EDI systems (Electronic Data Interchange) are data exchange techniques based on the principles of e-mail, the characteristic feature of which is the independence of the characteristics of the hardware and software used. These techniques are indicated by the abbreviation EDI, and are referred to as: "a system of electronic transmission of structured commercial data and other documents from a computer application program or database of one organization to a user program or database of another organization". Sending objects in this case takes place in a form that is indicated by the general standard adopted under the abbreviation UN / EDIFACT (United Nations rules for EDI for Administration and Transport). Such a standard is indicated by strict grammar rules and a set of used expressions, taking into account the needs of all user groups in all countries. It can therefore be applied both by trading companies at all levels of trade as well as by production and service companies, banks and insurance companies.
The history of EDI systems
The origins of EDI systems date back to 1979, when the American National Standards Institute (ANSI) set up the X12 Accredited Standards Committee (X12 ASC). It consisted of: representatives of the US government, the transport industry and computer manufacturers. They were appointed to develop a standard of electronic data exchange between enterprises. In contrast, the standard developed in 1986 called "UN / EDIFACT (United Nations Electronic Data)" combined international forces of various industries. In later periods, newer specialized varieties of EDI standards were also developed, including: USC - food industry, ODETTE - automotive industry, WINS - warehousing).
Application of EDI
The use of electronic data exchange requires the use of appropriate computer software by the co-operators, thanks to which it is possible to perform the following functions:
- co- working with administrative applications used in the enterprise, such as spreadsheets, systems for handling the production process, supplies etc.,
- conversion of data sent and received consisting in one part on the translation of existing messages into a standard EDI format, and on the other hand in adapting the received messages to the needs of the used application software,
- service of communication links in the scope of connection performance and determination of transmission parameters
- management of documentation circulation, the scope of which depends on the type of software and may include, for example, archiving of documents, data compression, merging and separating messages, etc.
Characteristics of EDI systems
- Cost reduction
One of the reasons for reducing costs through EDI systems is reducing the unit cost of transactions by eliminating the need for manual processing of data when handling orders, and then invoicing or shipping of goods. According to estimates with the help of this system, the costs of handling individual transactions may fall by as much as 98.6%.
- Usability of information
EDI systems minimize the need for repeated data entry, which saves time and eliminates errors.
- Integrity of information
Thanks to the ability of EDI systems to check the correctness of transmitted information, overall data integrity is increased.
- The timeliness of information
Thanks to the real-time data processing related to the submission of a purchase order, using an EDI system can reduce the time between placing an order and issuing an invoice to a few seconds, which allows for a direct response to market needs and limits stock storage.
- Consistency of information
EDI systems maintain a consistent information structure, regardless of the IT system used internally in a company.
- Processing large amounts of business information
EDI systems are capable of processing a large amount of information quickly which allows enterprises to scale more rapidly and better predict costs.
Advantages of EDI systems
- eliminating time-consuming preparation and sending documents in a traditional way - the command to send relevant messages is executed near instantly
- avoiding errors resulting from multiple manual data entry - once entered, data is processed and read electronically and usually remains in the appropriate database
- shortening the time of order fulfillment and reducing stock levels - EDI ensures the fast transmission of relevant messages, which enables faster adaptation to changing operating conditions,
- increase in the efficiency of the company's internal systems - the need to use EDI can lead to the modernization of existing information systems, and thus to improvement of the internal message transfer,
- improvement of partner relations - this is mainly due to a decrease in the likelihood of communication-related misunderstandings, and in the case of their occurrence shortening the time of introducing appropriate adjustments, which favors closer cooperation and its long-term nature.
- EDI enables more efficient data transmission between companies, assuming technological compatibility. It facilitates the integration and coordination of activities of both sides of the participants in the supply chain, and thus - increasing the advantage over other enterprises.
- Better inventory management thanks to up-to-date knowledge about market demands
- Reduction of a companies' environmental impact by eliminating the use of paper
- Skipping the stage of checking the completeness and correctness of the data transferred reduces the costs and length of the order fulfillment cycle.
Disadvantages of EDI systems
- One of the important threats is the security of transmitted data, because confidential information sent may fall into the wrong hands. It is estimated that the costs associated with the theft of such documentation during transactions made via the Internet can amount to over $ 350,000 for each case.
- The higher cost of the initial implementation phase.
- Difficult data recovery process
- Bhatt, G. D. (2001). Business process improvement through electronic data interchange (EDI) systems: an empirical study. Supply Chain Management: An International Journal, 6(2), 60-74.
- Walton, S. V., & Marucheck, A. S. (1997). The relationship between EDI and supplier reliability. International Journal of Purchasing and Materials Management, 33(2), 30-35.
- Chau, P. Y., & Hui, K. L. (2001). Determinants of small business EDI adoption: an empirical investigation. Journal of Organizational Computing and Electronic Commerce, 11(4), 229-252.