Contrary to popular conception, e-business is not a new concept and businesses
have communicated electronically for a number of decades since the early 1970s
through EDI solutions. Electronic Data
Interchange or EDI is a set of procedures and protocols that enable very
structured communication between two businesses. Examples of the nature of communication could
be purchasing, billing, payment, fund transfer or other routine business transactions.
The important point to note is that the format of the transaction, the
protocols of communication, and the procedures that are followed are
pre-defined and agreed between the two business parties and to a greater extent
standardised globally across the business community.
A wide variety of sectors in the industry use EDI. These include retailing, banking, mortgage banking,
insurance, and government. Several
standard committees endeavour to include all appropriate transactions in their
body of standards, developed under the guidelines of American National Standards
Institute (ANSI). The role of ANSI is to ensure that all parties
that use EDI follow the same rules and methods to make sure that the programme
is universally accessible to all and that all businesses are adhering to the
same business protocol. This should
in turn minimise users' internal data pre-processing. EDI enables a high number of unrelated organisations
to do their business communication electronically. What this requires though is that two communicating
organisations adhere to the same EDI standard such as EDIFACT as EDI is based
on standards. Accredited Standards Committee (ASC)'s
ASC
X12 and EDIFACT are more prominent examples of internationally standardised
business languages that allow seamless communication between business computers
across the world.
Reduction in paper-based processing is the major advantage of EDI. Online processing of data (online entry of
data and management reporting) makes business processes less costly, and more
time efficient. Considerable amount of time is spent to compile paperwork for a
specific business transaction with further potential wastage of time if a
particular process is over-looked.
Transition between the processes are also very often time
consuming. Formalisation of the business
transactions and documentations also reduce the likelihood of error and
omission which would lead to more time-consuming and higher transaction
costs. Uniformity of the communications across
the business chain from the supplier to the distributor and the customer is
another advantage of EDI. Also worth
noting is that EDI gives the organisation the competitive edge in relation to
competitors that do not have an EDI solution.
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What
are the disadvantages of EDI? |
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Businesses that adhere to an EDI solution use a Value-Added-Network (VAN) to communicate.
With recent uptake of the Internet as the primary platform for business
communication, there has been a move towards EDI solutions that are Internet
based, termed Internet EDI (I-EDI) or sometimes
called Web-based Internet EDI. In essence
with I-EDI, the requirement for implementation of VAN is eliminated and the
solution becomes one of open and accessible where ever there is Internet access. This has a marked effect on the procurement
of businesses that adhere to EDI due to relatively low cost of implementation
and maintenance of I-EDI. This means
that smaller businesses that previously could not afford the expensive EDI
solutions and the deployment of VANs can now conduct business using web-based
EDI solution in place of traditional EDI software.
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Discuss
the advantages and disadvantages of Internet-based EDI over the traditional
EDI. |
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