Quadrant II– Notes

Programme : B. Com
Subject : Computer Science
Paper Title : Computer Applications for Business - I
Semester : IV
Paper Code : CSS 102
Course : Skill Enhancement Course
Unit I : E-Commerce theory
Module Name : EDI implementation in business
Module No :5
Presenter : Mrs. Jhimli Adhikari, Ph.D.
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Introduction
Information is the key to success for any business and, often times, the speed of information
can make the difference in revenue growth. In view of today’s global environment and the
speed of information available, the need to rapidly transmit key information between
businesses is now more important than ever. In business today the need to get the right
product to the right place at the right time is a must in order for retailers to survive in
today’s fast paced and uncompromising ecommerce market. EDI is one of the tools that is
needed to speed information in a supply chain. People tend to think of EDI as a process to
solve business problems, but it is not. It is, however, a very effective vehicle to move
business pertinent data from one location to another in a predefined and predictable
format. The key to achieving efficiencies is in the optimization of the business processes that
precede and follow the data that is received.
The process of EDI involves various aspects of the business and it is intended to optimize the
speed of information between business partners. As in the case of any business solution
implementation, it requires the commitment of all stakeholders in the company as well as
that of your supplier community. The implementation of an EDI project is a major project for
most companies. It holds potential risks if not implemented correctly and it should never be
implemented casually. There must be an underline business requirement, and a plan must
be developed that includes all stakeholders. Each assessment is as unique as each EDI
implementation is. For some enterprises, EDI can be difficult to implement. One reason is
the need to keep pace with shifting government regulations, standards and updates. It is
also inherently complex, as it needs to accommodate the complexities of global business
needs. For example, each trading partner in a B2B network can present individual
requirements. Even though two partners may agree on which EDI document to use, each
can have unique formatting requirements that need to be supported. These factors, and
others, have led many organizations to outsource their EDI solutions.
Definition
Electronic Data Interchange (EDI) is the electronic interchange of business information using
a standardized format; a process which allows one company to send information to another
company electronically rather than with paper. Business entities conducting business
electronically are called trading partners.

Whether in-house or outsourced, there are some basic conditions, capabilities and
resources needed to implement EDI effectively. In addition to factors like agreement on
document types, secure transmission methods, and requisite hardware and software, an
effective EDI implementation should consider:
EDI software
Electronic Data Interchange (EDI) software creates a data exchange between two or more
computers. This software is typically used for the fast transfer of business documents within
companies and between business partners, such as suppliers or customers. EDI software is
normally bought from a specialist supplier. EDI software suppliers provide functions that
include:
A) Trading partner database integrated into EDI software: This can provide for code
translation and / or for the specification of the EDI requirements of each trading partner.
B) Support of multiple EDI standards: Selection of appropriate standard may be determined
by the trading partner database
C) Facilities for transactions to be sent by fax or e-mail to customers that do not use EDI: The
identification of such customers may be determined b trading partner database
D) Interfacing with a variety of EDI Value Added Data Services (VADS) including the internet:
Selection of appropriate Value Added Data Services may be determined by a trading partner
database
E) Encrypting the EDI message
EDI software is available on a variety of platforms, from the basic PC up to a mainframe
system. At EDI Gateway, the following analysis should be performed before proceeding with
an EDI initiative project. This effort will identify the following:

• Benefits of EDI
• Possible risks and mediations to prevent any negatives
• Transactions that will be most effective to automate in priority
• How to reduce resistance
Planning an EDI implementation across a vendor community can be a challenging task and a
complicated project to manage. For an implementation to be truly successful, the
organization’s processes need to be examined and evaluated. Successful implementations
involve most processes of the company, and can result in substantial savings in the supply
chain process, such as reduction in inventory levels, and warehousing, improved cash flows,
etc.
This section provides an overview of the EDI implementation and a look at the different
factors involved in each step of the process:

• Organizational structure
• Business strategy
• EDI integration with existing business systems
• Mapping and data analysis
• EDI B2B pilot project
• Vendor deployment
It is important to appoint an EDI specialist to oversee the EDI implementation. Not only will
this person be charged with handling the technical aspects of the implementation, but will
also need to continuously evaluate the business system as it changes and becomes more
responsive. It is also advisable that a single individual be assigned as your company’s contact
point in dealing with all aspects of the project. Naming a project manager for this type of
implementation will ensure a smooth line of communication between all stakeholders.
ORGANISATIONAL STRUCTURE
This process is a 9 step investigation of the business processes within the organization to
determine all areas that will be impacted by the EDI initiative.
a. INVESTIGATE ERP OR POS SYSTEM: Investigate the primary ERP or POS system to
determine what information can be processed, what can be generated and what
information can be accepted by the system.
 b. SURVEY TRADING PARTNERS: Investigate all trading partners to determine those
who are EDI capable and for which EDI transactions.
c. GAP ANALYSIS: Perform a Gap Analysis to evaluate which information is readily
available and what information is required for your EDI transactions, according to
your requirements.
d. SEQUENCE DIAGRAM: Create a sequence diagram to describe the flow of data
between each step of the processes. That will enable to demonstrate which
processes are impacted and where the data will be going.
e. MAPPING REQUIREMENT: Prepare Mapping Requirements to provide to your trading
partners so they are able to determine what information will be exchanged.
f. INITIAL VENDOR TESTING: Identify a group of vendors for initial testing purpose
g. LAUNCH LETTER: Inform your vendors of your EDI initiative by writing an EDI
initiative Launch Letter.
h. ROLL-OUT AGENDA: Prepare a schedule and determine timelines for your roll-out.
i. ROLL-OUT TESTING AND SET-UP: Document and set-up the testing process.

BUSINESS STRATEGY
The advantages of an EDI system may vary among companies. To distinguish the area of
your company in which an EDI system can make the most improvement, you must perform
an EDI survey of your actual organization’s supply chain actors. Your company will discover
the most effective profits in areas where an EDI system is normally supported by many, or
few, high volume vendors. The most significant benefits of an EDI implementation is the
degree of adaptability and personalization it provides for B2B integration:
• Many large organizations have started an EDI implementation within their
purchasing departments in an effort to maximize business process management
(BPM) of supplier purchase orders.
• Manufacturers are likely to find material release documents an excellent place to
begin for their EDI systems because it enables you to cultivate just-in-time (JIT)
manufacturing strategies.
• Suppliers usually use an EDI system for sales order transactions since the majority of
their primary customers want to send Pos electronically.
• Accounts payable will benefit from an EDI system, with the integration of vendors
that have numerous invoices.
Retailers in the purchasing position (HUB) frequently have the power to demand EDI of
their suppliers as a mandatory condition to doing business with them. For this reason,
purchasing is frequently the initial target of an EDI implementation.

EDI Integration with existing business systems

A complex EDI system that fulfils several departments and makes use of EDI integration with
corporate applications needs significant data routing and internal programming. The most
significant development task that EDI systems typically deal with is EDI integration with
current corporate applications. EDI mapping is required to capture data out of internal
applications and transport it via the EDI software. Therefore, developing EDI integration
software can often be the most significant cost of an EDI system. Methodologies employed
for system prototypes are developed prior to the coding of systems. EDI integration is
created when an EDI workflow is established between trading partners. For integration of
business application and the EDI software there needs to be an interface to transfer data
from business application to EDI software and visaversa. Thus, most EDI software provides
for a flat file. In this mode of operation incoming EDI messages are printed out from the EDI
software and then manually keyed into the business application that they are intended for.
Outgoing EDI messages are extracted from the business application and typed into the EDI
software for formatting and onward transmission. EDI integration typically consists of 3 key
activities:
• Analysis of data during EDI mapping
• Using EDI software to map data
• Custom interface programs and user exit development

EDI operation
Once EDI system is set-up, it needs careful and systematic operation
EDI solution on-premises (in-house operation) : With an on-premises solution, the company
acquires the EDI software and operates it in its own data center, i.e. on its in-house or self-
managed hardware. Operation and support are usually also carried out under the
company's own responsibility, but can also be outsourced to a hosting partner.

EDI as cloud service : With cloud services, IT operations can be outsourced to external
service providers. Data, software, platforms or even computing power are outsourced to the
cloud provider and used through the Internet. With this operating model, the investment in
an EDI software is completely unnecessary; instead, the most standardized EDI cloud service
of a service provider is used.
An EDI cloud service is particularly suitable for medium-sized companies, as the 24/7 in-
house operation of an EDI solution often represents too great a challenge for them. The
total costs of a clearly calculable EDI cloud service are often significantly lower than those of
an in-house operation.
The advantage of an on-premises solution is that all EDI requirements can be implemented
without dependence on external partners. Sometimes the company policy requires that no
data is given to the outside. Thus, only in-house operation is considered for EDI. In this case
it is necessary to build up comprehensive know-how about EDI.

EDI alternatives
A large organization that processes many electronic transactions is going to need its own
EDI set-up. However, there are many small companies that are associated into EDI trade by
a large trading partner. For these organisations there are a number of alternatives:
• Low cost, PC based, free-standing EDI facility
• Making use of an EDI clearing house: to do this the company contract for their EDI
messages to be sent to a clearing house who decode them, print them out and then post or
fax them on
• Internet access through a clearing house: Here clearing house is used but the inward and
outward transactions are transmitted between the end user and the clearing house and
accessed by the client using a standard web browser.

EDI agreements
Electronic data interchange agreements are concluded between the involved partners and
comprise the processes and procedures, the set of agreed formats, directories and
guidelines for the electronic interchange of structured data between independent
computerized information systems. The agreement states that the parties intend to be
legally bound in the same manner as though they were exchanging paper documents. The
signature on the agreement serves as a substitute for signatures on paper document. The
agreement specifies
• The point in its transmission and processing at which a message will be deemed to be
legally binding-the usually accepted standard is that the document achieves legal status
when it arrives at the receiving party.
• Timescale for processing EDI messages: One purpose of EDI is to speed up the trade cycle
and this not achieved if messages are not reliably processed within an agreed timescale
• Time that copies of the messages will be retained
• Procedure for setting any disputes
• Legal distribution in which any disputes should be settled

EDI security
• Ensures that interchange of messages is reliable
• Controls in the EDI standards: EDI standards include controls designed to protect against
errors in message and the corruption of message during the interchange.
• Controls in the Transmission Protocol: When the corruption of message is detected, the
network system starts a retransmission without the need for outside intervention.
• Protection against tampering: When there is a concern that the transmission might be
intercepted and modified, it can be protected by a digital signature. The digital signature is
designed to ensure that the message received is exactly the same as the message sent.
• Privacy of message: when the contents of the message are considered sensitive, the
privacy of the message can be protected during transmission by encrypting the data.
• Non-repudiation: It is a way to guarantee that the sender of a message cannot later deny
having sent the message and that the recipient cannot deny having received the message.

The ERP Connector for EDI

In many companies, an ERP system is the basis for controlling internal business processes.
To enable electronic data exchange with external business partners, this ERP system is
connected to the EDI system. The ERP Connector connects the EDI software with the ERP
software so that messages can be automatically transferred between the ERP system and
the EDI software. Widely used ERP systems for which EDI connectors are available on the
market is
SAP
Microsoft Dynamics AX / NAV
Oracle E-Business Suite
ProAlpha
JD Edwards
IFS
Peoplesoft
NetSuite

Implementing EDI in business

Implementing EDI across your organisation and network of trading partners can be complex.
Taking a systematic approach will help you deliver an effective EDI programme. Below is a
structured 10- step implementation process for successful EDI implementation:

Step 1: Develop the organisational structure

Your first action is to ensure that you have access to the correct skills. Develop EDI
coordinators and teams that will drive the programme through your organisation.

Step 2: Undertake a strategic review

The business areas that benefit most from EDI deployment vary by organisation. A strategic
review identifies where EDI has greatest potential in your business.

Step 3: Conduct in-depth analysis

An accurate analysis of costs and projected payback when implementing EDI is essential.

Step 4: Develop a business-focused EDI solution

Selecting the correct EDI solution for your business requires an in-depth understanding of
both the technical and business issues – for you and your trading partners.

Step 5: Select the correct EDI network provider (VAN)

Most organisations find using an EDI provider makes the best business and financial sense.
Selecting the correct provider for your business is imperative.

Step 6: Integrate EDI with the business

How an EDI system is designed and developed depends on the amount of custom work
required and the amount of internal systems with which it needs to share data.

Step 7: Integrate data across the business

Most applications impose their own data structures. The data from internal and external
systems need to be analysed in order to ensure they translate into your EDI system.

Step 8: Undertake data mapping

To ensure the smooth flow of information between internal applications and trading
partners, documents need to be mapped to allow effective data transmission.

Step 9: Establish a pilot project

Before your EDI system goes live within your entire trading community, it is important to
select a small number of partners to test the system in ‘near live’ conditions.

Step 10: Roll out EDI to trading partners

The last action is to implement EDI across your trading partners. This should be achieved in
a staged manner that reflects your current business priorities.

Future of EDI
In future supply chains, EDI will be the core document exchange capability to support
innovations like the Internet of Things (IoT), blockchain and artificial intelligence (AI). Future
EDI will use:
IoT sensors: Incorporated into the shipment’s packaging and tied to periodic EDI 214
messages to improve package condition visibility in near real time.
Blockchain technology: Underpinning EDI information flows for shipments can offer a
shared version of the truth to help quickly resolve and even avoid chargeback disputes.
AI agent: Monitors all relevant events and information connected to a shipment and can
identify a non-compliant event; can determine if a reshipment is required, analyze the most
efficient source of replacement, initiate a new shipment and an authorized return.