Email is great for quick communications to avoid the timely mail system not to mention paperless. If you were to send a purchase order via email then you would likely have to print out the document and enter the data into another program such as an accounting or inventory package. Businesses need a structured secured format for sending and receiving information.  The white papers below will highlight some of the options.

EDI: What is it?

EDI is simply the sending and receiving of information using computer technology

Benefits of EDI!

• Reduced postage costs, expenses in general
• Speed. Because information is moved faster and with greater accuracy, time spent communicating with suppliers is decreased
• Elimination of paper documents
• Elimination of  labor-intensive tasks such as data entry
• Greater accuracy of information
• Better tracking

The efficiency of EDI has made it a condition of doing business in numerous industries, including retail, grocery, warehousing, transportation, health care, education, real estate, and government.  Companies or trading partners can exchange standard business documents as needed using EDI as long as both have made the preparations to do so. Some examples of the type of documents are purchase orders, invoices, shipping schedule, inventory inquiry, and many more.  

EDI is not limited by differences in companies or communication methods. Instead, EDI bridges the information gap that exists between companies using different computer systems. EDI can’t be activated with a flip of the switch as many procedures must be carried out in preparation for exchanging EDI data with a trading partner.

There are typically two ways of communicating the data between trading partners. Usually the trading partner will designate the method of either a VAN or Direct Connect.

VAN (Value Added Network)

A Van is a third-party service that transmits and stores data in the “electronic mailbox” until it is picked up by the appropriate party.  Since the EDI message contains addressing information, the VAN routes the message to the mailbox of the recipient. Until recently, it was considered the most secure method of transferring data. Communication via a VAN can sometimes become quite costly. Most VAN providers charge monthly for the services that they provide based on the number of kilo-characters transmitted.

Direct Connection

Unlike a VAN, a direct connection allows you to pass the data straight to the receiving party.  There are a few types of direct connection like, VPN (Virtual Private Network), FTP (File Transfer Protocol), and EDIINT (EDI over the internet) usually EDIINT is done in conjunction with AS2 software which encrypts the data before sending it over the internet.

AS2: A new standard for data exchanges

AS2 (Applicability Statement 2) is the draft specification standard by which vendor applications communicate EDI or other business-to-business data (such as EDI and XML) over the Internet using HTTP, a standard used by the World Wide Web.  AS2 provides security for the transport payload through digital signatures and data encryption and ensures reliable, non-repudiable delivery through the use of receipts. AS2 communications can securely transfer not only EDI documents but also documents in various formats such as X12, SML and Microsoft word.  Due to the high level of security and cost-effectiveness, several businesses including major retailers such as Wal-Mart and Kohn’s have mad the move to AS2.

XML: A New Standard for Document Exchange and Application Integration

What is XML?

XML stands for “Extensible Markup Language.  XML was developed by an XML Working Group in 1996 and became a formal specification in February 1998.  XML is now an industry standard that enables accurate, flexible, information rich data exchange.

XML allows the flexible development of user-defined document types. XML is not a programming language, and you don’t have to be a programmer to use it or learn it. XML makes it easy for a computer to generate data, read data and ensure that the data structure is unambiguous.  It provides a robust, non-proprietary, persistent and verifiable file format for the storage and transmission of text and data both on and off the Web.

XML is extensible, meaning that it is designed so that its capabilities can be expanded.  XML is also platform-independent, meaning that data can be exchanged across the internet or from application to application, regardless of the operating system/application used.

Why is XML important?

XML is commonly used in enterprise application integration, linking legacy systems to newer systems such as intranets and Web sites.  XML makes it easy to send data from any application to any internet or desktop application (application-to-application integration).

In order to appreciate XML, it is important to understand why it was created.  XML was created so that richly structured documents could be used over the web.  The adaptability and functionality of XML lends itself to many uses.

XML: A New Standard for Document Exchange and Application Integration

XML has the potential to become the method for exchanging data because it is easy to use, extensible (its capabilities can be expanded as needed) and platform-independent reasons and because XML document trading is more cost-effective than other means for exchanging data, XML is becoming the buzz word in the 3PL industry as the new standard format for trading documents electronically.

Who is using XML?

Distributors are beginning to use XML to trade documents such as Transfer Orders (shipments), Shipment Confirmations (shipment acknowledgements), Receipt Authorizations (inbound receipts), Receipts (receipt acknowledgements) and Product Master Updates with their fulfillment centers (3PL Warehouses).  With the use of XML and applications that make use of internet connectivity, it is possible for 3PL’s and their customers to be “linked together” so that these documents can be traded seamlessly.  At the distributor’s order processing center, the user generates the order and sends it as an XML document.  In even as little as seconds, the order is received into the 3PL’s WMS system without any user interface – meaning that the user does not have to import a file into their system to create the order.

 EDI and XML

The big question is, “Is traditional EDI obsolete?”  There are advantages and disadvantages to both, so therein lay the debate.  At this time, though, the answer is “Far from it.”

“When the largest company in the world won’t do business with you unless you do EDI; when the US health industry makes it mandatory to use EDI; when the world’s energy companies are using EDI; when institutions that are sending people into space are using EDI; when Universities are sending students’ records in EDI; and when a Department of Defense, with the largest budget ever, has an EDI system in place, then surely one can’t say EDI is obsolete.”*

In reality, XML and EDI are not mutually exclusive.  “XML actually complements EDI. Any technology that promotes e-commerce is good for EDI.”*

However, flexibility and speed are the key factors that make XML a viable alternative to traditional EDI.  It allows multi-point or many-to-many integration required in an elaborate trading partner network.  Unlike traditional EDI, where information movement between companies is predominantly through batch transfers, XML fosters cost-effective, real time data exchange.

In addition, there are moves to enable traditional EDI documents to travel inside XML, as well as proposals to replace the existing traditional EDI formats with XML ones**.

Probably the biggest effect on traditional EDI is the rise of standardization attempts for XML business documents and transactions.  The standard jointly sponsored by OASIS and United Nations/CEFACT is ebXML (Electronic Business XML) which provides Schemas for the common commercial transaction document types.**