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From Traditional to Internet Based EDI

Electronic Data Interchange (EDI) 

Electronic Data Interchange (EDI) is a communication standard that enables the electronic transfer of routine documents, such as purchase orders, between business partners. It formats these documents according to agreed-upon standards. EDI has been around for about 30 years in the non-internet environment (usually VANS). 

EDI often serves as a catalyst and a stimulus to improve the standard of information that flows between organisations. It reduces costs, delays, and errors inherent in a manual document-delivery system. 

According to International Data Exchange Association (IDEA), “The transfer of structured data, by agreed message standards, from one computer system to another, by electronic means." 

This definition of EDI has four elements, each of them essential to an EDI system:

1) Structured Data: EDI transactions are composed of codes, values and (if necessary) short pieces of text; each element with a strictly defined purpose. For example, an order has codes for the customer and product and values such as quantity ordered.
 
2) Agreed Message Standards: EDI transaction has to have a standard format. The standard is not just agreed between the trading partners but is a general standard agreed at national or international level. A purchase Order will be one of a number of agreed message standards.
 
3) From One Computer System to Another: The EDI message sent is between two computer applications. There is no requirement for people to read the message or re-key it into a computer system. For example, the message is directly between the customer's Purchasing System and the supplier's Order Processing System.
 
4) By Electronic Means: Usually this is by data communications but the physical transfer of magnetic tape or floppy disc would be within the definition of EDI. Often networks specifically designed for EDI will be used.

As figure 2.14 depicts, EDI defines standard formats for all types of documents. First, sender A's documents are converted to the standard EDI formats, and are transmitted over a VAN to the receiver B. At this point, another conversion takes place from the standard EDI format to B's internal format, as defined by the application software running on B's computer.

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