EDI because the data is in an unstructured
format.

 If we send purchase order from email, it might require to print out

the document or need to enter the data into another program
manually, such as inventory system or accounting system.
19
 No manual data entry is required in EDI since the received data is
automatically stored in the database.

EDI VS. EMAIL

EDI Email
Emails are message distributed by
EDI is the direct transfer of data from one electronic means from one computer to
computer system to another electronically. another by using some intermediate mail
server.
Email transmits data in unstructured
EDI transmits data in structured format,
format, location and format of data is not
location and format of data is fixed.
fixed.
No human intervention is required. Human intervention is required.

Receiver computer must always be online Receiver computer do not need to be online
at the time of data transmission. at the time of data transmission.

Normally used in business transactions. Normally used for messaging.

It generates the functional

acknowledgement whenever an EDI No any facility of acknowledgement.
message is received.
Speed synchronization is needed between Speed synchronization is not needed
sender and receiver. between sender and receiver. 20

Faster processing. Slower processing.

Er. Sanjay Kumar Sah 10

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

ADVANTAGES OF AN EDI SYSTEM

 Following are the advantages of having an EDI system:
1. Reduction in Data Entry Errors:
 Chances of errors are much less while using a computer for
data entry, hence improve quality.

2. Improved Data Speed and Accuracy:

 Digital documents can be processed much faster with high
accuracy.
 It reduces the processing time of the transfer documents.

3. Electronic Form of Data:

 It is quite easy to transfer or share the data, as it is present in
electronic format.

4. Reduction in Paperwork:
 As a lot of paper documents are replaced with electronic
21
documents, there is a huge reduction in paperwork.

ADVANTAGES OF AN EDI SYSTEM

5. Cost Effective:
 As time is saved and orders are processed very effectively, EDI
proves to be highly cost effective.
 Electronic exchange of information is much cheaper than traditional
paper documents.

6. Standard Means of Communication:

 EDI enforces standards on the content of data and its format which
leads to clearer communication.

7. Reliability:
 Electronic processing also reduces human errors, which can extend
the processing an order and benefit.

8. Automation:
 By automating the ordering process, EDI can greatly minimize the
22
manual human power required, saving a business time and money.

Er. Sanjay Kumar Sah 11

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

ADVANTAGES OF AN EDI SYSTEM

9. Receipt Verification:
 Receipt verification can easily be done with help of EDI
software.
 No human intervention is involved so there are minimal
chances of error or delay.

10. Data Validation:

 Data validation is automatically done.

11. Availability of Free Software:

 Free software are available depending upon the EDI format.
 For example: In TRADACOMS EDI format, Price Information
file and order files are available for free.

12. Building long-term Relationships:

 EDI helps in building long term relationships with trading 23
partners and hence helps in business growth.

DRAWBACKS OF AN EDI SYSTEM

 Following are the drawbacks of having an EDI system:
1. Expensive:
 Setup and maintenance of some of the formats of EDI is expensive.
 Requires expert EDI consultants or an IT professional to make it
work.

2. Initial Setup is Time Consuming:

 Initial cost to setup EDI is time consuming.

3. EDI Standard Changes:

 Standardizes programs and procedures.
 The business process depends on EDI standard format.
 If any of the standard format changes then the business process has
to be changed accordingly.

4. Need System Electronic Protection:

 An EDI enabled system needs electronic protection from viruses, 24
hacking, malware and other frauds.

Er. Sanjay Kumar Sah 12

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

DRAWBACKS OF AN EDI SYSTEM

5. Staff Training Cost:
 Lack of a common understanding and limited education.
 Staff needs training in order to run EDI enabled software which
needs an investment.

6. Proper Backup:
 Proper backup should be maintained as the whole data depends on
EDI.
 In case of any crash of EDI system, proper backup has to be
maintained and extra cost is required for

7. Limit Your Trading Partners:

 Some organization stops doing business which don’t use EDI.
 For instance, Wal-Mart prefers to do business only with those
organization which uses EDI.

8. Complex and Rate of Return: 25

 Complex to use and difficult to quantify return on investment.

WORKING OF EDI
 Today, EDI is being used in industries like banking, finance,
retail, automobiles etc. to share business documents within
and outside the organizations.

 Exchange EDI document has no involvement of any paper or

people.
▪ It is directly linked from the sender’s system to the
receiver’s system, thus making it faster and cost-effective.

 Following are the steps followed in an EDI System:

▪ A program generates a file that contains the processed
document.
▪ The document is converted into an agreed standard format.
▪ The file containing the document is sent electronically on the
network.
▪ The trading partner receives the file.
26
▪ An acknowledgement document is generated and sent to the
originating organization.

Er. Sanjay Kumar Sah 13

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

WORKING OF EDI

Direct, Point-to-Point Communications

 These are the steps required in EDI document transfer:27

STEPS IN EDI WORKING

1. Preparation of Electronic Documents:
 The first step in any sequence of EDI is the identification,
collection and organization of data by sender’s internal
application systems.
 The data can be gathered by direct data entry into the system
by people or from some of the existing system.
 For Example: Rather than printing out purchase orders, their
system builds an electronic file of purchase orders.

2. Translate to EDI Document:

 Translate the collected and organized electronic data file into
EDI standard format using appropriate segment and
elements.
 This can be done using EDI translator software.
 There is three important part of each EDI document i.e., 28
Segments, Data Elements, and Envelopes.

Er. Sanjay Kumar Sah 14

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

STEPS IN EDI WORKING

3. Connect and Transfer of EDI Document:
 Sender’s computer automatically makes connection and
transmits all the EDI format files that have been
prepared with vendor/client.
 This transmission can directly be done using the internet
or using some provider’s services.
 The transmitted file will reach the corresponding
destination of receiver’s computer.

4. Receiving End:
 Once the EDI formatted document is received at the
receiver’s end, it is again converted back to a data file
using EDI standard format, appropriate segment, and
element. 29
 This process is done using the EDI translator or services.

APPLICATIONS OF EDI
 No definition of EDI is complete without real-world applicability.
 EDI plays vital role to improve business and hence is widely
applicable.
 The major applications of EDI in different sectors are as follows:

30

Er. Sanjay Kumar Sah 15

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

1. INTERNATIONAL TRADE
 In recent years, significant progress has been made to liberalized (i.e.,
more open and dynamic) the trade policies.

 The General Agreement on Tariffs and Trades (GATT), North American

Free Trade Agreement (NAFTA) between US, Canada and Mexico,
creation of European Union (EU), South Asian Regional Countries
(SARC) etc. are results in such efforts.

 In this context, trade efficiency which allows faster, simpler, broader

and less costly business transaction is a necessity.

 Trade efficiency can be achieved only by using EDI as a primary global

transactions medium.

 EDI benefits for international trade include:

▪ Reduced transaction expenditure
▪ Quicker movement of goods
▪ Improve customer service
31
▪ Faster custom clearance and reduces opportunities for corruption

2. FINANCIAL SECTOR
 Financial EDI is the electronic transfer of payments and remittance
information in a standardized, machine-readable format.

 It facilitates the flow of payment between the bank accounts trading

partners without requiring any human intervention.

 Financial EDI allows businesses to replace the labor-intensive

activities associated with issuing, mailing and collecting financial
information with automated initiation, transmission and processing
of payment instructions.

 A payee’s bank account is electronically credited and the payer’s

account is electronically debited on the scheduled payment,

 Thus, traditionally wholesale or B2B payment is accomplished using

three types of non-cash payment are cheques, electronic fund
transfer (EFT) and automated clearing house (ACH) for domestic 32
and international fund transfer.

Er. Sanjay Kumar Sah 16

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

3. HEALTH CARE AND INSURANCE

 EDI is widely used in healthcare for medical providers, patients, and
payers to process claims via electronic network.

 It can be sent from providers of health care services to payers either

directly or via intermediary billers.

 It can also be used to transmit health care claims and billing

payment information between payers and regulatory agencies to
monitor the payment of health care services.

 Thus, use of EDI in healthcare and insurance claims avoids complex

manual work between hospitals and insurance companies thereby
reducing time, cost and effort for claims settlement.

 EDI benefits for health and insurance include:

▪ Exchanging patient health information
▪ Health insurance processing
▪ Prescription information exchanges 33

4. MANUFACTURING/RETAIL PROCUREMENT
 The manufacturing and retail procurement are already heavy
users of EDI.

 In manufacturing, EDI is used to support concept of just-in-

time for production activity and manufacturing.
 Inventories are delivered just-in-time rather than keeping in
stock of production.

 EDI calculates how many materials are needed each day

based on production schedule and electronically transmit
orders and schedules to suppliers everyday or in some cases
every hour.

 In retailing, EDI is used to support Quick Response (QR).

 QR enables customers to get better service and availability of
wide range of services.
 At the same time, QR helps retailer and suppliers to survive 34
in
the competitive marketplace.

Er. Sanjay Kumar Sah 17

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

5. BUSINESS INFORMATION FOR

PRODUCTION DESIGN AND PROCUREMENT
 Business information is all information required by
enterprises for the efficient planning, execution and
monitoring of product manufacturing and marketing.

 EDI plays role in providing right information at the right

time to help company’s better design products.

 Business information helps companies to achieve

competitive intelligence.

 EDI assists companies to provide information from

electronic directories of equipment producers, value- 35

added producers and original information producers.

EDI TRENDS IN 2023

 EDI is here to stay, and its relevance will grow as we move into
2023.
 Globally, the EDI (electronic data interchange) market is projected
to reach $49.21 billion by 2027.
 The adoption of EDI integration technology has continued to rise as
more organizations realize the immense value it brings.

 For example, businesses are reaching for the ability to:

▪ Create cost-efficient and time-efficient integrations quickly
▪ Gain real-time visibility into orders, integrations, and partners
▪ Accelerate partner onboarding to increase business agility
▪ Enable non-specialist personals to manage multi-application
integration initiatives
▪ Enhance overall procedures and make the use of different
technologies more agile
36
 EDI continues to thrive in the B2B communication realm.

Er. Sanjay Kumar Sah 18

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

THE FUTURE OF EDI

 EDI is alive & well and will remain critical to business for many
years to come.
 However, the true future lies in using and evolving B2B integration
alongside disruptive technologies.

 In future supply chains, EDI will be the core document exchange

capability to support innovations such as the Internet of Things
(IoT), blockchain and artificial intelligence (AI).

 Future EDI will use:

▪ IoT sensors incorporated into a shipment’s packaging to improve
package condition visibility in near real time.
▪ Blockchain technology underpinning EDI information flows for
shipments to offer a shared version of the truth that can quickly
resolve and even avoid chargeback disputes.
▪ AI agent that monitors all relevant events and information
connected to a shipment and can identify a non-compliant event,
also determine if a reshipment is required, analyze the most
37
efficient source of replacement, initiate a new shipment and accept
an authorized return.

SECURITY AND PRIVACY ISSUES OF EDI

 There are many advantages of implementing EDI in terms of
speed, accuracy, cost and flexibility.

 Since in the case of EDI, we are dealing with trade between

countries and corporations.
▪ A major concern embedded in the use of EDI is the need to
protect the valuable information from misuse.

 As the communication networks are not secure, therefore

security and privacy have become prominent issues.

 If these concerns are not properly resolved, they threaten to

limit the full potential of networking.
▪ in terms of both participation and usefulness.

 The users of EDI have expectations concerning integrity, 38

privacy, secrecy and availability.

Er. Sanjay Kumar Sah 19

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

SECURITY AND PRIVACY ISSUES OF EDI

 Security and privacy are need to be maintained throughout
the EDI process.

 Although a lot of progress has been made to give legal status

of EDI messages in various countries, nothing concrete has
come out these efforts.

 No rules exist that indicate how electronic messages may be

considered binding in business or other related transactions.

 The establishment of such a framework is essential if EDI is to

become widespread.

Who assumes liability?

 In case of EDI, courts haven't decided who is liable if an EDI
network fails to transmit a document or transmits a document
to the wrong party or transmit a document with error. 39

▪ There is no legal precedence in this area yet.

SECURITY ISSUES RELATED TO EDI

1. Password Guessing Attacks:
 Most of the present day systems rely on passwords to gain
access but, passwords are easy to guess and this makes the
system vulnerable to password guessing attacks.

2. Multiple Standards:
 Trading partners usually work on a variety of standards such
as UN/EDIFACT, ANSI X12 etc.
 The security features offered in a particular standard may not
be comparable to the other standard.

3. Authentication:
 Authentication relates to a scenario where a claimant has
presented a principal's identity and claims to be that principal.
 Authentication enables a verifier to verify the identity of the 40
principal.

Er. Sanjay Kumar Sah 20

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

SECURITY ISSUES RELATED TO EDI

4. Non-Repudiation:
 In EDI, non-repudiation services provide a user with protection
against another user who later denies that some communication
exchange took place.
▪ They provide evidence to resolve any such disagreement.

5. Disclosure of Information:
 An EDI trading agreement is done for the exchange of data among
geographically dispersed participants.
 Consequently this mechanism is exposed to all threats to which the
telecommunication system is subjected.

6. Eavesdropping:
 Eavesdropping allows an intruder to obtain sensitive information,
such as passwords, data, and procedures for performing functions.
 An intruder can gain information by wire tapping, eavesdropping by 41
radio or eavesdropping via auxiliary ports on terminals.

SECURITY ISSUES RELATED TO EDI

7. Denial of Service (DOS):
 In DOS attacks, one user can render the system unusable for
legitimate users by damaging or destroying resources so that they
cannot be used.
 Three common forms of network denial of service attacks are service
overloading, message flooding and signal grounding.

8. Packet Replay:
 Packet replay refers to the recording and the re-transmission of
message packets in the network.
 An intruder could replay legitimate authentication sequence
messages to gain access to an EDI system.

9. Packet Modification:
 Packet modification involves one system intercepting and modifying
a packet destined for another system.
 In many cases, packet information may not only be modified, but
may also be destroyed. 42

Er. Sanjay Kumar Sah 21

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

DIGITAL SIGNATURE AND EDI

 Cryptographic community is exploring various technical uses of
digital signatures.
▪ By which messages might be time-stamped or digitally notarized
to establish dates and times at which a recipient might claim to
had access or even read a particular message.

 The digital signature provides a means for a third party to verify

that the notarized object is authentic.
▪ Digital signature should have greater legal authority than
handwritten signatures.

 Digital signatures for privacy and security of EDI messages are

recognized in many countries.

 For example, if a ten-page contract is signed by hand on the 10th

page, one cannot be sure that the first nine page have not been
altered.
 If contract is signed by digital signature, however, a third party can43
verify that not one byte of the contract has been altered.

EDI FOR E-COMMERCE

 The economic advantages of EDI are widely recognized.
 Companies are realizing that to improve their productivity they need to
automate their processes.
▪ This is the thrust of new directions in EDI.

 EDI services for e-commerce are seen as the future bridge that
automates the external and internal processes, enabling companies to
improve their productivity.
 EDI present information management solutions that allow companies to
link their trading community electronically.
▪ for electronic order entry, purchasing, accounts payable, funds
transfer, and other systems interact with each other throughout the
community.
▪ to link the company with its suppliers, distributors, customers,
banks, transportation and logistics operations etc.

 EDI with the highest speed increases accuracy as well and prevents
human intervention and its related errors.
 Another goal of EDI services is to reduce the cost of setting up an EDI 44
relationship.

Er. Sanjay Kumar Sah 22

E-Commerce Unit-3: Electronic Data Interchange
(EDI)

TYPES OF EDI
➢ With the advent of inter-organizational commerce, several types of EDI
can be broadly categorized as Traditional EDI and Open EDI.
1. Traditional EDI:
 Traditional EDI replaces paper forms with almost one-to-one mapping
between parts of a paper forms to fields of electronic forms called
transaction sets.
 Traditional EDI covers two basic business areas:
▪ Trade data interchange (TDI)
▪ Electronic Funds Transfer (EFT)
 Traditional EDI is divided into two types: Old EDI and New EDI.

2. Open EDI:
 The increased interest in open EDI is a result of dissatisfaction with
traditional EDI.
 Open EDI provides a framework where two potential trading partners
can whip out an EDI structure for their potential partnership.
 It takes them to draw up and negotiate the legal contract.
 Open EDI is a business process that enables e-commerce to occur 45
between organizations where the interaction is of short duration.

FOR YOUR ATTENTION !

Any Questions?
46

Er. Sanjay Kumar Sah 23