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Roger Clarke's 'Introduction to EDI'

Electronic Data Interchange (EDI): An Introduction

Roger Clarke

Principal, Xamax Consultancy Pty Ltd, Canberra

Visiting Fellow, Department of Computer Science, Australian National University

Revision of December 1998

© Xamax Consultancy Pty Ltd, 1992, 1993, 1998

Available under an AEShareNet Free for Education licence

This document is a lightly revised version of materials originally published in 1992 and 1993

Republished in Business Credit (October 2001!) 23-25

This document is at http://www.rogerclarke.com/EC/EDIIntro.html


Definition

Electronic Data Interchange (EDI) may be most easily understood as the replacement of paper-based purchase orders with electronic equivalents. It is actually much broader in its application than the procurement process, and its impacts are far greater than mere automation. EDI offers the prospect of easy and cheap communication of structured information throughout the corporate community, and is capable of facilitating much closer integration among hitherto remote organisations.

A more careful definition of EDI is 'the exchange of documents in standardised electronic form, between organisations, in an automated manner, directly from a computer application in one organisation to an application in another'.


Architecture for EDI

EDI can be compared and contrasted with electronic mail (email). Email enables free-format, textual messages to be electronically transmitted from one person to another. EDI, on the other hand, supports structured business messages (those which are expressed in hard-copy, pre-printed forms or business documents), and transmits them electronically between computer applications, rather than between people.

The essential elements of EDI are:

EDI depends on a moderately sophisticated information technology infrastructure. This must include data processing, data management and networking capabilities, to enable 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.

A common connection point is needed for all participants, together with a set of electronic mailboxes (so that the organisations' computers are not interrupted by one another), and security and communications management features. It is entirely feasible for organisations to implement EDI directly with one another, but it generally proves advantageous to use a third-party network services provider.


Benefits of EDI

EDI's saves unneccessary re-capture of data. This leads to faster transfer of data, far fewer errors, less time wasted on exception-handling, and hence a more stream-lined business process. Benefits can be achieved in such areas as inventory management, transport and distribution, administration and cash management. EDI offers the prospect of easy and cheap communication of structured information throughout the government community, and between government agencies and their suppliers and clients.

EDI can be used to automate existing processes. In addition, the opportunity can be taken to rationalise procedures, and thereby reduce costs, and improve the speed and quality of services. Because EDI necessarily involves business partners, it can be used as a catalyst for gaining efficiencies across organisational boundaries. This strategic potential inherent in EDI is expected to be, in the medium term, even more significant that the short-term cost, speed and quality benefits.


History of EDI

The early applications of what became known as EDI were undertaken in the United States. The idea's origins have an international flavour, however, being traceable back to the 1948 Berlin Airlift, where the task of co-ordinating airfreighted consignments of food and consumables (which arrived with differing manifests, languages and numbers of copies) was addressed by devising a standard manifest. Electronic transmission commenced during the 1960s, initially in the rail and road transport industries. The standardisation of documents was a necessary concomitant to that change. In 1968 the United States Transportation Data Coordinating Committee (TDCC) was formed, to coordinate the development of translation rules among four existing sets of industry-specific standards. A further significant move towards standardisation came with the X12 standards of the American National Standards Institute (ANSI), which gradually extended and replaced those created by the TDCC.

At about the same time, the U.K. Department of Customs and Excise, with the assistance of SITPRO (the British Simplification of Trade Procedures Board), was developing its own standards for documents used in international trade, called Tradacoms. These were later extended by the United Nations Economic Commission for Europe (UNECE) into what became known as the GTDI (General-purpose Trade Data Interchange standards), and were gradually accepted by some 2,000 British exporting organisations.

Problems created by the trans-Atlantic use of two different (and largely incompatible) sets of standardised documents have been addressed by the formation of a United Nations Joint European and North American working party (UN-JEDI), which began the development of the Electronic Data Interchange for Administration, Commerce and Transport (EDIFACT) document translation standards. A full range of business documents is in the process of being developed.

EDI's direct impact is to reduce the amount of data capture and transcription. This generally results in a decreased incidence of errors, less time spent on exception-handling, and fewer data-caused delays in the business process. Benefits can be attained in such areas as inventory management, transport and distribution, administration and cash management.

By the time of the 1991 EDICA Conference in Sydney, it was claimed that there were 1,500 corporations using EDI in Australia and New Zealand. This would have compared favourably with the populations variously claimed for the U.S. (5,000-12,000), but less so with the U.K. (12,000) and Singapore (2,000). The transaction volumes in Australia to date were, moreover, small compared with those countries.


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Last Amended: 20 December 1998; addition of FfE licence 5 March 2004



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Created: 20 December 1998 - Last Amended: 20 December 1998; addition of FfE licence 5 March 2004 by Roger Clarke - Site Last Verified: 15 February 2009
This document is at www.rogerclarke.com/EC/EDIIntro.html
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