EDI Basics

Your Introduction to Electronic Commerce

What are the basics facts of electronic commerce (EC) and electronic data interchange (EDI)?

You can find succinct answers to your questions in the following summary that

	defines terms
	describes the technology itself
	explains the business environments in which EC and EDI are used

What's Electronic Commerce?

EC is defined as the paperless exchange of business information using Electronic Data Interchange (EDI), electronic mail (e-mail), computer bulletin boards, Electronic Funds Transfer (EFT), and other, similar technologies.

What's Electronic Data Interchange?

EDI is the computer-to-computer exchange of business information using a public standard. EDI is a central part of Electronic Commerce because it enables businesses to exchange information electronically much faster, more cheaply and more accurately than is possible using a paper-based system.

Where Did EDI Originate?

EDI was first used in the transportation industry more than 20 years ago. Ocean, motor, air, rail carrier, and the associated shippers, brokers, customs, freight forwarders, and bankers put EDI into practice. The first set of EDI standards were developed by the Transportation Data Coordinating committee (TDCC). ANSI (American national Standards Institute)X12 standards (electronic numbers and formats) were developed later and based upon the TDCC format.

Who Uses EDI Today?

About 50,000 private sector companies in the United States, like Federal Express, Eastman Kodak, American Airlines, Nike, Staples, Nationsbank, JC Penney, and others currently use EDI. EDI is widely used in these industries: manufacturing, shipping, warehousing, utilities, pharmaceuticals, construction, petroleum, food processing, and health care. A recent study projects that the number of companies using EDI will quadruple in the next six years.

What Are EDI Trading Partners?

A Trading Partner is a business that has agreed to exchange business information electronically. This term describes any business that has been registered with the U.S. Federal Government as well businesses in the commercial market place that exhange business information electronically.

How Does EDI Work?

In EDI, electronic documents (purchase orders, bills, etc.) are given standardized electronic formats and numbers, so everyone involved can correctly interpret the information being transferred. Value-Added networks (VANs), maintained by companies similar to long-distance phone companies, provide telecommunications connectivity between Trading Partners. Translation software is used by each Trading Partner to translate the business data.

What Are the Benefits of Electronic Commerce and Electronic Data Interchange?

Here's what EC/EDI can do for your business:

	Greatly increase opportunities through wider diffusion of procurement information.
	Improve overall business quality through better record-keeping, fewer errors in data, reduced processing time, less reliance on human interpretation of data, and minimized unproductive time.
	Reduce inventory because of faster and more accurate filling of orders.
	Reduce mailing costs due to mailroom sorting/distribution time, elimination of lost documents, and reduction of postage.
	Reduce order time since EDI allows businesses to process orders much faster.
	Improve customer relationships with higher customer satisfaction due to faster response to orders and less paper to handle.
	Reduce billing and closeout time, since orders are filled and delivered more quickly.
	Provide better management decision-making information with accurate documentation and audit trails of transactions identifying areas of greatest potential for cost reduction or efficiency improvement.

In Partnership with General Electric Information Services