EDI is the electronic exchange of business documents in a standard, computer processable, universally accepted format between trading partners. In EDI, the computer application of both the sender and the receiver, referred to as Trading Partners have to agree upon the format of the business documents which is sent as a data file over an electronic messaging service.
1.Either the inventory management system – based on a re-order policy following the examination of the stock levels – raises the purchase requisition for the item or a department raises the requirement for some items. The information on the requisition forms is entered into the purchase processing system. Many a time there are transcription errors in the process. Thus, it is necessary to edit and correct to the data.
2.Once the correct requisition information has been updated in the computerized purchase system, the purchase management system scans the suppliers ‘ databases for potential suppliers and prints the purchase requisitions, requesting the price and delivery quotation in the name of screened suppliers.
3. The purchase requests are transmitted to the suppliers, either through phone / fax or through mail / courier service.
4. The information printed on the purchase requests may be keyed in by the suppliers in their computerized systems for processing, and a quotation against the purchase request may be prepared and printed.
5.The quotation from the supplier is transmitted using traditional paper transmission mechanisms such as fax /courier / mail service.
6. All quotations received from suppliers against a purchase request, are entered into the manufacturer's automated system and edited and corrected to remove any transcription errors. Based on the quotations received, the system may process the quotations using structured or semi - structured mechanisms and select the most suitable candidate ordering.
7.The order is then printed on a standardized order form along with the terms and conditions for delivery and payment.
8. The printed order is mailed, couriered, or faxed to the supplier.
9.The supplier, on receiving the order, enters it into the computer system and matches the order with the quotation that has been submitted.
10.If everything is found in order, it raises an internal sales order. Since the raising of an internal sales-order requires data entry / editing of the information from the received purchase order, matching and processing of the order, and then printing of the internal sales order, it often becomes a source of delay. In extreme cases, if the prices / terms on quotation and the purchase order do not match, it may be require repetition of some of the earlier steps, or re-negotiation / clarifications, causing further delays.
11.The internal sales order is used for generating several documents and forms for locating and identifying the appropriate stocks. In case where such stocks are not readily available, it may lead to the raising of a work order or schedule to the production shop. The appropriate stock thus picked and packed for sending it to the buyer along with the packing list and advance shipping note and advice. The process, at times, may lead to a partial fulfillment of the order. In that case, the customer needs to be informed of the short – delivery and order – status in writing..
12. With the goods, the internal sales – order processing system also prepares a delivery note. The goods packed in the previous step are sent using an appropriate dispatch mechanism.
13.The delivery / dispatch note is sent to the buyer using postal mail / courier / fax services.
14.The buyer or receiving yard, on receiving the goods and advices, compares and inspects the goods, and prepares a goods receipt note containing the purchase order number against which the goods are received, and marks the acceptance and rejection of the items shipped. The information on the goods receipt note is transcribed at the computer department, edited, and matched against the outstanding purchase – order. The information on the pending quantity against a purchase - order and the stick levels in the inventory management system are updated. In case of partial delivery, steps 9 – 14 are repeated several times until the quantities on the order are fulfilled.
15. The suppliers computer, on completion of the order fulfillment, also generates an invoice by printing it, when, in turn, is dispatched to the buyer / manufacture.
16.The supplier’s computer also generates a financial statement at the end of the trading month for the payments. At times it also keeps sending reminders for the payment till the complete payment have been received from the buyer.
17.The buyer’s computer enters the information on the payment statement, matches it against the purchase order, and also matches it against the information provided by goods receipt note, or in other words, ensures that the order has been fulfilled and has been inspected and accepted. If everything is found to be in order, the buyer’s computer processes the ordered payment.
If we look at the above process, we will notice that computerization has helped only in managing and processing of records of the traditional supply chain management. The whole process remains more or less the same, and is burdened with exhaustive paper work, repetitive entry of data, making it prone to errors and, is still dependent on the postal communication of the document. The advances in communication technologies have made it possible to interconnect the computers of suppliers and buyers. As a result, they can talk to each other directly, or exchange the requisite information without printing on paper, dispatching it through mail / fax, and then re – entering it all at the other end. If this model of transmitting information electronically between the supplier’s and buyer’s computer is put in practice, it will lead to increased speeds, avoidance of errors due to re – entry, accuracy and cost reductions due to reduced cycle time. These improvements dramatically influence the overall efficiency of business and commerce. Electronic Data Interchange is a paperless mechanism that addresses the problems of the traditional systems by electronic interchange of documents.
In the EDI environment, buyers create purchase requisitions in their computers and based on these purchase requisitions, and the suppliers’ database at the buyer’s computers, the purchase system creates calls for quotations to suppliers. The calls for quotations are transferred electronically to the suppliers’ computers to the push of a button. The supplier’s computerized system receives the requests and prepares a quotation record which, in turn, is submitted to the buyer’s computer electronically. The buyers’ purchase system collects, compiles and processes all quotations and finally creates purchase orders in their own company’s’ purchasing software program. The electronically generated purchase – order, on pushing a button, is automatically transferred to a supplier’s order entry system. In other words, the transmission of the data between two trading partners happens in electronic form.
EDI covers wide and varied application areas and, depending upon the perspective, has been defined in several ways. According to the Data Interchange Standards Association.
In case a need arises to handle a new proprietary format for an additional partner, four new format conversion programs have to be built. Thus, the approach is markedly unsuitable for the general purpose EDI system. The problem of heterogeneity of formats can be better addressed using a common standard format for documents / messages transferred within the EDI system. The internal processing systems continue to use the proprietary formats, but, for transmission over the wire, they adopt a common document / message format. In this case the conversion program learns to translate the common message format to the proprietary message format used by a system, and vice – versa. The approach greatly simplifies the problem posed by heterogeneity of proprietary message formats, as depicted in the fig. below. Operational EDI systems follow the second approach, in which all the documents that need to be transmitted to the other systems are translated into the standard format. The receiving systems accept the input in the standard format and convert it into the native format used internally by the local system.
. In Europe on the other hand, the industry developed and adopted yet another set of standards.
The X12 devised the standards to deal with transactions such as purchase order placement, order processing, shipping, invoicing, and payments, to name a few. In the X12 standard, paper documents related to particular business activities are mapped into a transaction set. It assigns a numeric code to each of these transaction sets, in a manner similar to the numbering of business forms followed at many organizations.
1.The header contains the information that is common to the whole document, such as date; from address; to address; terms and conditions, tec. In the sample order form shown in Fig., the following information is the header:
Alpha Electronics Date 24/11/04
1025, Sector K
Aliganj, Lucknow 226011
Purchase Order no. : 200401123
2. Detail refers to line items that describe the actual business transaction. In case of a purchase order, it may contain item number, description, quantity ordered, and price information. In the sample order shown in Fig., the following information is the detail:
3. Summery refers to the control information and other components that refer to the complete transaction. In case of a purchase-order, it may refer to order value. In the sample order form example, the summery information refers to the following.
For each transaction set, extended specification is required. Each of the transaction sets in the X12 standard has a further specification. For example, The transaction set 850 is reserved for the purchase order and X12.1 describes the transaction specification for it, Transaction set 838 is used for vendor registration and X12.7 contains the transaction specification for each transaction set. For example, the specification for the purchase order transaction set (850) can be found in X12.1 standard. For some commonly used documents, the transaction set number along with the corresponding specification standards are listed in the following table:
The GE.1 group of UNEC / EDIFACT deals with data element and rules and formats for automated data exchange. The GE.1 group also coordinates the six EDIFACT boards set up for Western Europe, Eastern Europe, Pan America, Australia/New Zealand, Asia, and Africa. The Asia EDIFACT board (AEB) consists of members like India, Japan, Korea, Hong Kong, China, Singapore, Taiwan, and Malaysia.
Typically, a company subscribers to a VAN for smooth provision of network services and to facilitate electronic data interchange (EDI). These services include: EDI translation, encryption, secure e-mail, management reporting, and other extra services for their customers.
1.Document conversion from one standard to another; typically required when two trading partners use different standards for EDI exchanges, ANSI ASC X 12 to EDIFACT or TDCC to ANSI ASC X12.
2. Converting one ANSI ASC X12 document to another ANSI ASC X12 documents when the documents may need to be converted to another type within the same system. For example, a motor carrier details and invoice document may need to be converted to a generic freight invoice
4. The appropriate customer data can be saved in the VAN account and later appended on messages where required. For example, the sender's bill of lading (BOL)number can be stored in the account and upon receipt of the BOL acknowledgment , an acknowledgment message including the BOL number can the created and transmitted to the sender.
5.The VAN provider's computers also store data such as customer profiles, repetitive waybill codes, etc. which can be used for filling up the EDI transaction document with the help of the customer profile code. The customer profile stored on the VAN can be accessed using the customer profile code and the data from the profile stored on the VAN can be used for completing the EDI transaction .
8.the VAN can alert the subscriber (receiver) that there is data in their mailbox to be picked up,
11.In situations where such missing or mismatching data is found during the edit process, the vans usually send messages to the originator informing it about the missing or mismatched data and the request re-transmission of the same. For example the ASC X12, upon receipt of the shipment status message with missing data, sends a status inquiry transaction to the carrier requesting correction and re-transmission.
12. Validate and verify the information stored in customers databases for missing data and send messages to appropriate firms requesting correction of the missing data .
many third party VAN providers the marketplace some of them are listed here:
Satyam infoway- Satyam is first private national internet service provider to offer EDI VAN Services in india, in association with the sterling software of USA. In addition to the standard VAN services, it offers WEB EDI VAN services as well .