Electronic Data Interchange (EDI)

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EDI is the computer-to-computer exchange of repetitive, standardized or structured transaction data to trading partners’ computers over a telecommunication network. The standard transaction documents include invoices, bills of lading, purchase orders, approval of credit, shipping notices, confirmation sent between business partners, etc. Both parties of the transaction must use the standardized forms of transaction that include the transaction date, transaction amount, sender’s name, recipient’s name, unit price, total number of products, etc. For EDI to be effective, users must agree on certain standards for formatting and exchanging information according to a set of recommendations for standardizing equipment and protocols used in both public access and private computer networks.

Established companies still rely on EDI to transmit and receive order requests along the supply chain. Traditional EDI uses private networks and value-added networks (VANs). VANs are subscription-fee-based, private, data-only, third- party-managed telecommunication networks. The VANs are usually confined to large trading partners due to expensive fees, including a fixed monthly subscription fee and a variable per-transaction data transmission fee. The VAN provides its subscribers with extra values, including message routing, error checking, resource management, and protocol conversion facilities for computer communicating at different speeds or using different communications protocol. Therefore, traditional EDI has not been a viable option for those companies doing business with small companies that cannot afford to pay the fee. However, the emergence of Internet-based EDI allowed many small businesses to use EDI to conduct electronic business.

Large retailers are pushing their suppliers to adopt the Internet-based EDI. For example, in August 2002, Wal-Mart, the world’s biggest retailer, told its suppliers they would have to start sending and receiving electronic data over the Internet. Today, more than 98% of Wal-Mart’s EDI exchanges with suppliers are done over the Internet using EDIINT AS2 (Electronic Data Interchange-Internet Integration Applicability Statement 2)(Hayes, Hulme, Kontzer, Whiting, & Colkin, 2002; Zimmerman, 2003). In addition to cost savings, Internet-based EDI provides a cheaper, faster, and more accurate method for trading partners and several functionalities such as collaboration, workflow, and sharing of point-of- sale data among trading partners. Retailers can share point-of-sale data with suppliers over the Internet—something not easily done with the traditional EDI system. Thereby, suppliers can better meet retailers’ requirements with more up-to-date demand information (Greenemeier, 2001). Many vendors offer the “value-added network” EDI for sending critical data, while AS2-based Internet EDI can be used for less critical business information (Anonymous, 2003).

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Inter-Organizational Information Systems in the Internet Age
Inter-Organizational Information Systems in the Internet Age
ISBN: 1591403189
EAN: 2147483647
Year: 2006
Pages: 148

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