Topic Contents

7.1 Introduction
7.2 Electronic Data Interchange
7.3.1 Transporting EDI Formatted Data
7.3 P
7.3.1 R
7.3.2 D
7.3.3 C
7.4 P
E-Commerce and E- Governance
Chapter 7

Structured Electronic Documents

7.2 Electronic Data Interchange
Referring to Figure 7.1, we see that in a purchase operation two parties are involved: a
vendor and a purchaser. The steps followed are:

The purchase office of the purchasing organization sends a Request For Quotation
(RFQ) to a vendor's sales office.

The vendor's sales office enquires with its stores about the availability and quantity
available of the item(s).

Based on the reply the vendor sends a quotation to the purchase office.

The purchase office examines the quotation and if OK sends a purchase order to the
vendor.

The vendor sends an order acceptance and an invoice to the purchaser; It

simultaneously sends a request to its stores office to supply the goods. The stores office
in turn requests the shipping office to ship the items invoiced.

The shipping office sends the items along with a delivery note to the receiving office of
the purchaser which forwards this along with the items received to the inspection office.

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The inspection office examines items received (both quantity and quality) and
sends a note on accepted items along with the items to the stores office.
Simultaneously, it informs the purchase office about rejected items which is
immediately communicated to the vendor's sales office with a request for a revised
invoice. The stores office takes the items into stock and informs the purchase
office.

The revised invoice is sent to the accounts office for payment to the vendor.

The accounts office sends an e-cheque to the vendor's accounts office along with
the revised invoice and informs the purchase office.

The vendor's accounts office acknowledges receipt of the cheque to the

purchaser and simultaneously informs its sales office.

The above procedure illustrates how a large number of documents have to flow
among the offices of each of the organizations transacting business and also
between the organizations.

Before the advent of computing all these were paper documents which required
enormous time and effort with a large number of clerks doing the processing. When
computers came in these paper documents were converted to computer readable
documents by manually entering all the data on terminals..
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Thus, organizations were keen to avoid this manual data entry which was
expensive and prone to errors. There were two requirements:

Standardization of electronic format of documents within an organization to

enable fast handling and processing of inter-office document flow.

Standardization of common documents normally exchanged between business

partners and make them computer readable to eliminate manual entry of
documents. Eliminating manual entry reduces cost and ensures accuracy.

As it happened, the electronic documents within each organization were

standardized to ease the design of business data processing programs which
are company specific.

However, for exchange of documents between two organizations a standard

had to be evolved. IBM which was a dominant computer vendor in the 1970s
designed a standard for Electronic Data Interchange (EDI).

This was modified by the American National Standards Institute and was
published as ANSI X 12 EDI standard. Another standard was developed as an
International standard by the United Nations Economic Commission for Europe
and was called EDIFACT (Electronic Data Interchange Format for
Administration Commerce and Transport).
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Currently EDIFACT is used by most countries outside USA whereas in USA,
the ANSI X 12 EDI standard is used.

There are several definitions for EDI. EDIFACT standard definition is:
"Electronic Data Interchange (EDI) is the interchange of standard formatted data
between computer application systems of trading partners without manual
intervention.

In other words, the internal document structure of a Business A has to be

transformed to the EDIFACT standard of that document before sending it to its
trading partner Business B. Business B's computer should receive this, interpret
it and transform it to its own internal format (See Figure 7.2).

Similarly, B's internal document formats have to be translated to EDIFACT and

sent to A's computer which should in turn convert them to their own internal
format. You may wonder why the businesses should not adopt EDIFACT as
internal standard also.

However, EDIFACT standard was evolved before the advent of Internet and
the current generation of high speed communication and computing. Thus, they
tried to minimize the size of documents and make them simpler for computer
processing.
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This makes these forms difficult to use for local processing as it is not
understandable to humans. Internal documents of businesses are designed to
be understandable and to simplify data processing programs.

Figure 7.2 Steps followed when EDI format is used (VAN provider's services
enclosed within broken lines).

The common structure of EDI documents contain:

Transaction set which is equivalent to a business document such as

purchase order, invoice etc. Each transaction has several data segments.
There are several hundred transaction sets defined in the standard.

Data segments which is a group of data elements that together convey some
information, for example, a purchase order line, company name and address.

Data elements which are individual fields such as price of an item, quantity,
etc.

A sample EDI document for a book purchase order is given in Table 7.1

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 Observe that the document format is difficult to understand. It is meant to be
interpreted only by computers. -

Developing data processing systems with business rules which are unique to each
organization is difficult if EDIFACT is used. Thus, the most common method adopted by
several companies is to have a third party called Value Added Network Service provider
to handle EDIFACT data formats. This is not essential but it is convenient (see Figure
7.2).

VAN provider's responsibility is to:

Provide secure and stable communication among business partners.

Translate internal formats of each of its members to a standard EDI format (EDIFACT
or ANSI X 12) and vice versa.

Provide 7 days a week, 24 hours per day service so that documents may be received
at any time and be stored and forwarded to the appropriate addresses.

Transactions roll back to support uncommitted transactions.

Provide audit trails for documents received to settle any disputes which may arise
between businesses.

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 Provide a good customer support.

EDIFACT and other standards define formats for a range of business

documents such as purchase order, tenders, bill of ladings and invoices. The
number is enormous and most businesses find it convenient to employ a VAN
provider.

However, VAN providers are expensive and many Small and Medium
Businesses (SMBs) find them beyond their budgets. Thus, EDI adoption has been
sluggish with less than 10% of businesses adopting them. Only when compelled
like in international trade (India's Customs Department insists on EDIFACT for bill
of lading) or by big businesses (such as Wal Mart) do companies adopt EDI
standard.

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7.2.1 Transporting EDI Formatted Data
So far we have not discussed in detail how EDI documents are transported
between business partners. In the early years of EDI (1970-90) the documents were
transported physically using magnetic tapes in which EDI data were recorded.

Later floppy disks were used. When communication systems improved, leased
lines were used by VANs. With the advent of the Internet the entire scenario has
changed. Now there are many alternatives to transport EDI data. One may send EDI
data by e-mail using S/MIME (Security enhanced multipurpose internet mail
extension) standard.

One may also send EDI files using ftp after encrypting the files using 3DES/RSA
combination. Another, alternative is to use the World Wide Web infrastructure and use
https.

The main point is that EDI is independent of the communication protocol and the
physical transport layer. The physical transport layer may be leased lines, extranets
using VPN and even the Internet if security is ensured.

One of the services provided by VANs is to maintain leased lines and electronic
post boxes between business partners. With the advent of the Internet the
communication function of VANs has lost its importance. Small and Medium
Businesses can adopt EDI using the services of EDI gateway programming services
which will provide the following services: 13
Translation programs to convert company specific forms
to EDI standard data format
Translate EDI standard data format received from
business partners to company specific formats
Provide audit trails of sent and received documents
ensuring non-repudiation
Ensure security of data transported among business
partners
Transaction roll back to support uncommitted
transactions
Overall customer support

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 Electronic Data Interchange
Computer readable forms for business documents such as
invoices, purchase orders, delivery notes needed in B2B e-
commerce so that e-documents can be exchanged.
Essential to eliminate manual data entry which is error
prone
Essential to agree on common formats for commonly
used forms.
Electronic data interchange (EDI) standard gives
specifications for commonly used standard business forms
Currently two standards are available for EDI forms
It is possible to adapt these standards for documents
which use XML (Extensible Markup Language) for
specification.

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 EDI Standards

ANSI X.12 standard proposed by American National

Standards Institute
EDIFACT (Electronic Data Interchange For
Administration Commerce and Trade) standardized by
United Nations Economic Commission for Europe for
international trade

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EDI Transactions in B2B E-commerce

Cooperating businesses agree on EDI standard

Programs needed to translate data received in
EDI format to a form needed by the application
program
Method of sending/receiving data between
businesses to be agreed on - is it PSTN, Extranet
or VAN (value added network) service ?
Important to ensure reliable, guaranteed and
secure receipt of electronic documents by
intended receiver

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EDI Using Value Added Network Service
VAN provides post box for all subscribers
Guarantees delivery
Open 24 hours, 7 days a week
Provides security, acknowledgement, audit trails for
transactions, non repudiation by users
Some VANS provide conversion of EDI forms to
application format
Disadvantage high cost. Used by large businesses -
may not be cost-effective for smaller businesses

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 EDI Using Internet

Cheaper method for use by small business is to use XML for

EDI and e-mail,instead of VAN
Establish EDI form standard - XML appropriate Document
Type Definition(DTD) publicised using organizations web
page-cooperating business can use a DTD to interpret XML
documents.
Use MIME (multipurpose internet mail extension) to attach
EDI forms to e-mail messages

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 EDI Using Internet

Can use Simple Mail Transfer Protocol(SMTP) of internet

If secure transmission needed use S/MIME (Security
enhanced MIME) which uses encryption and digital signature
(We will describe encryption and digital signature later in this
module)
If very long document or many documents are to be sent
together File Transfer Protocol (FTP) may be more
appropriate.

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 EDI Standard

Defines several hundred transaction sets

corresponding to each type of business document
such as invoice, purchase order etc.
Defines data segments - corresponding to
groups of data elements such as purchase order
line
Defines data elements - which are individual
fields such as price, quantity etc

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THANKS

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