One of the technological fields required to implement EDI is data processing. Data processing allows the EDI operation to take information that is resident in a user application and transform that data into a format that is recognizable to all other user applications that have an interest in using the data. In the EDI environment, data processing will handle both outgoing and incoming data, as depicted in figure 1.
Figure 1: Data Processing and EDIThe user-defined files in figure 1 are the flat files that are produced by a business application. These files may or may not be formatted by the user. These are the business files that need to be translated into the X12 format.
The translation software in figure 1 is the software that maps the elements of a user-defined file into the ANSI X12 or EDIFACT standard format. This software is available through commercial retailers on various platforms from PCs to mainframes.
The mapping of the user-defined data elements into the translation software requires some skill in mapping. The mapping itself requires knowledge of both the translation software and the EDI standards being used so new mapping and processing rules can be set up for the translator. If a new trading partner places no new requirements on the translator, the new trading partner is simply set up under existing mapping rules. However, when the trading partner requires that additional or different data fields be sent, a new mapping scheme needs to be identified and associated with that trading partner (Sokol, 1995).
The other technological field that is heavily involved in EDI implementation is data communications. Once the standards have been employed and the required software is in place, the EDI participant still needs to have the ability to communicate with remote trading partners to take advantage of EDI.
Data must be transported across telecommunications lines in order for the trading partners to trade information. Following are some basic concepts that describe mechanisms and methods used in this transport of data:
Direct connect is the term used to indicate that two EDI trading partners trade information directly to each other without a third-party connection service. Direct connects are normally used by large corporations for intracompany EDI transactions and for intercompany transactions with trading partners that have established high-volume rates of exchange of EDI data.
Modems are heavily used by EDI practitioners today. Modem-to-modem connections provide a level of security and reliability that long-time practitioners are reluctant to give up. The standard in the industry, as this paper is written, is transmission by binary synchronous modem or "bisync." This method allows for high-speed continuous transmission in which the sending and receiving modems are controlled by clock pulses. The clock pulses regulate the rate and timing of the data flow.
Routers, although not the primary transport mechanism for EDI transactions today, have the potential to become the de facto standard of transmission for high-volume traffic. Currently, routers are used mainly over leased lines, requiring expensive setups and ongoing data communications transport costs.
EDI transactions can be passed between trading partners using standard transmission protocols. Graphic images, charts, and diagrams must be transmitted using protocols that allow the transfer of binary data. Some of these common standards are SMTP, MIME, X.400, X.435, and X.500. Internet Protocols are excluded from this discussion as the audience is already very familiar with them.
X.400 is an electronic messaging standard that was developed by the Consultative Committee on International Telegraph and Telephone, which is tasked with developing standards to enable incompatible networks and computer systems to exchange data. In this standard, an X.400 header precedes the message itself. The header allows the sender of the message to specify information relating to the transmission and delivery and notice requests.
The architecture of the X.400 standard calls for an outer envelope that is application independent and is used to route the message. Within the outer envelope lies the content header, again application independent, which is used to deliver the message to the recipient. A message transfer agent (MTA) receives the message, discards the outer envelope, and then reads the header to determine the recipient. The message itself is composed of body parts, each body part being an application-specific message.
X.435 is a standard that further enhances the X.400 standard to make it deal more effectively with EDI transmission requirements. X.435 is the specification for the EDI body part that attaches to the X.400 message.
X.500 is an addressing directory containing the names and characteristics of electronic messaging receivers. X.500 facilitates the delivery of X.400 messages, including those that include the X.435 standard. The idea is the production of a global electronic directory and a guide to associated databases so the user can find an e-mail address if it is needed and not known.
Any business application that can be improved through paperless trading in a fast, efficient environment is a good candidate for EDI. EDI is currently widely used by the airline industry, banking industry, credit card industry, and auto industry. The current push in the EDI world comes from companies who wish to trade with each other electronically--buyers and their suppliers--hence the term "trading partners."
The business process examined here to which to apply EDI concepts is the procurement process. This business process was chosen for two reasons. First, within industry itself, new EDI technology is developing fastest in this area. Second, the President has issued an initiative to streamline government procurement through the use of EC. Since the initiative was announced in October 1993, the thrust within the government has been to implement the initiative using EDI technologies. These factors make the procurement process the most relevant business process to examine at this time
The business application depicted in figure 2 is a simple purchasing application.
and then
Figure 2: Business Application and EDI
As shown in figure 2, the procurement process normally begins with the buyer being made aware of a need within the organization to make a purchase. As soon as a need is established and precisely described, the buyer begins the process of selecting the supplier that will be used. Routine items may be purchased using suppliers that have already been contracted with. New items or high-value items may require investigation by the buyer in selecting an appropriate supplier.
The buyer will select a preliminary group of suppliers and then employ the methods of competitive bidding, negotiation, or a combination of the two to secure the final supplier. When competitive bidding is used, the buyer issues an RFQ to the suppliers that the buyer might be willing to do business with. Typically, the RFQ will contain the same basic information that will be included on the purchase order.
When a supplier receives an RFQ that the supplier has an interest in bidding on, the supplier issues a quotation to the buyer. The quotation will contain pricing information so the buyer can do a price comparison between the suppliers. For instance, an RFQ might be issued for 200 gallons of white, latex-based paint. The supplier who is issuing a quotation may quote a price of $xxx.xx.
Once a supplier has been selected, the purchasing department issues a serially numbered purchase order. The purchase order itself becomes a legally binding contract. For this reason the buyer will carefully prepare the purchase order and ensure that the wording is precise and specific. Any drawings, diagrams, or related documentation that is necessary to precisely describe the item being purchased will be incorporated or referenced in the purchase order. Additionally any conditions or sampling plans will be stated precisely.
Normally a list of terms and conditions designed to give legal protection to the buyer on various matters prescribed by law are incorporated in, or attached to, all purchase orders as boilerplate to those orders. These boilerplate terms and conditions cover a wide range of concerns including, contract acceptance, delivery performance and contract termination, shipment rejections, assignment and contracting or the order, patent rights and infringements, warranties, compliance with regulations, and invoicing and payment procedures.
Change orders are required when a company makes a change in the contract after a purchase order has been issued. The buyer will issue the change order and, when accepted by the supplier, the change order either supplements or replaces the original purchase order.
The original copy of the purchase order constitutes a legal offer to buy. The purchase contract then comes into existence when the contract is performed or when formal acknowledgment of acceptance of the offer is made.
Normal business methods suggest that the supplier may not bother to acknowledge the offer if the items are immediately shipped to the buyer. When the items are not immediately shipped, then the supplier should send the acknowledgment back to the buyer.
The supplier may acknowledge the buyer's order accepting the buyer's terms and conditions, or may acknowledge and incorporate the supplier's own terms and conditions in the acknowledgment. If the seller's terms are different than the buyer's, the law allows them to be incorporated into the contract as long as they do not alter the buyer's intent or unless the buyer files a written objection to the inclusion of new terms and conditions. In general, terms and conditions that are in conflict between buyer and seller are excluded from the contract, leaving the settlement to negotiation or suit. For this reason it is imperative that the buyer beware of the terms and conditions in the order acceptance.
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