At its simplest, Electronic Data Exchange is the transmission of documents by electronic means. In other words, the paper-based documents are replaced by electronic data which is transmitted by a number of means. It is largely used in order to automate standard processes such as re-ordering, but its application is far broader than that, and it affects a range of industries and corporations.
EDI relies on electronic transmission, but is not necessarily email or using the Internet. In the least, EDI requires some level of sophisticated information technology infrastructure, which includes data processing, data management and networking capabilities.
This enables the efficient capture of data into electronic form, the processing and retention of data, controlled access to it, and efficient and reliable data transmission between remote sites. The other form of transmission medium is the VAN or value-added network, which acts as a middle man between the sender and receiver of the transmission, and can be a storehouse for un-received messages. These two options of transmission have their pros and cons.
EDI requires a standard set of rules for how to set out the documents, an order that they can be easily read by the machine at the other end. However, the potential for EDI is that it can link companies together in networks that provide efficient and cost reducing methods for delivery of not only data, but of financial payments and more possibilities that have previously been conceived.
The first computer was created in the late 17th century by Leibnitz. This would not be considered a computer by today’s standards, but a computational machine, which is a computer in its simplest form. However, it was unable to communicate messages, which still at that point required quill and paper. From these humble beginnings, the ages have advanced technology so that it no longer the scratch of the pen or the man with his post that sends messages, but electronic signals that allow our communications to become more swift and efficient.
Within this vein, today’s communication abilities are more fully realized through the innovation of messaging techniques such as SMS and email, which provide the youth of today with quick and easy calls to arms. However, other levels of society such as the business sector require other forms of communication devices to improve the daily running of corporations, companies and businesses. Within this area are fax, Internet and EDI. These mediums of communication allow for an increased rate of transmission, reduced errors and improved communication between partners. EDI has evolved since the 1960’s as an effective form of communication, and has recently come into it’s own as a must have for many business sectors.
From then Until now
During the 1960’s processing of business orders and shipping data was able to transmitted using networks. This was referred to Electronic Data Interchange or EDI. This occurred within the transport industry, where is found to be more time efficient to transfer data between trade partners that were on the same network. As such, the networks needed to be talking about the same thing in the same language. And so a set of documentation was created to allow for this. A committee called the Transportation Data Coordinating Committee was formed to coordinate the development of translation rules among four existing sets of industry-specific standards. Standardization was more in range when the X12 standards of the American National Standards Institute (ANSI) were issued.
These were an expansion on the TDCC standards, and eventually replaced them. At the same time, the UK Department of Customs and Excise in collaboration with the British Simplification of Trade Procedures Board (SITPRO) was also making moves to create standards for its documentation in international trade called Tradacoms. These were eventually extended by the United Nations Economic Commission for Europe (UNECE) into the General purpose Trade Data Interchange standards (GTDI), and were gradually taken on by about 2000 British exporter organizations. As two of the major traders of the world had created different and somewhat incompatible systems of standardization, problems arose.
These have been addressed by the formation of a United Nations Joint European and North American working party (UN-JEDI). Hence began the development the Electronic Data Interchange for Administration, Commerce and Transport (EDIFACT) document translation standards. The automotive industry went through a similar confusion when GM attempted to reduce costs by holding an inventory which would be only a day’s worth of supply. In this way, their inventory costs were reduced considerably. They did this through EDI and thus set up their own mode of communication with suppliers. This style was soon adopted by other automotive entities in order to similarly reduce their costs.
This led to a need for standardized documentation across the industry. These were made clear through the Automotive Industry Action Group which worked with automakers and suppliers to develop an EDI standard for the entire industry. As such, the industry was able to create a standard which was related just to the automotive industry. Currently there is a large list of business documents which the standard covers, from shipping to trucking, to re-ordering. This list has developed over the last ten years, and includes the finance, health, trucking, shipping, automotive and various other sectors of industry. It has widened the scope of efficiency, decreased human related errors and reduced delays.
EDI is used world wide from Australia to Alaska. Improvements can be seen in areas such as inventory management, transport and distribution, administration and cash management. Currently EDI is in a great phase of expansions, where it is being used in collaboration with other data tools such as XML, and the Internet. These allow for the potential of EDI to come through as a tool not simply for data transmission, but as a means to create closer ties and networks for businesses and corporations.
Current Application of EDI
Although companies will change their advertising and adapt their style to new eras and demographics, often the internal infrastructure will remain unchanged for long periods. Lately, the introduction of various new technologies and communication devices forced many industries to reconsider their positions and how to interact not only with their target audience, but with each other.
Competition is always fierce on the industrial scale, and anything which can provide an advantage is eagerly sought. EDI has been adopted by many industries as it has many benefits such as increased cash flow, decreased error rate, improved time efficiency, decreased rates of delay and various other benefits. Thus for a long time, EDI has been on the scene.
The last ten years has seen an increasing use of technologies within business structures, such as the Internet. The incursion by the Internet into mainstream business, while still utilizing EDI, gives an indication of EDI’s flexibility and ability to evolve with new processes. Many businesses are using open Internet portals to exchange data, although it is not viewed as secure as other mediums of transmission. This enables those who do not have the EDI set up to still use the program. I allows for greater business flexibility, and increased networking capability.
At the moment, other systems are collaborating with EDI to form improved ways of transmitting and translating data. XML and EDI have been combined to create a system whereby the format and representation of the data can be more stylish than previously, but it utilizes the same transmission modes and protocols as previously. This new step in the technology requires advanced systems on either side of the transmission. EDI is also important for new systems of management such as Just in Time (JIT). This system allows for an increased efficiency of time management, and an increased regulation of ordering methods.
Since its inception, EDI has been widely utilized as a tool for decreasing error incidence and increasing efficiency and profitability. It has been able to cope with the changing technological world which includes now the use of Internet and other tools such as SAP and XML. EDI has continued to function well and to provide users with many benefits. Standards have been created that allow EDI to be used over the globe, thus creating a network of users, and improving the daily business life of many. Its impact in direct terms is to reduce the amount of data capture and transmission.
In general terms, this means decreased incidence of errors, few data-caused delays, and reduced time spent on exception-handling. These benefits combined with the ability to meld with current technologies are the greatest advantages of EDI. In 1991, there were perhaps 25,000 corporations using EDI. However, in the current business climate, EDI is viewed as a must have, not only to allow a corporation to trade, but as a tool to expanding business possibilities.