Manage Inc. - Services/EDI

What do you need to get started with EDI?

The following components and tools are necessary for performing EDI:

Trade Agreement - a legally binding trade agreement between you and your trading partner.

Standard Document Format - the standard agreed upon format for the document to be electronically transmitted.

EDI Translation Management Software - software used to convert the document your application's format into the agreed upon standard format. For optimum performance the translation software should be on the same platform as your business application.

Communications Software - a programming tool that enables you to write communications protocols, or a separate application. It can be a module to the translator or a separate software application.

Modem/Internet Connection - Trading information between partners can either be done via modem or through the Internet with FTP (file transfer protocol).

Value Added Network (VAN) - A network to which you can connect to transmit data from one computer systems to another. One network can act as a gateway to another.

Point-to-Point - a direct communication link from one computer to another. Some trading partners offer a direct connection to their EDI computer. Trading partners may opt for this method of communication instead of using a VAN.

The Operation of EDI

EDI starts with a trading agreement between you and your trading partner. You make joint decisions about the standard to be used, the information to be exchanged, how the information is to be sent, and when information will be sent. The information can be sent through a direct connection (Point-to-Point), or through a VAN.

To send a document, you use your EDI translation software to convert the document format into the agreed upon standard. The translator creates and wraps the document in an electronic envelope and puts the ID for your trading partner on it.

If the information is to be sent Point-to-Point, the communications software sends the document directly from your computer system to your partner's computer system. If a VAN is used, the communications software dials the phone number for the network and transmits the envelope containing the document. The VAN reads the ID on the envelope and places it in the correct mailbox.

Your trading partner's modem calls the network and retrieves everything in the mailbox. The EDI translator opens the envelope and translates the data from the standard form to their application's format.

If you attempt to do EDI without translation, you run a great risk of transmitting data that your trading partner will not be able to read. Your trading partners may use business applications on computers that are different than yours. The translator ensures that the data you send is converted into a format that your trading partner can use.

EDI Standards

In the early days of EDI large firms announced a proprietary format and communication interface and either encouraged or mandated trading partner participation. Proprietary data formats and technical requirements work well enough when a firm deals with only one, two or a small number of partners. However, without the development of widely accepted data formats and communication standards, widespread implementation of EDI cannot not proceed

Standard Organizations

A number of different standards bodies exist to develop standard formats for EDI. The Electronic Data Interchange Association (EDIA) is a non-profit organization set out to serve as an administrator for several different industry groups. Each industry served has a committee to determine new standards, modify existing ones, and pass the information on to the EDIA for publication and distribution. EDIA was asked to develop a set of standards applicable to the grocery industry. The first such standard is The Uniform Communication Standard (UCS) which was applied to an actual transaction by the Quaker Oats Company in 1981. UCS standards are now widely applied in the grocery and retail trade.

The ANSI X12 Committee is set out to develop standards that will be acceptable across industry groups. The ANSI X12 committee has published standards for 20 documents including purchase order, remittance advice, invoice, and request for quote. Work is going forward to define EDI formats for an additional 100 documents.

Parallel efforts in standards development have also been proceeding in Europe, leading to the development of the EDIFACT standards. The EDIFACT (EDI for Administration, Commerce and Trade) committee worked out a common data dictionary and syntax rules so standards in different industries and countries can base standards development on the same building blocks.

Costs of EDI

The cost of EDI solutions varies considerably depending upon:

The ability of your Application Software to Import/Export transaction data. Some software applications are ideally set up to send and receive transaction-level data from trading partners, others are not. The ability of your enterprise software to accommodate the transfer of data is a large determinant of EDI project costs both from initial set-up top ongoing functionality.

The Expected Volume of Electronic Documents. Generally speaking, PC products cost less, but handle only a few documents and trading partners. Midrange EDI packages can be a little more expensive, but handle a much larger volume of EDI. If you anticipate multiple documents or trading partners, a midrange EDI system is a much better choice.

The Amplitude of The EDI Translation Software. Some products look like a bargain, but as your EDI needs grow, hidden costs (such as having to purchase new transaction sets) suddenly appear. You may pay more for a program with an integrated mapper, but you'll avoid purchasing overlays and maps in the future.

Implementation Time. Some applications are easier to learn and use than others. The more time you spend in training, the more time it takes to get into production mode. If your time frame is tight, look for a translator that doesn't require training before implementation.

Fees vary from software company to software company. Ignoring the hidden costs mentioned above, you can expect the following ongoing charges:

Maintenance Fees. Most companies charge an annual maintenance fee that is usually a percentage of the translator's list price. This fee should include software updates, standards updates, technical support, and customer service.

VAN Charges. The VANs bill you for transmitting data similar to making a long distance phone call. Some also bill you for connect time. A fast modem helps to lower transmission costs.

Mailbox Costs. Most VANs charge a monthly fee for maintaining a mailbox on their network. Some base billing on the document (25 cents per document transmitted). Others charge based upon the number of characters in each document.