How does EDI works?

 How does EDI work?

• All business documents can be digitalized using EDI, such as order forms, purchase orders, mandates, invoices, payment documentation, shipping notices, customs documents, and inventory analyses. 

• However, these documents must follow a standard format so that computers can process this flow of information automatically. Several standards (XML and OCI for messages relating to purchase requests, orders and order confirmations, etc.) are available to ensure standardization, each of which comes in several versions. Before sending any documents, business partners must agree on the format (standard and version) they wish to use.

Once a format is decided upon, the process follows three main steps:

1. Prepare the documents

• First, the information required to create the document needs to be gathered and organized.

2. Translate the documents into the correct format

• Next, the internal document must be converted into the defined format. To do this, you can either purchase and use your own EDI translation software or utilize a service provider.

3. Connect and send the documents

• Your business documents are ready to go! There are multiple ways to send them to your business partner:

Direct connection using a secure protocol, also known as Point-to-Point EDI

Connection via an EDI network provider

                                                        

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There are 3 steps to sending EDI documents – Prepare the documents, Translate the documents into EDI format, Transmit the EDI documents to your partner.

Step 1: Prepare the documents to be sent

The first step is to collect and organize the data. For example, instead of printing a purchase order, your system creates an electronic file with the necessary information to build an EDI document. The sources of data and the methods available to generate the electronic documents can include:

• Human data entry via screens
• Exporting PC-based data from spreadsheets or databases
• Reformatted electronic reports into data files
• Enhancing existing applications to automatically create output files that are ready for translation into an EDI standard
• Purchasing application software that has built-in interfaces for EDI files

Step 2: Translate the documents into EDI format

The next step is to feed your electronic data through translator software to convert your internal data format into the EDI standard format using the appropriate segments and data elements. You can purchase EDI translation software that you manage and maintain on your premises. This requires specialized mapping expertise to define how your internal data is to be mapped (i.e. correlated) to the EDI data. Translation software is available to suit just about any computing environment and budget, from large systems that handle thousands of transactions daily to PC-based software that need only to process a few hundred transactions per week.

Alternatively, you can use the translation services of an EDI service provider. In that case, you send your data to the provider, who handles translation to and from the EDI format on your behalf.

Step 3: Connect and Transmit your EDI documents to your business partner

• Once your business documents are translated to the appropriate EDI format they are ready to be transmitted to your business partner. You must decide how you will connect to each of your partners to perform that transmission. 

• There are several ways, the most common of which include:-

 1) to connect directly using AS2 or another secure internet protocol, 

2) connect to an EDI Network provider (also referred to as a VAN provider) using your preferred communications protocol and rely on the network provider to connect to your business partners using whatever communications protocol your partners prefer, 

or 3) a combination of both, depending on the particular partner and the volume of transactions you expect to exchange.

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How does EDI Works? 

• User Places an Order into the Computer 

• That Order goes through an interface program.

 • The Application edits the Order and relays it to intermediate EDI Files. 

• Purchase Order is changed to EDI. 

• Translation program functions with several programs. 

• It allows the receiver's system to interpret the order. 

• The network proceeds to take the order.

 • From EDI’s format, it is changed back to the sender’s Original format.

 • This allows the receiver to read the document.

                                                       OR,

How does EDI Works? 

–Supplier’s proposal sent electronically to purchasing organization.

 –Electronic contract approved over the network.

 –Supplier manufactures and packages goods, attaching shipping data recorded on a bar code. 

–Quantities shipped and prices entered in the system and flowed to invoicing program; invoices transmitted to purchasing organization.

 –Manufacturer ships orders. 

–Purchasing organization receives packages, scans bar code, and compares data to invoices actual items received.

 –Payment approval is transferred electronically. 

–Bank transfers funds from purchaser to supplier’s account using electronic fund transfer (EFT). How does EDI work?

 –EDI requires companies to agree on standards Compatible hardware and software Agreed upon electronic form format

 –Established EDI standards Automotive Industry Action Group (AIAG) X.12 de facto umbrella standard in U.S. and Canada EDI for Administration, Commerce, and Trade (EDIFACT) umbrella of standards in Europe Electronic Data Interchange

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How does EDI Works? 

•  EDI permits hundreds of unrelated companies to communicate and process business transactions electronically. 

• EDI works because it relies on a standard system that everyone can use, developed under the guidelines of the American National Standards Institute (ANSI), the coordinator for national standards in the United States. 

• The ANSI committee ensures that everyone using a process such as EDI follows the same rules and methods, making the program universally accessible. 

• As a result of the standard, all businesses share a common interchange language, which minimizes the need for users to reprogram their internal data processing systems.

                                                        OR,

How does EDI Works? 

Today EDI is being used in industries like banking, finance, retail, automobiles, etc. to share business documents within the organizations. Exchange EDI document has no involvement of any paper or people, it is directly linked from the sender’s system to the receiver’s system, thus making it faster and cost-effective.

These are the four steps required in EDI document transfer:

Collect & Create Data File: Identify the data that you want to share in your EDI document. Collect and organize this data. The data can be gathered by direct data entry into the system by people or from some of your existing systems. Create a file of this organized data.

Translate to EDI Document: Translate the collected and organized electronic data file into EDI standard format using appropriate segments and elements. This can be done using EDI translator software. There is three important part of each EDI document i.e., Segment, Data Element, and Envelopes.

Transfer EDI Document: You can share the documents with your vendor/client once your data file is converted into EDI format. This transmission can directly be done using the Internet or using some provider’s services.

Receiving End: Once the EDI formatted document is received at the receiver’s end, it is again converted back to a data file using EDI standard format, appropriate segment, and element. This process is done using the EDI translator or services.