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E Commerce Chap.5

Electronic Data Interchange (EDI) is a method for electronically transferring business documents within an organization and with external partners, replacing paper documents with electronic formats. EDI offers advantages such as lower operating costs, improved business cycle speeds, and enhanced transaction security, but also has disadvantages including high initial setup costs and complexity. The main components of an EDI system include transmission devices, data translation applications, connections between parties, and users for data exchange.

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11 views7 pages

E Commerce Chap.5

Electronic Data Interchange (EDI) is a method for electronically transferring business documents within an organization and with external partners, replacing paper documents with electronic formats. EDI offers advantages such as lower operating costs, improved business cycle speeds, and enhanced transaction security, but also has disadvantages including high initial setup costs and complexity. The main components of an EDI system include transmission devices, data translation applications, connections between parties, and users for data exchange.

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shampatilkam
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B.

COM 1ST YEAR SEMESTER 2


ESSENTIALS CHAPTER 5 :-ELECTRONIC dATA
OF INTERCHNAgE
E-COMMERCE
Meaning of EDI

• EDI stands for Electronic Data Interchange.


• It is an electronic way of transferring business documents in an organization
internally between its various departments or externally with suppliers,
customers or any subsidiaries etc.
• In EDI, paper documents are replaced with electronic documents like word
documents, spreadsheets etc.

.
Characteristics of EDI

• Business Transactions Messages: EDI is used primarily to electronically transfer


repetitive business transactions. These include purchase orders, invoices,
approvals of credit, shipping notices, confirmations, and so on.
• Data Formatting Standards: As EDI messages are repetitive, it is sensible to use
some formatting (coding) standards. Standards can shorten the length of the
messages and eliminate data entry errors, since data entry occurs only once
• EDI Translators: It is a system that standardizes the process of trading and
tracking routine business documents. EDI translates these documents into a
globally understood business language and transmits them between trading
partners using secure telecommunications links..
STEPS IN AN EDI SYSTEM
1) A program generates the file which contains the processed document
2) The document is converted into an agreed standard format.
3) The file containing the document is sending electronically on network.
4) The trading partner receives the file.
5) An acknowledgement document is generated and sent to the originating
organization.
Advantages of EDI
• Lower operating costs:-EDI lowers your operating expenditure by at least 35%
by eliminating the costs of paper, printing, reproduction, storage, filing, postage,
and document retrieval.
• Improve business cycle speeds:-Time is of the essence when it comes to order
processing. EDI speeds up business cycles by 61%
• Increase business efficiency:-Because human error is minimized, organizations
can benefit from increased levels of efficiency. Rather than focusing on menial
and tedious activities, employees can devote their attention to more important
value-adding tasks.
• Enhance transaction security:-EDI enhances the security of transactions by
securely sharing data across a wide variety of communications protocols and
security standards.
• Paperless and environmentally friendly:-The migration from paper-based to
electronic transactions reduces CO2 emissions, promoting corporate social
responsibility.
Disadvantages of EDI
• Initial setup is time consuming:-Not only is the implementation of EDI
system expensive to install, but it also consumes a considerable amount of
time to set up the essential parts. Thus, such limitations of EDI can hinder
fast-tracking of services if urgently required.
• Investing in system protection:-EDI may also require a heavy investment in
computer networks. It will need protection from viruses, hacking, malware and
other cyber security threats if an on-premises system is chosen.
• Robust data backups of systems:-EDI needs constant maintenance since the
business depends on it. Robust data backups must be in place in the event of a
system crash.
• Open to limited traders:-EDI requires expensive VAN (Value Added Network)
networking to operate at peak efficiency. Only high-volume, large trading
partners can afford this investment.
• Usage not easy:-As a system, EDI is not easy to learn, use and implement.
Main components of EDI system
• A device on which to transmit the data
• An application or an outsourcing company that translates the data
into a standardized EDI format
• A connection between the sender and the recipient
• Users to send and receive data

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