EDI Communication Protocol

2.2.3 EDI Communication Protocol

Within the general transaction process, traditional trade is usually discussed, entered into contracts and executed by relevant parties through telephone, fax or mail. Relevant trade documents have to be made and delivered manually. Different texts with the same message should be processed more than once in a transaction process that usually involves banks, customs, commodity inspection and transport. Therefore such a way of transaction often incurs redundant labor and extra expenditure and opportunities of committing mistakes on the one hand; and any delay or loss of messages often cause the unexpected losses to both sides on the other hand.

Ever since computers are used, people are searching for new ways to replace the traditional paperwork in an attempt to reduce the error caused by manual work.

EDI (Electronic Data Interchange) is a technological means to simplify the traditional trade transaction by simulating the movement of commercial bills and documents. It is not a new technology. As a matter of fact, it can be traced to 1970s when it is used to exchange internal data within an enterprise and then to deliver commercial data between enterprises. Because of the different areas and aims it serves, so it is difficult to define EDI in a unified way. Here we enumerate some definitions given by authorities.

Definition 1: Bill exchange in standard format for commercial use. Definition 2: Transmission of information with commercial or strategic

significance between independent institutions.

2 E-commerce Supporting Technologies

Definition 3: Standard formatted data exchange between computer systems for trading.

Definition 4: The transmission of the authorized, standardized, and structured data which are processed by computers. From the authoritative explanations about EDI listed above comes our understanding of EDI:

(1) EDI is the transmission of electronic information between computer systems. (2) EDI is the interchange of standardized and structured data. (3) EDI is the data interchange between sender and receiver on the basis of the

standard and structure agreed on by both sides.

(4) EDI is the data interchange that computers automatically process without manual interference. (5) EDI is the data interchange that serves commercial purpose. EDI uses computers instead of manual work to process transaction information,

which greatly enhances the speed and accuracy of data process. Digital communication network replaces telephones, fax and mails as the media to transmit transaction information. In order to enable the computers to process the information, it should be formatted in advance according to some unified standard predefined, which is a little different from traditional commercial operation patterns. Thus, EDI can be generally defined as: information transmission and automatic processing via network among multi-parties.

The core content of EDI is commercial information and documents, such as orders, invoice, and advice of charge, certificate of payment, schedule and proof of delivery. Because EDI is being used more and more extensively in commerce, more and more commercial documents are generated by computer programs. Thus EDI has become the information interchange between computer programs. As the electronic capital transfer and payment system supported by EDI is used more extensively, use of checks and other payment will be declined tremendously. EDI greatly simplifies the processing of paper documents, which is a way to save paper. What’s more, it is causing changes in the operation of banks. Capital transfer through networked banks will be an irreversible trend in the future. A flow chart about documents flow, framework, and message generation and transmission is illustrated in Figs. 2.3, 2.4, 2.5.

Another important impact on commerce by EDI is that it makes the relationship between businesses partners more close and causes a subtle change in the role played by salespersons. For instance, on-line ordering system and on-line client information system will have great impact on businesses that enjoy tremendous sales. EDI will make revolutionary change in the operating patterns between business partners in the future. So as far as commerce is concerned, EDI will become an important fundamental establishment in the future economic world in that it is not only a new communication technology, but also a bridge connecting the international production and commercial activities.

Introduction to E-commerce

Figure 2.3 EDI certificate flow

Figure 2.4 EDI framework

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Figure 2.5 EDI diagram generation and transmission process The strategic role of EDI has been gradually recognized by the world. Ever

since the 1970’s, as the computer technologies are being used more widely, the world has stepped into the era of automatic information processing. In the 1980’s, EDI was often considered as a way to improve management, promote efficiency, and reduce cost. At that time EDI was used only in big companies with complicated management. Since the 1990’s, people have not confine EDI within the enterprise or business any longer. EDI, as a new communication technology, has acquired new implications. Currently, people consider the development of EDI from the commercial perspective more than from the technical perspective, for it is the business area that gives it power of development. It is estimated according to its application and development that EDI will cause a revolution to the commercial world.