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INTRODUCTION

• Technology continually offers new and innovative techniques that affect companies and individuals:

1. Cordless telephone2. Video games3. fax machines4. Answering machines5. Notebook computers6. Electronic mail (e-mail)7. ATM card

• We are in the midst of the e-communications era• One innovation is electronic data interchange

– causing major changes in how companies conduct business

EDI IN ACTION

• In a traditional system, the pervasive practice of converting digital data into hard copy data that is reconverted into electronic information again on the receiving end generates unnecessary costs. The use EDI carriers save substantial administration costs by eliminating the bulk of circulating paperwork. Further, the accessibility of information is improved manifold, which enables a more efficient audit of the operation.

EDI IN ACTIONThe EDI transactions for a purchase, shipment and corresponding

payment are as follow:• Buyer’s computer sends Purchase Order to seller’s computer• Seller’s computer sends Purchase Order Confirmation to buyer’s

computer• Seller’s computer sends Booking Request to transport company’s

computer• Transport company’s computer sends Booking Confirmation to

seller’s computer• Seller’s computer sends Advance Ship notice to buyer’s computer• Transport company’s computer sends status seller’s computer• Buyer’s computer sends Receipt Advice to seller’s computer• Seller’s computer sends Invoice to buyer’s computer• Buyer’s computer sends Payment to seller’s computer.

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WHAT IS ELECTRONIC DATA INTERCHANGE

(EDI)?

EDI is defined as an application-to-application transfer of business documents between computers using industry-defined standards

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WHAT IS ELECTRONIC DATA INTERCHANGE?

• A Definition From Book:– EDI is computer-to-computer communication

using a standard data format to exchange business information between companies.

• Ex:– Consider the Postal System

EDI is a comprehensive set of standards and protocols for the exchange of business transactions in a computer-understandable format. This may cover applicationssuch as the following:• Acknowledgment of business transactions• Financial reporting• Inquiries• Invoices Order status• Payments• Pricing• Purchasing• Receiving• Scheduling

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EDI Example

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EDI USERS AND TYPES OF ACTIVITIES

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EDI USERS AND TYPES OF ACTIVITIES

SECTION OUTLINE:–Who Uses EDI?

–Where is uses EDI?

– Types of EDI Activity

– Business Processing Considerations

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EDI USERS AND TYPES OF ACTIVITIES

Who Uses EDI? (From Book)• Companies of all types and sizes are able to utilize EDI.• Ex. Some large corporations specify EDI :

– Use as the communication method of choice– Automakers

• suppliers to send all purchase orders and invoices electronically– Industry – banking– healthcare– retailing– travel– Manufacturing– insurance– Government

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EDI USERS AND TYPES OF ACTIVITIES

Who Uses EDI? (From Net)• Any company that (buys, sells goods, services) can

potentially use EDI.

• Because it supports the entire business cycle

• EDI can streamline the relationship that any company has with its (customers, distributors, suppliers)

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EDI USERS AND TYPES OF ACTIVITIES

Where Is Uses EDI?– Sample EDI application areas – EX:

• Inventory• Billing• Distribution• Price notification• Financial• Freight rate notifications• Sales & cash management• Purchasing

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EDI USERS AND TYPES OF ACTIVITIES

Types of EDI Activity • Currently EDI is primarily used for:

• Purchase orders• Bills of lading• Invoices• Healthcare claims• Financial exchanges

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EDI USERS AND TYPES OF ACTIVITIES

Types of EDI Activity

Difference between EDI & electronic funds transfer (EFT)

• EFT is also used to exchange information electronically.

• Financial EDI is the exchange of payment and bank balance information between a company and its bank or another company.

• EFT is the exchange of information between two banks that results in value being transferred.

• It is possible for financial EDI to be bank to bank, but EFT does no bank-to-company exchanges.

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EDI USERS AND TYPES OF ACTIVITIES

Business Processing Considerations

• EDI is changing the way companies do business

• shifting the ordering process from a snail-like

• paper-intensive system to a computerized one

• The nature of business relationships, both internal and external, is changing

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EDI USERS AND TYPES OF ACTIVITIES

Business Processing Considerations

• Ex:– A salesperson who used to receive and write orders has

become a product advisor

– Customers conducting business with firms that have multiple divisions now request centralized electronic transmission

COMPONENTS OF EDI Trade agreement Standard document format EDI translation management Software Communication software Modem VAN Point-to-Point

Benefits of EDI to IndustryThe benefits and advantages are shared by both the trading partner submitting EDIinformation. Some of the benefits derived by industry by using EDI are:• Improved reporting performance• Time savings• Eliminates manual preparation and transfer of paper documents.• Cost savings Reduces paper costs, storage requirements and handling overhead.• Improved accuracy• Improves customer service.• Enhanced flexibility

• Improves quality of products and services.• Improves relationships with suppliers and customers.• Reduces order lead times.• Improves cash flow• Creates better procedures• The elimination of data re-entry, resulting in reduced errors• Reducing days in accounts receivable• Increasing staff productivity

The major factors that have limited the use of traditional EDI are: ◗ Significant initial investment is needed, and ongoing operating

costs are high. ◗ Business processes must be restructured to fit EDI requirements. ◗ A long start-up time is needed. ◗ Use of expensive, private VANs is necessary. ◗ There are multiple EDI standards, so one company may have to use

several standards. ◗ An EDI cannot support dynamic trading in marketplaces. ◗ The system is complex. ◗ A converter is required to translate business transactions to EDI

code. ◗ The system is inflexible; it is difficult to make quick changes, such

as adding business partners.

Fig. 56 Application of EDI transaction in a manufacturing concern

EDI TRANSMISSION There are 3 basic ways of transmitting EDI documents through computers.

Value Added Networks

Interconnect Transmission

Direct Transmission

Value Added Networks :-  

The VAN acts as a clearing house to send and/or receive data.

 

Data to be transmitted can be stored by the VAN and delivered on demand. 

Data can be archived and delivered a second time if necessary without retransmission from the sender. 

The data transmission is secure, and VANs may also provide messages for tracking transmission success.

  For all these reasons , VANs are widely used to transfer EDI documents all over the world. However , they are uneconomical for small enterprises sending large amounts of data , since VANs charge for the amount of data transferred , without due regard to the time taken. 

Interconnect Transmission :- Variation of VAN transmission. Interconnects 2 VANs together. Employed when trading partners subscribe to different VANs.

Direct Transmission :-

EDI transfers data directly between trading partners

Each partner must take care of auditing details , security , etc. Direct transmission, vs. using a VAN, is far more economical when exchanging a large volume of data. Direct transmission provides a means of communication for trading partners not using a VAN.

EDI APPLICATIONS  EDI is currently being utilized only in a limited realm of activities, in spite of its enormous capabilities . It is so under- tapped , that the industry joke goes that several companies are even unaware of the expansion of EDI. As of now ,it is being used in the following areas,apart from purely business purposes.  Streamlining buyer - seller interaction .  Quick transcript exchange in universities .  Transmitting large , complex engineering designs created on specialized computers , in auto manufacturing .  Sending on-line catalogues to customers on product- prices , discounts & terms , for large MNC s .  

Legal and Privacy concerns

One way of legal & security issue is Digital signatures. The technical uses of digital signatures are :-1. Messages are time- stamped or digitally notarized to establish dates and times at which a recipient hard access or even read a particular message.2. These signatures are to replace handwritten signatures, as it is same legal status as handwritten signatures.3. Digital signatures should have greater legal authority than handwritten signatures

THE LEGAL ISSUES OF ELECTRONIC COMMERCE AND DEVELOPMENTS IN INDIA

ISSUES ADDRESSED BY DRAFT E-COMMERCE ACT

(Model Law of UNCITRAL on Legal Aspects of EDI )

In a world of paper documents, the established norms of contract and commercial law have been sufficient to resolve legal disputes concerning these documents. However, in an EDI setting, new risks and problems are involved, requiring new modes of thinking and behavior.

e.g.When does an EDI transaction become binding ?What can be done in place of a signature ?Who bears the risk of erroneous transmission, lost record, fraud ? etc..,

In general, the legal issues that are raised by the use of EC/EDI include

evidential,

contractual, and

liability issues.

The evidential issues of EDI have two distinct aspects. The first considers the questions of admissibility, whether an electronic document is admissible as evidence in court. The second aspect considers the need to have trade data properly authenticated, the requirement to be signed.

The contractual issues of EDI considers the impact that the use of EDI may have on traditional contract formation.

Within an EDI network, there exists two major relationships, those between service providers and users; and an agreement between the users themselves. These relationships leads to commercial responsibility and extent of liability created through use of EDI.

The Electronic Commerce Act of 1998 aims to facilitate the development of a secure regulatory environment for Electronic Commerce by providing a legal infrastructure governing electronic contracting, security and integrity of electronic transactions, the use of digital signatures and other issues related to electronic commerce

The act provides the definition of all the requisite terms and addresses the following broad areas: Electronic Records and Signature Generally; Secure Electronic Records and Signatures; Electronic Contracts; Effect of Digital Signatures; General Duties Relating to Digital Signatures; Duties of Certification Authorities; Duties of Subscribers; Regulation of Certification Authorities and Repositories; Government use of Electronic records and Signatures; Liability of Network Service Providers; Computer Crime

The Electronic Commerce Support Act, 1998 serves to amend various Indian Acts to facilitate the continued growth of electronic commerce and to resolve the questions raised regarding the applicability of such legislation to the unique features of the electronic regime.

The Act suggest amendments in the following Acts :

Amendments to the Indian Penal Code, 1860 ; Amendments to the Indian Evidence Act, 1872; Amendments to the Contract Act, 1872; Amendments to the Indian Telegraph Act, 1885; Amendments to the Banker’s Books Evidence Act, 1891; Amendments to the General Clauses Act, 1897; and Amendments to the Reserve Bank of India Act, 1934

EDI ISSUES

EDI AS A TECHNICAL ISSUE•The Standardisation Issue

EDI AS A STRATEGIC ORGANISATIONAL ISSUEOrganisational Readiness for EDIIntegration with Existing Application SystemsChange Management ConsiderationsSenior Management Support