2.WHAT IS EDI?
3.WHY USE EDI?
4.ADVANTAGES OF EDI OVER A PAPER-BASED DOCUMENT TRANSFER SYSTEM
5. HOW EDI WORKS?
Everybody uses business connections of one sort or another to get orders, send bills, make collections, determine and pay what it owes, move goods, and control its money. The business connections used historically to perform these operations have been the postal service and the telephone. A relatively new link is electronic data communications facilities.
Your links to business connections are limited to the mail and the telephone. Both are slow. Both terminate with that wall of people who feed the computer and who may make errors.
What your company needs is a better link to business connections and that is what electronic data interchange is all about. To appreciate what electronic data interchange (EDI) means, think about all those orders, invoices, freight bills, shipment instructions, tracing requests, payment instructions, government reports, and the like that your company sends out or receives every day. Think about each as a single transaction.
WHAT IS EDI?
Traditionally, the transfer of data from one company to another has been by paper documents. This is known as a paper-based system. These documents have to be manually forwarded and entered to the destination computer.
EDI is the electronic exchange of structured business information, in standard formats, between computers, EDI eliminates the need for a paper-based system by providing an electronic link between companies. This reduces data entry tasks and improves business cycle times.
EDI is the electronic transfer of structured business documents in an organization--internally among groups of departments or externally with its suppliers, customers and subsidiaries.
In EDI information is passed electronically from one computer to another over a network without having to be read, retyped or printed. The information transferred must have a defined structure agreed between your company, and the company or group you send and receive data from.
Any company or group which uses EDI is called a TRADING PARTNER. Examples of current uses of EDI includes automatic teller machines (ATMs) in banks where EDI is used for transferring and withdrawing funds between different bank accounts, airline reservation systems, stock exchange transactions and car reservation systems.
USE OF EDI:
The data from one computer is normally not in a form suitable to be entered directly into another computer. The data may have to be arranged differently before it can be entered into another computer or some items of data may not be needed at all. With EDI, all the data is converted unto an agreed standard format before it is sent over the network. The computer that receives the data can then extract the information it requires.
Using EDI implies three things:
1. Information is transferred electronically rather than on paper. This means that there is no need to enter the data manually in the destination computer. 2. Information is transferred between trading partners who have negotiated trading agreements and have formalized their data transfer system. 3. Information that is transferred complies with agreed standards for the format of the content and the transmission control mechanisms.
ADVANTAGES OF EDI OVER A PAPER-BASED DOCUMENT TRANSFER SYSTEM
This section highlights the advantages EDI has over a traditional paper-based document transfer system.
In a Paper-based System: