Introduction to Electronic Data Interchange
All Organization and administrative association with large information system faces a situation where typing and printing of all information arriving or leaving their domain is no longer feasible. Everyone who works in a business organization where hundreds and thousands of standard forms, (e.g. invoices) and received and responded to, knows how difficult it is to manage this task. These forms should be entered in the computer for processing, and response, should be generated and posted to the concerned parties. The whole process is time-consuming and prone to human errors during data entry and expensive to operate.
Electronic Data Interchange (EDI) is the electronic exchange of business documents in a standard, computer processable, universally accepted format between-trading partners. EDI is quite different from sending electronic mail, messages or sharing files through a network. In EDI, the computer application of both the sender and the receiver, referred to as Trading Partners (TPs) have to agree upon the format of the business document which is sent as a data file over an electronic messaging service.
Refer figure 5.1, it illustrates how EDI messages can be used to totally automate the procurement process between two trading partners.
The two key aspects of EDI that distinguish it from other forms of electronic communication, such as electronic mail, are:
The information transmitted is directly used by the recipient computer without the need for human intervention is rarely mentioned but often assumed that EDI refers to interchange between businesses. It involves two or more organization or parts of organization communicating business information with each other in a common agreed format.
The repeated keying of identical information in the traditional paper-based business. Communication creates a number of problems that can be significantly reduced through the usage of EDI. These problems include:
• Increased time
• Low accuracy
• High labour charges
• Increased uncertainty.
To take full advantage of EDI’s benefits, a company must computerize its basic business applications. Trading partners are individual organization that agrees to exchange EDI transactions. ED! cannot be undertaken unilaterally but requires the cooperation and active participation of trading partners. Trading partners normally consists of an organization’s principal suppliers and wholesale customers. Since large retail stores transact business with a large number of suppliers they were among the early supporters of ED!. In the manufacturing sector, EDI has enabled the concept of Just-In-Time inventory to be implemented. JIT reduces inventory and operating capital requirements.
Costs and Benefits
Wherever the EDI has been implemented, computers electronically exchange business documents with each other, without human intervention. This only reduces the operating
costs, administrative errors, and delivery delays. The benefits accruing from EDI implementation can be broadly classified into direct benefits and long-term strategic benefits.
Direct Benefits
• The transfer of information from computer to computer is automatic.
• Cost of processing EDI documents is much smaller than that of processing paper documents.
• Customer service is improved. The quick transfer of business documents and marked decrease in errors allow
orders to be fulfilled faster.
• Information is managed more effectively.
• There is a improved job satisfaction among the data entry operators, clerks etc. When redeployed in more creative activities.
Strategic Benefits
• Customer relations are improved through better quality and speed of services.
• Competitive edge is maintained and enhanced.
• Reduction in product costs can be achieved.
• Business relations with trading partners are improved.
• More accurate sales forecasting and business planning is possible due to information availability at the right place at the right time.
Networking Infrastructure for EDI
For the successful functioning EDI, it assumes availability of a wide area network to which organization can subscribe. All organization that is willing to join EDI services must subscribe to the common network. In addition, all organization participating in a EDI service-group that they will use, and load appropriate EDI software on their compute systems. This software is responsible for providing translation services. EDI services and network access services as shown in figure 5.2.
When a sender’s computer system produces a message and passes it to the translation service software. This translates the message into the common agreed structure and passes it to EDI service software. EDI service software executes necessary functions and procedures to send the message, track it in the network and ensure that it reaches its destination. EDI services, in addition, may include procedures to ensure security functions, billing and accounting functions and generate necessary logs for auditing purposes. Network access services are responsible for actually controlling the interaction with the network that transports messages from one site to another.
The transport network provides a powerful electronic messaging service to support EDI services. Transport network uses a “store and forward mechanism” and messages are sent to ‘mail boxes’ that are managed by the network service provider. The originator can send his messages at any time independent of the recipient’s system status, Le. whether or not it is ready for receiving. The recipient systems periodically check their mailboxes
and transfer messages from network mailboxes to their own memory. Thus a transfer cycle is completed. The receiving computer applies necessary translator and converts the received message into a format understandable by its application software. The application software is programmed to recognize various messages and take necessary actions such as generating response to receive messages and updating other database.
Functioning of EDI
Any organization using EDI communicates with their Trading partners, in one of the two ways:
1. Exchange of date with several trading partners directly.
Interaction with multiple companies through a central information-clearing house.
In the latter case, all transaction takes place through a third party’s computer system, which then sends them to the appropriate receiver’s computer. This enables the sender to
communicate with an unlimited number of trading partners without worrying about the proprietary system audit trails, variables transmission speeds, and general computer compatibility.
EDI Works in the Following Manner:
1. Prior to any computer work, representatives of two companies interested in exchanging data electronically meet to specify the application in the EDI standards, which they will implement.
2. The two companies exchange data electronically in the standard formats.
3. Each company-adds EDI program to its computer to translate the company data into standard formats for transmission, and for the reverse translation in the data it receives.
The sender transmits the database formatted in the EDI standards to the receiver who then translates the formatted message to a computer record to be processed and used internally. All transmission is checked both electronically and functionally and the protocol includes procedure for the error detection and correction.
Once a company has established standardized communications with another company, it is now in a position to communicate with any other company that is also using the EDI standards.
The Flow of Information in EDI is as Follows
• Collection of data for its own operational or statistical requirements, which is edited to be added to its own database.
• Extraction of Pertinent information by the company from its database, summarized if necessary and constructed into EDI transaction sets, and finally it is transmitted to the
company or organization requiring it for valid reasons.
• The frequency of preparing this information is determined by the operational requirements of each recipient.
• A communication link for transmission is established according to the standard communication protocol.
• The Receiver receives the information transmission, checks for its physical characteristics (parity, checks character, transmission mode), and requests for retransmission if an error is detected in the physical characteristics of the transmission.
• Checking the functional characteristics of the data by the receiver and an acknowledgement sent to the original sender for receiving the transmission and to identify any errors detected.
• To process the information received by the receiver according to its own internal procedures and timing requirement.
EDI Components
A typical EDI system converts generic EDI messages (in EDIFACT or any other EDI standards) format to RDBMS format and from RDBMS format to EDI format. RDBMS
database contains the data to be translated into EDI format and where EDI data to be converted (and written) to. EDI configuration programs do these translations.
There are three main components of an EDI system as shown
in figure 5.4.
1. Application Service.
2. Translation Service
3. Communication Service
EDI Services
The three EDI services all performs three different tasks.
Application Service
The Application Service provides the link between a business application and EDI. It allows us to send document to, and receive documents from an EDI system.
A set of callable routines is used to transfer documents from the business application into EDI. Documents destinations can is either intra-company or to external companies, Le., trading partners.
The EDI Application Service holds each incoming and outgoing document as a single internal format file.
EDI converts the document to a standard format and sends it to be the trading partner the relevant communication protocol. A number of different standards and communication protocols are available.
The below list describes what happens in the Application Services:
For Outgoing Documents:
• The business application uses the callable routines to send a document from the business application to the Application Service. The document is now in the EDI system and is called internal format file.
• The Application Service sends the document in the internal format file to the Translation Service.
For Incoming Documents:
The Application Service receives an internal format file from the Translation Service.
The Application Service makes the data in the internal format file available in database so that the business application can fetch the document from EDI. A callable interface is used to do this.
The figure 5.5, it displays the application service:
Translation Service
Refer figure 5.6, where Translation service:
Converts outgoing documents from an internal format file to an agreed external format. Translates incoming documents from an external format to the EDI internal format file.
The external document standards that an EDI system supports are EDIFACT, X12, TDCC, and ODETTE.
For outing documents:
The Translation Service receives a document in the internal format file from the Application Service. It converts the internal format file from the Application Service. It converts the internal format file to the appropriate external standard (either EDIFACT,X12, TDCC, or ODETTE) to the internal format file.
The file is now an internal format file.
The Translation Service combines one or more external format file into a transmission file. The Translation Service now sends the transmission file to the communication Services.
For incoming documents:
• The translation Service receives a document in the transmission file from the communication Service.
• Separates the transmission file to produce external format files.
• It translates each external format file, which may be in an external standard (either EDIFCT, X12, TDCC, or ODETTE) to the internal format file. The file is now an internal format file.
• The Translation Service now sends the internal format file to the Application Service.
Communication Service
The communication Service sends and receives transmission files to and form the trading partners either directly or by using a third party service called a Value Added Network (VAN).
The list below describes what happens in the Communication Service:
For outgoing Documents:
• The Communication Service receives a transmission file from the Translation Service. It checks the file to see which trading partner it has be sent to. When it has identified the
type of connection to be used for this trading partner it determines which gateway to use.
• The Communication Service sends the Transmission file to the Translation Service.
For Incoming Documents:
The Communication Service receives a transmission file from the trading partner. The file arrives through one of the gateways that EDI support.
The Communication Service sends the transmission file to the Translation Service.
Refer figure 5.7, shows the Communication service.
File Types in EDI
EDI creates the following files as a document passes through the system..
• Internal Format File (IFF)
• External Format File (EFF)
• Transmission File (TF)
Internal Format File
Internet Format File (IFF) contains a single document for a single trading partner. Internal Format File is principally for EDI’s own use.
External Format File
External Format File (EFF) contains the same data as the internal format file translated into the appropriate standard document format.
Transmission File
Transmission file contains. one or more documents for the same trading, partner. Documents of the same type are packaged together in functional groups. The functional ‘ groups going to one trading partners are packaged into an interchange set. An interchange set contains one or more functional groups of documents with the same sender and receiver. Refer figure 5.8, it represents a transmission file.
Electronic Fund Transfer (EFT)
Electronic Fund Transfer (EFT) system involves the electronic movement of funds and funds information between financial institutions. The transfers are based on EDI technology transfer of funds involves. minimum amount of data interchange between two parties. There are two major worldwide EFT networks: the Clearing House Interbank Payments System (CHIPs) and FedWire (the Oldest EFT in the US.). In 1993,these networks moved an. estimated US $ 1.5 billion each banking day. A third major network the society for World -Wide interbank Financial Telecommunication (SWIFT) is capable of handling nearly 1 million massages per day.
EDI has been widely adopted by financial institutions and service sectors in the western world. Insurance brokers can send
EDI messages to the computers of various insurance companies and get details on specific policies. Even though EDI can be useful for almost any sector, banks have been the primary user for EDI services till now.
EDI Massages- Security
Security is used as a blanket term to cover many different needs according to the data and use to which it is being put. Basic reference model 7898/2 specifies an internationally adopted security architecture for end-to End security in network interconnection. The five services defined in the model are:
• Authentication: This service verify the identity of communication entities in a network.
• Access control: It restrict access to the information and processing capabilities of a network to authorised entities.
• Confidentiality: It prevents the unauthorised modification of information.
• Integrity: It detects whenever there is unauthorised modification.
• Non-repudiation: Prevents denial by one of the entities involved in a communication of having participated in all or part of the communication.
X.400 in its present version of 1988 offers some features of security which are indispensable in business communication. Security in computer networks is provided with the use of cryptography technique. Two types of cryptography are available private key cryptography(conventional cryptography) and public key cryptography. The private key cryptography to communicating parties share a single encryption and decryption key. The sender encrypts the message before transmission using its. encryption key. The receiver decrypts the message using the reverse process. The US DES (Data-encryption Standard) algorithm has traditionally been used to secure EDI messages. It used 64 or 128-bits encryption or decryption key. The public key cryptography make use of two speared keys for encryption and decryption. The transmeter encrypts the message using its encription key known as its private key and receiver decrypts the message using corresponding decryption key called public key.
Since both keys are registered with a registration authority the message becomes a digital signature of the sender as no one else knows the private key of the pair allotted to the transmitter. Public key is made available to all receivers in the network.
The Possible Methods Used for Security Purposes of EDI Messages are:
• Authentication-creation of digital signature.
• Confidentiality-any method, DES or Rivett, Shamir and Adleman alogorithm (RSA) is acceptable.
• Non-repuditable-Only public key cryptography can provide this feature.
VSNL now offers Gateway Electronic Data Interchange Service (GEDIS) trade net to Indian subscribers.
All Organization and administrative association with large information system faces a situation where typing and printing of all information arriving or leaving their domain is no longer feasible. Everyone who works in a business organization where hundreds and thousands of standard forms, (e.g. invoices) and received and responded to, knows how difficult it is to manage this task. These forms should be entered in the computer for processing, and response, should be generated and posted to the concerned parties. The whole process is time-consuming and prone to human errors during data entry and expensive to operate.
Electronic Data Interchange (EDI) is the electronic exchange of business documents in a standard, computer processable, universally accepted format between-trading partners. EDI is quite different from sending electronic mail, messages or sharing files through a network. In EDI, the computer application of both the sender and the receiver, referred to as Trading Partners (TPs) have to agree upon the format of the business document which is sent as a data file over an electronic messaging service.
Refer figure 5.1, it illustrates how EDI messages can be used to totally automate the procurement process between two trading partners.
The two key aspects of EDI that distinguish it from other forms of electronic communication, such as electronic mail, are:
The information transmitted is directly used by the recipient computer without the need for human intervention is rarely mentioned but often assumed that EDI refers to interchange between businesses. It involves two or more organization or parts of organization communicating business information with each other in a common agreed format.
The repeated keying of identical information in the traditional paper-based business. Communication creates a number of problems that can be significantly reduced through the usage of EDI. These problems include:
• Increased time
• Low accuracy
• High labour charges
• Increased uncertainty.
To take full advantage of EDI’s benefits, a company must computerize its basic business applications. Trading partners are individual organization that agrees to exchange EDI transactions. ED! cannot be undertaken unilaterally but requires the cooperation and active participation of trading partners. Trading partners normally consists of an organization’s principal suppliers and wholesale customers. Since large retail stores transact business with a large number of suppliers they were among the early supporters of ED!. In the manufacturing sector, EDI has enabled the concept of Just-In-Time inventory to be implemented. JIT reduces inventory and operating capital requirements.
Costs and Benefits
Wherever the EDI has been implemented, computers electronically exchange business documents with each other, without human intervention. This only reduces the operating
costs, administrative errors, and delivery delays. The benefits accruing from EDI implementation can be broadly classified into direct benefits and long-term strategic benefits.
Direct Benefits
• The transfer of information from computer to computer is automatic.
• Cost of processing EDI documents is much smaller than that of processing paper documents.
• Customer service is improved. The quick transfer of business documents and marked decrease in errors allow
orders to be fulfilled faster.
• Information is managed more effectively.
• There is a improved job satisfaction among the data entry operators, clerks etc. When redeployed in more creative activities.
Strategic Benefits
• Customer relations are improved through better quality and speed of services.
• Competitive edge is maintained and enhanced.
• Reduction in product costs can be achieved.
• Business relations with trading partners are improved.
• More accurate sales forecasting and business planning is possible due to information availability at the right place at the right time.
Networking Infrastructure for EDI
For the successful functioning EDI, it assumes availability of a wide area network to which organization can subscribe. All organization that is willing to join EDI services must subscribe to the common network. In addition, all organization participating in a EDI service-group that they will use, and load appropriate EDI software on their compute systems. This software is responsible for providing translation services. EDI services and network access services as shown in figure 5.2.
When a sender’s computer system produces a message and passes it to the translation service software. This translates the message into the common agreed structure and passes it to EDI service software. EDI service software executes necessary functions and procedures to send the message, track it in the network and ensure that it reaches its destination. EDI services, in addition, may include procedures to ensure security functions, billing and accounting functions and generate necessary logs for auditing purposes. Network access services are responsible for actually controlling the interaction with the network that transports messages from one site to another.
The transport network provides a powerful electronic messaging service to support EDI services. Transport network uses a “store and forward mechanism” and messages are sent to ‘mail boxes’ that are managed by the network service provider. The originator can send his messages at any time independent of the recipient’s system status, Le. whether or not it is ready for receiving. The recipient systems periodically check their mailboxes
and transfer messages from network mailboxes to their own memory. Thus a transfer cycle is completed. The receiving computer applies necessary translator and converts the received message into a format understandable by its application software. The application software is programmed to recognize various messages and take necessary actions such as generating response to receive messages and updating other database.
Functioning of EDI
Any organization using EDI communicates with their Trading partners, in one of the two ways:
1. Exchange of date with several trading partners directly.
Interaction with multiple companies through a central information-clearing house.
In the latter case, all transaction takes place through a third party’s computer system, which then sends them to the appropriate receiver’s computer. This enables the sender to
communicate with an unlimited number of trading partners without worrying about the proprietary system audit trails, variables transmission speeds, and general computer compatibility.
EDI Works in the Following Manner:
1. Prior to any computer work, representatives of two companies interested in exchanging data electronically meet to specify the application in the EDI standards, which they will implement.
2. The two companies exchange data electronically in the standard formats.
3. Each company-adds EDI program to its computer to translate the company data into standard formats for transmission, and for the reverse translation in the data it receives.
The sender transmits the database formatted in the EDI standards to the receiver who then translates the formatted message to a computer record to be processed and used internally. All transmission is checked both electronically and functionally and the protocol includes procedure for the error detection and correction.
Once a company has established standardized communications with another company, it is now in a position to communicate with any other company that is also using the EDI standards.
The Flow of Information in EDI is as Follows
• Collection of data for its own operational or statistical requirements, which is edited to be added to its own database.
• Extraction of Pertinent information by the company from its database, summarized if necessary and constructed into EDI transaction sets, and finally it is transmitted to the
company or organization requiring it for valid reasons.
• The frequency of preparing this information is determined by the operational requirements of each recipient.
• A communication link for transmission is established according to the standard communication protocol.
• The Receiver receives the information transmission, checks for its physical characteristics (parity, checks character, transmission mode), and requests for retransmission if an error is detected in the physical characteristics of the transmission.
• Checking the functional characteristics of the data by the receiver and an acknowledgement sent to the original sender for receiving the transmission and to identify any errors detected.
• To process the information received by the receiver according to its own internal procedures and timing requirement.
EDI Components
A typical EDI system converts generic EDI messages (in EDIFACT or any other EDI standards) format to RDBMS format and from RDBMS format to EDI format. RDBMS
database contains the data to be translated into EDI format and where EDI data to be converted (and written) to. EDI configuration programs do these translations.
There are three main components of an EDI system as shown
in figure 5.4.
1. Application Service.
2. Translation Service
3. Communication Service
EDI Services
The three EDI services all performs three different tasks.
Application Service
The Application Service provides the link between a business application and EDI. It allows us to send document to, and receive documents from an EDI system.
A set of callable routines is used to transfer documents from the business application into EDI. Documents destinations can is either intra-company or to external companies, Le., trading partners.
The EDI Application Service holds each incoming and outgoing document as a single internal format file.
EDI converts the document to a standard format and sends it to be the trading partner the relevant communication protocol. A number of different standards and communication protocols are available.
The below list describes what happens in the Application Services:
For Outgoing Documents:
• The business application uses the callable routines to send a document from the business application to the Application Service. The document is now in the EDI system and is called internal format file.
• The Application Service sends the document in the internal format file to the Translation Service.
For Incoming Documents:
The Application Service receives an internal format file from the Translation Service.
The Application Service makes the data in the internal format file available in database so that the business application can fetch the document from EDI. A callable interface is used to do this.
The figure 5.5, it displays the application service:
Translation Service
Refer figure 5.6, where Translation service:
Converts outgoing documents from an internal format file to an agreed external format. Translates incoming documents from an external format to the EDI internal format file.
The external document standards that an EDI system supports are EDIFACT, X12, TDCC, and ODETTE.
For outing documents:
The Translation Service receives a document in the internal format file from the Application Service. It converts the internal format file from the Application Service. It converts the internal format file to the appropriate external standard (either EDIFACT,X12, TDCC, or ODETTE) to the internal format file.
The file is now an internal format file.
The Translation Service combines one or more external format file into a transmission file. The Translation Service now sends the transmission file to the communication Services.
For incoming documents:
• The translation Service receives a document in the transmission file from the communication Service.
• Separates the transmission file to produce external format files.
• It translates each external format file, which may be in an external standard (either EDIFCT, X12, TDCC, or ODETTE) to the internal format file. The file is now an internal format file.
• The Translation Service now sends the internal format file to the Application Service.
Communication Service
The communication Service sends and receives transmission files to and form the trading partners either directly or by using a third party service called a Value Added Network (VAN).
The list below describes what happens in the Communication Service:
For outgoing Documents:
• The Communication Service receives a transmission file from the Translation Service. It checks the file to see which trading partner it has be sent to. When it has identified the
type of connection to be used for this trading partner it determines which gateway to use.
• The Communication Service sends the Transmission file to the Translation Service.
For Incoming Documents:
The Communication Service receives a transmission file from the trading partner. The file arrives through one of the gateways that EDI support.
The Communication Service sends the transmission file to the Translation Service.
Refer figure 5.7, shows the Communication service.
File Types in EDI
EDI creates the following files as a document passes through the system..
• Internal Format File (IFF)
• External Format File (EFF)
• Transmission File (TF)
Internal Format File
Internet Format File (IFF) contains a single document for a single trading partner. Internal Format File is principally for EDI’s own use.
External Format File
External Format File (EFF) contains the same data as the internal format file translated into the appropriate standard document format.
Transmission File
Transmission file contains. one or more documents for the same trading, partner. Documents of the same type are packaged together in functional groups. The functional ‘ groups going to one trading partners are packaged into an interchange set. An interchange set contains one or more functional groups of documents with the same sender and receiver. Refer figure 5.8, it represents a transmission file.
Electronic Fund Transfer (EFT)
Electronic Fund Transfer (EFT) system involves the electronic movement of funds and funds information between financial institutions. The transfers are based on EDI technology transfer of funds involves. minimum amount of data interchange between two parties. There are two major worldwide EFT networks: the Clearing House Interbank Payments System (CHIPs) and FedWire (the Oldest EFT in the US.). In 1993,these networks moved an. estimated US $ 1.5 billion each banking day. A third major network the society for World -Wide interbank Financial Telecommunication (SWIFT) is capable of handling nearly 1 million massages per day.
EDI has been widely adopted by financial institutions and service sectors in the western world. Insurance brokers can send
EDI messages to the computers of various insurance companies and get details on specific policies. Even though EDI can be useful for almost any sector, banks have been the primary user for EDI services till now.
EDI Massages- Security
Security is used as a blanket term to cover many different needs according to the data and use to which it is being put. Basic reference model 7898/2 specifies an internationally adopted security architecture for end-to End security in network interconnection. The five services defined in the model are:
• Authentication: This service verify the identity of communication entities in a network.
• Access control: It restrict access to the information and processing capabilities of a network to authorised entities.
• Confidentiality: It prevents the unauthorised modification of information.
• Integrity: It detects whenever there is unauthorised modification.
• Non-repudiation: Prevents denial by one of the entities involved in a communication of having participated in all or part of the communication.
X.400 in its present version of 1988 offers some features of security which are indispensable in business communication. Security in computer networks is provided with the use of cryptography technique. Two types of cryptography are available private key cryptography(conventional cryptography) and public key cryptography. The private key cryptography to communicating parties share a single encryption and decryption key. The sender encrypts the message before transmission using its. encryption key. The receiver decrypts the message using the reverse process. The US DES (Data-encryption Standard) algorithm has traditionally been used to secure EDI messages. It used 64 or 128-bits encryption or decryption key. The public key cryptography make use of two speared keys for encryption and decryption. The transmeter encrypts the message using its encription key known as its private key and receiver decrypts the message using corresponding decryption key called public key.
Since both keys are registered with a registration authority the message becomes a digital signature of the sender as no one else knows the private key of the pair allotted to the transmitter. Public key is made available to all receivers in the network.
The Possible Methods Used for Security Purposes of EDI Messages are:
• Authentication-creation of digital signature.
• Confidentiality-any method, DES or Rivett, Shamir and Adleman alogorithm (RSA) is acceptable.
• Non-repuditable-Only public key cryptography can provide this feature.
VSNL now offers Gateway Electronic Data Interchange Service (GEDIS) trade net to Indian subscribers.
Thanks for providing this great amount of detail about electronic data interchange. The whole information is highly interesting and useful. With the use of internet all type of information travel across electronic medium which automatically demands security.
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