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ACG 5458 EDI Issues. EDI, Electronic Commerce, and the Internet. Traditional EDI Systems Value Added Networks (VANs) Financial EDI EDI Systems and the Internet. What is EDI?. EDI refers to the exchange of electronic business documents between applications Traditional EDI Characteristics:

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ACG 5458 EDI Issues

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acg 5458 edi issues
ACG 5458

EDI Issues

edi electronic commerce and the internet
EDI, Electronic Commerce, and the Internet
  • Traditional EDI Systems
  • Value Added Networks (VANs)
  • Financial EDI
  • EDI Systems and the Internet
what is edi
What is EDI?

EDI refers to the exchange of electronic business documents between applications

Traditional EDI Characteristics:

  • Identified trading partners
  • Expensive initial investments
  • Dedicated leased line or utilization of a Value Added Network (VAN)
  • Standard, inflexible data sharing
    • US standard: ANSI’s x12
    • UN standard: EDIFACT
  • Batch connectivity
  • Low transaction costs
edi growth
EDI Growth
  • During the 1990’s, EDI use grew 30% each year
  • Currently growing at 15% per year
  • 1999 total EDI transaction value $3 trillion
  • Estimated 2003 value $4 trillion

Buying CompanyFULL EDI

Selling Company

1) Identify Need

2) Research Vendors

3) Select Vendor

4) Place Order


5) Receive purchase order

prepare sales order,

check credit, and

check inventory

6) Pick and ship inventory

shipping notification

bill of lading

7) Receive inventory

(verify accuracy)

9)Receive Invoice

(verify accuracy)

10) Prepare check and

remittance advice

11) Mail check and

remittance advice


8) Prepare and send Invoice

12) Receive Payment

prepare deposit and

update records


Value Added Networks (VANs)

  • Third-party network services
  • EDI translation software
  • Security assurances
  • Independent audit trails
  • Reliable transmission (redundant systems)
  • EDI systems development assistance
  • Employee training
  • Exact, explicit contracts with trading partners
  • Authorized data sharing
ansi asc x12 formatting
ANSI ASC X12 Formatting

Interchange Control Header – electronic envelope

Functional Group Header – type of document

Transaction Set Header – specific document

Data Segment Header – fields identified

Data Elements – contents of field

Data Segment Footer – end of fields

Transaction Set Footer – end of document

Functional Group Footer – end of document set

Interchange Control Footer – close the envelope

sample transaction sets

Response to RFQ (843)

Department of Defense

Trading Partner

Purchase Order (850)

Request for Quotation (840)

Contract Award (838)

PO Acknowledgment (855)

PO Change (860)

PO Change Acknowledgment (865)

Order Status Inquiry (869)

Order Status Report (870)

Shipping Schedule (862)

Shipping Notice (858)

Receiving Advice (861)

Invoice (810)

Payment Order (820)

Material Safety Data Sheet (848)

Project Cost Reporting (839)

Sample Transaction Sets
advantages of edi
Advantages of EDI
  • Lower processing costs
  • Tighter relationships between suppliers and customers
  • Lowered error rates
  • Decreased lead and cycle times
  • Decreased inventory shortages and problems
  • Increased product differentiation
  • Better information for all trading partners
edi systems and the internet
EDI Systems and the Internet

Utilizing the Internet (involving Browsers and a markup language, e.g., HTML) for electronic transactions:

  • Much lower initial investment costs
  • More connectivity: greater sharing and tracking of data
  • Allows for new partners
  • More flexibility with XML (See next slide)
  • Creates serious security concerns
    • Risk of loss of packets or sniffed packets
    • Loss of third-party audit trails and authentication
  • Electronic Data Interchange – Internet Integration (EDIINT) group currently defining standards for encryption and digital certificates
comparison of edi systems

Full Web-EDI

w/ Intelligent









Sharing of Data







Comparison of EDI systems
edi web browser translation software
EDI-Web Browser Translation Software
  • Many VANs providing services
  • Standard is XML (Extensible Markup Language)
    • Provides a universal data format
    • Allows data objects to be serialized into text streams
    • Is easy to parse, so it can be used to pass data between processes
    • Allows for custom tags, which can be passed easily over a variety of network protocols
    • Has companion standards to support browser presentation, hyperlinks, and querying
implications for the accounting profession
Implications for the Accounting Profession
  • EDI/Internet Solutions increase the demand for accountants to know
    • How the audit has become more complex
    • The risks surrounding Internet business processes
    • Reliance on data from the Value Added Network
    • Trading partners’ data integrity and system reliability
    • Encryption of data
    • Authentication of trading partners
    • Digital Signatures and Nonrepudiation
    • Firewalls