THE INSTITUTE OF CHARTED ACCOUNTANT OF

INDIA
( SET UP AN ACT OF PARLIAMENT )

ELECTRONIC DATA INTERCHANGE

(EDI)

SUBMITTED BY: SUBMITTED TO:

KARTIK MUNDRA ICAI
REG NO: CRO0732990

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 ACKNOWLEDGEMENT
I am thankful to our IT faculty for providing me an
opportunity to work on this project and giving there
guidance encouragement and this is a matter of a great
pride and pleasure to express our indebtedness and warm
gratitude to our IT staff for their keen interest unceasing
distance and constructive attitude at every stage of the
project work. I am also thankful to ICAI for including the
project work in the syllabus, I thank them all for the their
stimulating efforts. I have gained a lot of knowledge while
preparing the project. Your coincidence in me has made
this training successful.

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 Content to be coverd

TOPICS PAGE NO.

WHAT IS EDI 4&5
( ELECTRONIC DATA
INTERCHANGE )?

EDI STANDARDS 6
HOW EDI WORKS 7,8
EDI TRANSLATION AND 9
MAPPING

IMPLEMENTING EDI 10 - 14
EDI IN VARIOUS 15
INDUSTRIES

THE FUTURE OF EDI 16

COST OF EDI 17- 19
CONCLUSION 20

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 What is EDI ( Electronic Data Interchange )?

 Understanding Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI) is the computer-to-computer exchange
of business documents in a standard electronic format between business
partners. It eliminates the need for paper-based documents like purchase
orders and invoices, making transactions faster, more accurate, and
efficient. The adoption of EDI has revolutionized business communication,
leading to significant improvements in productivity and cost savings.

 What is EDI?
EDI is a technology that enables businesses to exchange documents
electronically in a structured and standardized format. Unlike traditional
methods that rely on manual processes and paper documents, EDI
automates the exchange, reducing errors and processing time.

 Key Components of EDI

Sender and Receiver: The parties involved in the exchange of EDI
documents.
EDI Standards: Agreed-upon formats that define how information is
structured in EDI documents.
EDI Translator: Software that converts data into the standard EDI format
and vice versa.

 Benefits of EDI
1. Efficiency: Automates document processing, reducing the time required
to send and receive documents.
2. Accuracy: Minimizes human errors associated with manual data entry.

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3. Cost Savings: Eliminates costs associated with paper, printing,
and postage.

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 EDI Standards

 Introduction to EDI Standards

EDI standards define the format and structure of electronic documents, ensuring that
different systems can understand and process the exchanged data. These standards
are essential for achieving interoperability between different organizations.

 Common EDI Standards

1. ANSI ASC X12: Widely used in North America, it covers various business
transactions.
2. EDIFACT: An international standard used across Europe and other regions.
3. TRADACOMS: Primarily used in the United Kingdom for retail transactions.
4. ebXML: An XML-based standard that supports a wide range of business processes.

 Different Versions of EDI Standards

Each EDI standard has multiple versions. For example, ANSI X12 includes versions like
ANSI 4010 and ANSI 5010, while EDIFACT has versions like D96A and D12A.
Businesses must agree on the specific standard and version to use.

 4 principles of EDI standards

All EDI standards adhere to four principles:
 Codes: EDI standards use codes to identify common components of a business
transaction, including currencies, date formats, and country names.
 Identification values: These determine how the values in an electronic document
are identified.
 Message designs: These dictate how each message appears. These
standardized designs eliminate the confusion of receiving multiple file formats
from your trading partners.
 Syntax: This refers to the rules governing what characters are used and in what
order they appear.

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 The EDI Process
Step 1: Prepare the documents to be sent.
The first step is to collect and organize the data. For example, instead of
printing a purchase order, your system creates an electronic file with the
necessary information to build an EDI document. The sources of data and
the methods available to generate the electronic documents can include:
 Human data entry via screens
 Exporting PC-based data from spreadsheets or databases
 Reformatted electronic reports into data files.
 Enhancing existing applications to automatically create output files
that are ready for translation into an EDI standard.
 Purchasing application software that has built-in interfaces for EDI
files.

Step 2: Translate the documents into EDI format.

The next step is to feed your electronic data through translator software to
convert your internal data format into the EDI standard format using the
appropriate segments and data elements. You can purchase EDI
translation software that you manage and maintain on your premises. This
requires specialized mapping expertise in order to define how your internal
data is to be mapped (i.e. correlated) to the EDI data. Translation software
is available to suit just about any computing environment and budget, from
large systems that handle thousands of transactions daily to PC-based
software that need only process a few hundred transactions per week.
Alternatively, you can use the translation services of all EDI Service
provider. In that case, you send your data to the provider, who handles
translation to and from the EDI format on your behalf.

Step 3: Connect and transmit your EDI documents to your

business partner.

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Once your business documents are translated to the appropriate EDI
format, they are ready to be transmitted to your business partner. You must
decide how you will connect to each of your partners to perform that
transmission. There are several ways, the most common of which include
1) to connect directly using AS 2 or another secure internet protocol, 2)
connect to an EDI Network Provider (also referred to as a VAN provider)
using your preferred communications protocol and rely on the network
provider to connect to your business partners using whatever
communications protocol your partners prefer, or 3) a combination of both,
depending on the particular partner and the volume of transactions you
expect to exchange.

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 EDI Translation and Mapping

 EDI Translators
EDI translation means converting data from enterprise-specific and
irregular formats into standardized and organized structures that are
compliant with EDI standards. It is commonly used in business-to-
business transactions to exchange documents such as purchase
orders, invoices, and shipping notices. The process involves mapping
data elements from one format to another, ensuring that the data is
accurately transmitted and interpreted by both the sender and the
receiver. EDI translation can help businesses streamline their
operations and reduce errors and inefficiencies. By partnering an
experienced EDI translation provider, businesses can ensure that
their electronic data is accurately and efficiently processed, improving
their overall efficiency and competitiveness.

 Mapping EDI Data

Although electronic data interchange (EDI) seems straightforward, it
becomes arduous as you incorporate more partners. Fortunately,
modern EDI platforms offer solutions with improved onboarding
times, reduced costs, and reduced complexity through advanced
mapping techniques.

EDI standardization and mapping evolved from the need to simplify

communications between trade partners. When executed correctly, it
eliminates miscommunication and enables streamlined automation
for smoother processes.

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 Implementing EDI

Step 1: Develop the Organizational Structure

For a successful EDI (Electronic Data Interchange) implementation, it's

crucial to establish a proper organizational structure. Key elements include:

- EDI Coordinator: An IT professional experienced in delivering EDI

solutions. This role could be filled by someone internal or an external hire,
depending on the organization’s current expertise.
- Steering Committee: Led by the EDI Coordinator, this committee typically
includes department heads, IT leaders, and legal representatives.
- Senior Management Sponsor: Senior management commitment is
essential for ensuring the success of the program.
- Dedicated EDI Team: Responsible for the hands-on implementation of the
EDI system.

Ongoing communication with all departments affected by the EDI program

is vital to securing buy-in and ensuring smooth implementation.

Step 2: Undertake a Strategic Review

A strategic review identifies potential applications for EDI and sets priorities
for its implementation. Factors to consider include:

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- The number of business partners, transaction volume, and types of
documents exchanged.
- Analyzing the current business processes and determining how EDI will
improve them, such as eliminating redundant steps, reducing manual effort,
and improving relationships with partners.

Key questions to address during this step include:

- Can EDI eliminate redundant data entry?
- Can it reduce inventory size or improve customer service?
- Does it support larger business strategies like Just-in-Time
manufacturing?

These questions help pinpoint the areas where EDI would be most
beneficial.

Step 3: Conduct In-depth Analysis

This step focuses on evaluating which business cycles will benefit most
from EDI, based on factors such as cost, potential savings, and readiness
for implementation. Tools like **Cost-Benefit Analysis (CBA)** and an **EDI
Survey** of business partners are used to assess the current state and
ensure the EDI system can be supported across the partner network.

The results will lead to a comprehensive report detailing the scope of the
project, financial data, system recommendations, and personnel
requirements.

Step 4: Develop a Business-Focused EDI Solution

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Based on the findings from the analysis, the next step is to design a
comprehensive EDI solution. This includes understanding the expected
volume of EDI transactions, required IT infrastructure, and network
connections needed for secure data exchanges with business partners.
The two critical components are:

- EDI Translator: A software tool that converts EDI data into a format that
the receiving system can understand.
- Communications Model: This includes choosing between direct
connections, EDI Network Providers (VAN), hybrid solutions, or outsourcing
to Managed Services, depending on the community size and complexity.

Step 5: Select the Correct EDI Network Provider (VAN)

Choosing the right EDI Network Provider (VAN) is crucial. The selection
process should consider:

- Services Offered: Does the provider offer only basic EDI, or do they
provide value-added services like training, reporting, and data security?
- Reach: Does the provider have a strong presence in your industry and a
broad network of business partners?
- Pricing Structure: Understand the cost structure, such as transaction fees
or subscription models, and determine if it aligns with your business needs.
- Reliability: Ensure that the provider has a proven track record and can
support your business globally.

Step 6: Integrate EDI with Business

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Integration is often the most complex part of EDI implementation. This
involves mapping internal data to EDI standards and ensuring seamless
communication between EDI systems and ERP systems. The key activities
include:

- Data extraction and loading.

- Mapping data from internal systems to EDI transaction formats.
- Installing and configuring communication software.

Proper mapping minimizes the need for custom programming and ensures
efficient data flow.

Step 7: Integrate Data Across the Business

Data integration ensures that information can be shared effectively across

different business systems. This requires thorough data analysis to
understand system requirements and standardize data formats, such as
using primary keys (e.g., purchase order numbers) and secondary keys
(e.g., department code). Industry-wide codes help facilitate data sharing
and avoid compatibility issues.

Step 8: Undertake Data Mapping

Data mapping defines how internal data corresponds to EDI transaction

formats. This process is done using an EDI translator, which uses the
mapping to translate data as it enters the system. Efficient data mapping
reduces the need for custom solutions, which improves system
performance and reduces costs.
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Step 9: Establish a Pilot Project
The pilot project is a crucial step in testing the system before full-scale
implementation. A small number of experienced partners are selected for
testing. The pilot helps identify issues, refine the system, and ensure that it
can handle real-world transactions. Success in the pilot project leads to
further testing and eventual rollout.
Key questions to address include:
- Does the system maintain adequate control?
- Does it meet the expected benefits?
- Can it handle the anticipated transaction volume?

Step 10: Roll Out EDI to Business Partners

Once the system is tested, the next step is to roll it out to all business
partners. This involves surveying the community for their EDI readiness,
offering different EDI solutions for less-ready partners (e.g., web-based or
Excel-based forms), and supporting partners through the startup process.
Continuous management is required to monitor communication,
troubleshooting issues, and update the system as needed.

Successful rollout and ongoing management ensure smooth EDI

operations across the entire supply chain, maintaining system effectiveness
and supporting business growth.

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 EDI in Various Industries

 EDI in Retail
EDI is widely used in the retail industry to streamline supply chain
operations. Common transactions include purchase orders, invoices, and
shipment notifications. EDI helps retailers maintain accurate inventory
levels and improve order processing times.

 EDI in Healthcare
In the healthcare industry, EDI facilitates the exchange of claims, payment
information, and patient data. It improves accuracy, reduces administrative
costs, and ensures compliance with regulatory requirements.

 EDI in Manufacturing
Manufacturers use EDI to manage orders, shipments, and inventory. EDI
helps manufacturers optimize production schedules, reduce lead times,
and enhance collaboration with suppliers and customers.

 The High-Tech Industry

The high-tech value chain has become very complex, with many high-tech
companies relying on external partners to help design and manufacture
their products. Time to market can define the success of a high-tech
company. EDI ensures the industry’s processes are as efficient as possible.

 The Financial Services Industry

The financial services industry relies on its ability to process accounts
payable and receivable, as well as managing investments and loans on
behalf of its customers, both retail and wholesale. For years, many of these
processes were manual and paper intensive. EDI is changing all that.

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 The Future of EDI

 Trends and Innovations

The future of EDI is shaped by emerging technologies and evolving
business needs. Trends include the adoption of cloud-based EDI solutions,
the integration of EDI with blockchain for enhanced security, and the use of
artificial intelligence (AI) to automate and optimize EDI processes.

 The Role of AI and Machine Learning in EDI

AI and machine learning can enhance EDI by predicting trends, identifying
anomalies, and automating complex data mappings. These technologies
have the potential to further streamline EDI processes and improve data
accuracy.

 Machine Learning and Artificial Intelligence in EDI

The intersection of machine learning and artificial intelligence (AI) with EDI
is another trend that could significantly impact the future of EDI. These
technologies offer the potential to automate, optimize, and even
revolutionize how businesses handle EDI.

 Blockchain Technology in EDI

Blockchain, best known as the technology underpinning cryptocurrencies,
has profound implications for the future of EDI due to its unparalleled
security and reliability.
At its core, blockchain is a decentralized and immutable ledger, meaning it
cannot be altered or deleted once data is added. Blockchain is particularly
beneficial to EDI, as it can ensure the integrity and authenticity of the
exchanged data.

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 Cost of EDI
The cost of EDI implementations will be impacted by the approach you
take: In-house or working with a third-party EDI provider.
Calculating the cost of EDI implementation is very important in order to
ensure that it will deliver real financial and business benefits to your
company. But first you must decide the approach you are going to take with
EDI: In-house or working with a third-party EDI provider (sometimes
referred to as a value-added network, or VAN).

 EDI Provider/VAN
As you’d expect, there are different pricing models available from third-
party providers that you will need to review. Although your final choice will,
of course, consider price, you should also consider key business factors
such as:
 The number of your partners who are enabled on the providers’
networks already.
 Whether the provider covers the range of geographies you require
 The levels of support and training they are able to provide to support
you and your trading community.
 The range of options that they can provide to enable you and all of
your trading community to do EDI.
The provider’s charge, to a large degree, is usually based on the volume of
data you transmit over the network. This is often measured in the number
of kilo-characters (KCs) contained within your EDI document. Based on
this, providers offer a variety of subscription models that you can select
from, such as:
 Pay-as-you-go.
 Monthly
 Annual subscription

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Often these models operate within price bands based on anticipated
volumes of KCs or documents. You should also be aware of hidden
charges such as minimum record lengths. Some providers specify a record
length of 128 to 512 characters. The result is that if you were to send 10
documents of 10 characters you would be charged for up to 5120
characters for sending only 100. If you have a large volume of small
transactions this can add a substantial amount to your monthly charge.
It is important that you understand the volume and nature of your business
transactions before selecting a provider. That way you can select the
pricing model that best meets your business needs. And look carefully at
the small print of any provider that claims to offer a “free” EDI VAN service,
as it is unlikely to be the case.
 In-House
A few very large organizations have created their own EDI networks. This
has the advantages of internal management, control and security but it is
not something to be undertaken lightly. If you are going to build your own
EDI system, at a minimum, you’ll need to invest in:
 EDI software
 Communications software
 EDI transmission methods
 Mapping and translation software
 EDI and mapping specialists
 Ongoing upgrades, support and maintenance
That investment will get you to the starting point. You’ll have an internal EDI
system. It is likely that you’ll have to assist each of your business partners
to implement the system at their end, maybe even build it for them. You will
need to do this with each business partner that you want to do EDI with,
and it will be an ongoing requirement as your trading community evolves,
grows and changes.

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Little surprise then that most organizations have chosen instead to work
with some form of third-party provider who can supply the EDI
infrastructure without their having to make that initial investment. This can
be particularly important for small- and medium-sized businesses that
simply do not have the people or cannot find the money for this level of

investment within their company .

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 Conclusion

 Summary of Key Points

EDI is a critical technology for modern businesses, enabling the efficient
and accurate exchange of documents. By adopting EDI, organizations can
achieve significant improvements in productivity, cost savings, and
business collaboration.

 The Ongoing Importance of EDI in Business

As businesses continue to evolve, EDI will remain a vital tool for achieving
seamless communication and streamlined operations. Embracing the latest
EDI standards and technologies will ensure that organizations stay
competitive in an increasingly digital world.

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 BIBLIOGRAPHY

WWW.GOOGLE.COM
WWW.YOUTUBE.COM

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THANK
YOU

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