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Ecommerce Notes 2

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business data between companies using standardized formats. It has distinct components including EDI standards, documents, and transmission media, and offers benefits such as lower operational costs, increased accuracy, and faster trading cycles. However, EDI also has disadvantages like dependence on trading partners, high costs for smaller companies, and challenges in agreeing on standards.

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9 views2 pages

Ecommerce Notes 2

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business data between companies using standardized formats. It has distinct components including EDI standards, documents, and transmission media, and offers benefits such as lower operational costs, increased accuracy, and faster trading cycles. However, EDI also has disadvantages like dependence on trading partners, high costs for smaller companies, and challenges in agreeing on standards.

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WHAT IS EDI?

Introduction
What is EDI? Electronic Data Interchange is the computer-to-computer exchange of business
data and documents between companies using standard formats recognized both nationally and
internationally. EDI provides a technical basis for commercial “conversations” between two
entities; either internal or external. The information used in EDI is organized according to a
specified format set by both companies participating in the data exchange. The general idea
behind EDI was originated by a group of railroad companies in the mid-1960’s, in the United
States. Much of the early work on EDI was driven by the industry sectors for the following
Purposes:
1. Transportation
2. Pharmaceuticals
3. Groceries
4. Automobiles
5. Banking

Currently EDI has three distinct components which are:


1. The EDI Standard
2. The EDI documents
3. The transmission Media

Characteristics of EDI
a) Provides standardized rigid format – American National Standards Institute (ANSI)EDI
standards (X12) – Stability and uniformity
b) High level of security
c) Point-to-point integration
d) Exchanges large amounts of data with no intervention
e) Requires dedicated EDI server
f) Minimizes file size in the exchange
g) Machine decipherable (difficult for a person to read)
h) Focus on data and structure
i) Many trading partners available

Benefits of EDI
i) Lower operational costs (Saves time and money). Costs such as transportation costs
that are vital for an organizations daily operations and the time it takes to transport
these are usually saved.
ii) Less Errors = More Accuracy. In EDI Systems there is reduced human element in the
handling of the data being exchanged. No data entry, so less human error Increased
Productivity. More efficient personnel and faster throughput. The technology presents
a means for information to be exchanged in a timelier manner bringing onboard
efficiency in the organizations activities
iii) Faster trading cycle. Due to streamlined processes there is improved trading
relationships and more coherent supply chains

Disadvantages of EDI
i) High Dependence on the participation of trading partners
ii) Costly for smaller companies
iii) Difficult to agree on standard to be used

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