B2B Integration : A Practical Guide to Collaborative E-commerce

154 B2B Integration — A Practical Guide to Collaborative E-commerce
6.2. What is Electronic Data Interchange (EDI)?
EDI involves electronic exchange of routine business transactions. These
transactions include documents, such as purchase orders, invoices,
inquiries, planning, acknowledgements, pricing, order status, scheduling,
test results, shipping and receiving, payments and financial reporting.
Through EDI, these highly secure documents are exchanged in a
compressed, machine-readable form over private value-added networks
(VANs). EDI permits hundreds of companies to communicate and process
business transactions electronically. In fact, EDI-based transactions over
proprietary private networks account for 'the bulk' of the goods and
services that businesses exchange electronically.
EDI enables long-term relationships among trading partners and it is
designed to address only those particular kinds of B2B relationships.
For example, EDI messages are exchanged back and forth in a preestablished
relationship of buyer and supplier, to maintain inventory of
products and manage the logistics of shipping. This way a retailer could
immediately let a warehouse know of an order and the warehouse could
immediately notify suppliers of a change in inventory.
One word in the above paragraph is of prime importance to EDIbased
relationships — 'pre-established'. The relationships are preestablished
and static as opposed to dynamic relationships, which are
open to interactions to all newcomers.
6.2.1. How does it work?
EDI works by providing a collection of standard message formats and
an element dictionary that can be exchanged via any electronic messaging
service. EDI is based on standards developed according to the guidelines
of the American National Standards Institute (ANSI), the coordinator
for national standards in the United States. The ANSI committee ensures
that everyone using a process such as EDI follows the same rules and
methods, making the program universally accessible. As a result of the
standard, all businesses using EDI share a common interchange language,
which minimizes the need for change in internal data processing systems.
EDI traffic is mostly composed of companies transferring bulk files.
EDI trading partners seldom connect to each other directly. Instead,