Electronic Data Interchange (EDI) is simply a set of data definitions that permit

business forms, that would have been exchanged using paper in the past, to be
exchanged electronically. This simple set of definitions has spurred a number of
organizations to put in place an operational environment in which the exchange of
electronic business forms substitutes for the exchange of paper forms. This has
resulted, in some cases, in the establishment of an EDI environment, which
arguably represents the most advanced state of electronic commerce today,
causing some to view EDI and electronic commerce as one and the same. We view
EDI only as a subset of electronic commerce, albeit a very important one. As such,
EDI provides an excellent example of a working electronic commerce environment
and is a good starting point for examining electronic commerce.

Electronic data interchange aims at single point collection of data for use by various
agencies participating in a common activity.

Electronic Data Interchange) The electronic communication of business

transactions, such as orders, confirmations and invoices, between organizations.
Third parties provide EDI services that enable organizations with different
equipment to connect. Although interactive access may be a part of it, EDI implies
direct computer-to-computer transactions into vendors' databases and ordering
systems.

The Internet gave EDI quite a boost. However, rather than using privately owned
networks and the traditional EDI data formats (X12, EDIFACT and TRADACOMS),
many business transactions are formatted in XML and transported over the Internet
using the HTTP Web protocol. See X12, EDIFACT, TRADACOMS, extranet,
externalization, XML and HTTP.

OBJECTIVE

The basic documents for transaction of business will be taken only once by one
agency and other agencies will take the information from that agency,
electronically, avoiding the need to either physically take the document from one
office to another or keying in the data again and again involving the attendant
problems of manual labor and errors creeping in at each stage of data entry.

EDI IN CUSTOMS CASE

Customs to Port Trusts/Airport authority.

Customs to Customs.

Customs to DGFT (Min of Commerce).

Customs to Export promotion councils,like AEPC, HEPC, etc,

Customs to RBI/Banks.

Customs to Importers/Exporters

Customs to Custom House Agents

Customs to Shipping Lines/Airlines

FUTURE SCENARIO

It should be possible to create a few or even a single message/document for the

entire process of transactions in the course of foreign trade. Steamer agents would
file manifest with the Customs Electronically that would be used also by Port Trust.
CHA's/Importers file B/E / S/B electronically with the Customs which could cover
more data so that Port Trust, CFS's, Transport authorities, Sales Tax Dept. are able
to use the same. The Certification of Licence would be available on-line once EDI
connectivity is established with these agencies (like DGFT, ASI, AEPC etc), when
electronic fund transfers (EDI for banks) are established, Importer / Exporter can
make payments without drafts or coming to Nodal bank for the purpose and can
receive his refund drawback payment directly to his account.

Once VSAT connectivity is established with all Customs / Excise formations in India,
all modvat verifications, end use certificate, rewarehousing certificate for transfer
bonds, TRA's could be made immediately. Above all there would be uniformity in
assessment decision all over India.

EDI is a way of business life. It is based on the principle of trust and contractual
obligations. Once Evidence act and other laws of the land recognise EDI
transactions and provide for the same by fast settlement of disputes, it should be
possible to do away with requirements for paper documentation, i.e., there would
be no necessity to submit invoices, packing list, B/L etc in paper. Records need only
be kept at the offices of Importers / Exporters / CHA's for a minimum period, for
verification by concerned authorities, if required. Since EDI is based on trust, there
would be not need for examination of cargo in a routine manner, the facility of
Green Channel would apply to almost 80% of cases of regular Importers with a
clean tract record. Therefore it is essential that Govt., trade and transporters
recognise the likely benefits and move forward to establish a regime of mutual trust
and confidence.

Electronic Data Inter-change (EDI) is a way of business life, which thrives in an

environment based on trust of faith, whereas in the present manual system the
procedures and practices are all based on lack of trust and faith. Attitudinal change
in the officers and the business people is required to adopt to EDI. EDI is a reality,
EDI cannot be introduced in a significant way unless we have complete overhaul of
working system, methods and procedures. Above all unless the Laws/Acts governing
business in the country are amended to recognise EDI transactions, full-fledged EDI
is not possible. Unless sincere efforts are made to transform the working
environment, with a distinct positive attitude we would be left behind in the interest
of the nations economic prosperity we adopt ourselves to global scenario and move
towards paperless transaction system.

ELECTRONIC COMMERCE/EDI GATEWAY AND NETWORK

With the issual of Tender Document dated 01st February 2000, CBEC has invited
bids for "Supply, Installation and Commissioning Of Electronic Commerce/EDI
Gateway and Network for Indian Customs".

It is now proposed to extend EDI services to all trading partners by setting up the
Customs gateway, which would handle all transactions centrally and route it to the
concerned Customs Commissionerate over ICENET. Tenders are called to propose a
complete solution on a turnkey basis comprising hardware, software and networking
arrangements. The selected vendor would be required to customize the solution to
suit the needs of ICES and maintain the system on a continuing basis for an initial
period of three years. For this purpose, the vendor would be required to work in
close association with domain experts from the Customs department. The proposed
Customs gateway will enable data interchange partners to transmit messages
(including lodging of documents) to the Customs computer system and also receive
messages form it, in any format. The messages could be based on international
messaging standards such as UN/EDIFACT or in the form of ASCII files. The
department proposes to enable the users to send/receive messages through web
based forms, email attachments of File Transfer Protocol (FTP) over the Internet.
The proposed solution will be versatile enough to receive, transmit and process
messages in any of these modes or a variant or combination thereof, and enable
seamless conversion into ICES formats

BACKGROUND

The Indian Customs EDI System (ICES) now operational in 19 major Customs
Stations envisages electronic filing and capturing of declarations regarding goods.
Members of the trade, importers, exporters, airlines, shipping lines etc., are
required to file their declarations i.e., Bills of Entry, Shipping Bills, Import and Export
General Manifests electronically, either from their respective office premises (for
those who have established connectivity either through NICNET or any other Value
Added Network service provider), or through the Service Centres established for this
purpose. Messages are also exchanged with other Government agencies, Trade
Promotion organizations, Port authorities, Airports Authority of India, Container
Corporation of India, Container Freight Stations and other Customs Warehouse
operators.

In addition, the monthly/quarterly Central Excise returns of assesses would also be

filed through the proposed gateway and routed to the concerned Central Excise
Commissionerate.

THE PROPOSED SOLUTION

Connectivity using VAN (X.400 Protocol)

The trading partners of Indian Customs can use the services of any Value Added
Network (VAN) Service Provider. The trading partner at any location can dial into the
local node of the VAN to which he is a subscriber and transmit the message as an
EDIFACT file or a flat file. The VAN would route the messages to the Customs EC/EDI
gateway router, which would be located in the premises of the Directorate of
Systems, Customs and Central Excise in Central Revenues Building, Indraprastha
Estate, New Delhi. Connectivity between the VANs and the Customs EC/EDI gateway
will be the sole responsibility of the VANs. Customs will make available a port on its
gateway router to the VAN depending on the proposed connectivity, for a charge to
be specified at a later date. The gateway would route the message through the
firewall to the EDI engine. The EDI engine would act as a translator to convert the
file into the proprietary ICES flat file format. The EDI engine to the concerned port
would then rout the flat file format over ICENET for processing by local ICES server
at the Customs nodes. Similarly, messages from the local ICES servers would be
routed through the EDI engine, converted into the corresponding EDIFACT
document and routed to the trading partner through the VAN. The successful bidder
will be responsible for the development and deployment of applications for handling
the message interchange excluding the backend ICES server operations that would
be handled by the application vendor. The backend processes will include loading of
the flat file into the ICES database and generation of messages as flat files (that
would then be handled by the proposed application).

Connectivity using Internet:

It is proposed to use the medium of Internet whereby the user would be allowed to
interchange documents through any of the following:

Hosting of Customs and Central Excise forms on the web server

that could be downloaded for entry by the trading partner. The process of filing the
import declaration (Bill of Entry) and the export declaration (Shipping Bill) will be
the same as in practice at the EDI stations. The service centre module for imports
and exports has been developed on Oracle 7.1 and consist of approximately 10
Forms accessing 50 tables (including look-ups) each. The EDI alternative to the
service centre data entry module for remote filing of Customs documents has been
developed in Clipper and has been functioning for over four years at Delhi. Both
versions provide the functionality of preparing the import and export declarations to
the Custom House Agents, importers and exporters. These declarations include
importer/exporter, consignment and assessment details etc. The same forms will be
available on the web server as downloadable forms for the members of the trade
using Internet as their medium of transacting business.

File Transfer Protocol (FTP) / as an attachment to email

There are several Custom House Agents/importers/exporters with a high level of
automation who are able to generate the import/export declaration using data
available with them. It is expected that such clients would prefer to send the import
and export declarations by using File Transfer Protocol (FTP) or as attachments to
email (which would need to be detached from the mail). These declarations could
be sent as UN/EDIFACT messages in which case the EDI engine would be
customized to translate them into the proprietary flat file messages that could be
loaded into ICES.

Message Exchange Server

In the case where messages are to be interchanged between Customs and

custodians of cargo (namely ports, Airports Authority of India, and CONCOR) and
between Customs and bank the interchange will take place by connecting the Local
Area Network of the ICES and those of the banks/custodians through a message
exchange server router. The bidders are required to customize these
servers/connectivity devices for uninterrupted, secure and seamless interchange.

In addition, an HTTP server is proposed to be hosted in the public area for posting
general Customs and Excise related information. Work on this web server is at an
advanced stage of completion.

ICENET

The Indian Customs and Excise Network (ICENET) are proposed to be set up
between EC/EDI gateway and the Customs nodes. The network would cater to all
traffic between the gateway and the nodes, which would primarily be related to
transactions, as well as inter node data, which would be in the nature of messaging
and database queries. ICENET has been designed as a redundant terrestrial network
with VSAT backup where necessary (Jaipur, Ludhiana, Petrapole, Raxaul & Haldia).
VSATs would be operational using ICENET and would be provided by Customs. The
backbone of ICENET would be E1 lines of 2.048 Mbps or higher bandwidth to be
leased from the Department of Telecommunications, Government of India. The E1
lines would terminate at the cluster locations in the metropolitan cities of Delhi,
Mumbai, Calcutta and Chennai from where leased lines of smaller bandwidth
(64/128 Kbps) would be used to connect the Customs nodes to the cluster locations.
The selected vendor would be responsible for setting up ICENET on a turnkey basis
(including interfacing with all other agencies such as the Department of
Telecommunications) and managing the network for a period of three years from
the date of commissioning.

CUSTOMS NODES PROPOSED TO BE LINKED WITH GATEWAYa. Delhi – IGI Airport,

ICD Patparganj, ICD, Tughlakabad.

b. Mumbai – Sahar Air Cargo, Nhava Sheva, Mumbai Customs House (Ballard
Estate) and CFS, Mumbai.

c. Chennai – Air Cargo (Meenambakkam) and Customs House (Rajaji Salai)

d. Calcutta – Air Cargo, Custom House (Strand Road)

e. Bangalore Air Cargo

f. Hyderabad Air Cargo

g. Cochin Custom House

h. Trivandrum Air Cargo

i. Kandla Customs House

j. Ahemedabad – ICD, Sabarmati and Air Cargo

k. Tuticorin Port

l. Surat

m. Goa – New Customs House, Marmagoa

n. Haldia

o. Mangalore Port

p. Jaipur

q. Ludhiana

r. Petrapole land Customs (Bangladesh border)

s. Vizag Customs House

t. Raxaul land Customs (Nepal border)

ELECTRONIC DATA INTERCHANGE – VERSION 2

ICES Version 2 is the biggest project involving the total redesign of the Indian
Customs EDI System. The work involves the entire lifecycle of the software design
and development and would use the latest information technology.

Presently, high-level committees such as Project Steering Committees (headed by

members of the CBEC), Project Advisory Groups and core working groups
comprising of domain specialists’ from Customs and Central Excise have been set
up by the Board. These groups are in the process of finalizing the documentation of
business processes, which would govern the Customs and Central Excise
administration in the coming 5-7 years. Once this documentation is ready, the
respective automation projects of Customs and Central Excise would begin. Vendors
may be chosen for development and could be expected to bring in IT related skills.

DATA WAREHOUSE

Current Status: Planning and Systems Specification Stage:

It is proposed establish data warehouse to harvest data generated out of the

automated systems. The Data warehouse would extract data from ICES and
SERMON transactional systems to enable easy, flexible analyses by Customs and
Central Excise officers. The department’s own automated applications would
themselves require data analysis (for the purposes such as risk analysis etc.,) Data
warehouse would also acquire data through a number of additional applications and
systems providing organization-wide capabilities to use data effectively. Although
the basic design is still under consideration, the data warehouse would broadly
consist wholesale data warehouse, the data marts, the mechanisms to transport
data among the data transaction systems and the wholesale and retails warehouse
(data marts), and the coordination necessary to ensure timely and appropriate
delivery of data. The wholesale data warehouse would acquires data from ICES,
Sperry, Sermon and other future systems other sources of data and would store the
data in a versatile repository. Data from the main data warehouse would then
pushed periodically to smaller data marts on individual databases running on
specified RDBMSs and operating systems. The data marts are required to be custom
designed for specific departmental users and applications. These users would be
able to analyse the data in the data marts using sophisticated web based tools.
Skills are required in database design, data management including data mining,
cleaning and data harvesting.

Advantages of EDI

[Link]

Lowering Operating Cost - EDI replaces paper transactions with electronic

transmissions, saving time and reduced cost of business transaction and enabling
the automatic processing of documents.

Reduced Error and Increases Business Information Accuracy - With the

implementation of EDI, there is no need for re-entering data, thus, reducing the risk
for human error. Each re-entry of data is a potential source of error.

Increase Productivity - Making personnel more efficient and it improves business

capabilities by speeding up throughput.

Increase Security - Data security and control are maintained through out the
transmission process using passwords, user identification and encryption.

[Link]
Inventory Control - EDI can directly and indirectly helps organisations improve their
inventory control. Fact and accurate permits better managing on stock balance,
stock in-and-out, stock handling.....etc.

Distribution - Improving delivery of services and goods by reducing order and

delivery time and increase the reliability of meeting targets.

Accounting - EDI facilitated financial processes and potential in providing faster

reconciliation or elimination of tasks, auditing, checking and improving cash flow.

[Link]

Faster Trading Cycle - EDI allows faster and streamlining trading cycle between
organisations leading to improved relationships between trading partners.

Marketing Competitiveness - With the use of EDI, buyer and customer can easily
search for product description, specification, prices and availability. The use of
computers to obtains information is replacing the use of telephone and catalogues.
Companies with EDI will certainly have an edge.

Better Quality Control - Quality control has becoming a key thrust for progressive
organisations. Many large, corporate buyers are now insisting their suppliers to
conform to company performance criteria. With EDI, customer have more accurate
information on the progress of their orders. Suppliers are given more specification,
inventories are better managed, wastage being minimized. Fast and accurate
communications permits better management.

Improve Corporate Trading Relationship - Business units, departments and regional

offices are co-ordinate together. This strengthen inter-company relationship,
making the entry of new competitors more difficult and gaining more new business
opportunity.
The Risks and Disadvantages involving in the use Of EDI

Trading Partners Involvement - Highly dependence on the participation of trading

partners. It is extremely difficult to get a high level of supplier compliance. EDI will
be a meaningless if your trading partner didn't get involve using EDI system
effectively.

Costly for smaller companies - Many small companies are facing resources problems
in getting starter with the initial implementation of EDI system. It is beyond the
resources these companies to invest tens or hundreds of thousands of dollars in
setting and implementation costs, as well as weeks of personnel training, to get an
EDI system running.

Difficult to agreed on standard used - Even though there are widely-accepted and
widely-used standards, there are no ways to force trading partners to accept these
standards. Cooperation between trading

Chek this one out too

1. Introduction

Traditional electronic data interchange (EDI) has been evolving for approximately
25 years and has truly become the paperless environment that is so often talked
about. EDI is a complicated mixture of three disciplines: business, data processing,
and data communications. This paper examines the concepts from the perspectives
of each discipline.

Internet standards are excluded from the discussion of communications protocols,

since the audience is probably already familiar with SMTP, MIME, and other Internet
messaging protocols.

2. What is EDI?
Since EDI is commonly defined as the direct computer-to-computer exchange of
standard business forms, it clearly requires a business process. Because the key
idea involved is the exchange of documents that allow a business application to
take place without human intervention, data processing is clearly necessary for
application processing. Data communication is then necessary for the exchange to
take place. It is the marrying of these three disciplines that allows the "paperless
trading" that comprises EDI technologies.

Besides the three career disciplines that are internal to the organization, three other
issues are important for EDI trading to take place: standardization of formats,
security, and value-added networks (VANs).

2.1 Looking closer at EDI

EDI is commonly defined as the direct computer-to-computer exchange of standard

business forms. The key idea involved is the exchange of documents that allow a
business application to take place without human intervention. The ability to send
business documents between machines simplifies and expedites the business
process itself. Many businesses choose EDI as a fast, inexpensive, and safe method
of sending purchase orders, requests for quotations, quotations, invoices,
payments, and other frequently used business documents.

Often today one will see the term EC/electronic data interchange (EC/EDI). This term
has evolved from placing EDI under the EC (EC) umbrella, EC being the broad view
of electronic trading. EDI is defined as the interprocess (computer application to
computer application) communication of business information in a standardized
electronic form. EC includes EDI, but recognizes the need for interpersonal (human
to human) communications, the transfer of moneys, and the sharing of common
databases as additional activities that aid in the efficient conduct of business. By
incorporating a wide range of technologies, EC is much broader than EDI. However,
the focus of this document in on EDI, not EC.

2.2 Comparing EDI and fax

Similarities exist between EDI and fax in that both use telephones lines and both
can travel from computer to computer (Sawabini, 1995). There are distinct
differences however. Fax is primarily paper based and requires a human interface.
Fax receipts are not generally acceptable to applications. Fax machines accept
nonstandard data formats, and anything that can be scanned can be faxed,
whereas EDI requires standard message formats between trading partners.

2.3 Comparing EDI and e-mail

Similarities also exist between e-mail and EDI. Both travel from computer to
computer and both use an electronic mailbox. However, three of the four
differences listed for EDI vs. fax also apply to EDI vs. e-mail: e-mail message format
is not standard, e-mail requires human interface, and e-mail is not acceptable to
applications.

3. Data processing and EDI

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 EDI

The 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).

4. Data communications and EDI

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.

4.1 Transport mechanisms move the data

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.

4.2 Communications protocols standardize the data formats

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.

5. The business process and EDI

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."

5.1 Applications of EDI

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

5.2 A typical small purchasing application

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 $[Link].

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.

6. Marriage of the three disciplines

EDI involves three very different and distinct disciplines. First, there has to be a
business process. If the business process would be improved by being accomplished
more quickly and with increased efficiency, then the business process is a candidate
for EDI. The business process is the domain of the business functional area. Second,
once the business process has been identified, data processing technologies have
to be applied to the business process so that the process can be handled using
computers. Some type of standard must come into play in the automation process
so that paper documents that are the output of the business process can be put into
a format that is interchangeable between computers. The automation of the
business process is the domain of the data processing discipline. Third, the
standardized business form must be transmitted from and received by computers,
using data communications technologies. The data communications aspect of EDI is
the domain of the data communications discipline.

The marriage of these disciplines allows for the "paperless trading" that comprises
EDI technologies. As EDI technologies evolve, the terminology changes.

6.1 Paper document flow

The traditional document flow for purchasing transactions starts with data entry by
the purchaser to create a paper document to send by mail to trading partners. Once
the trading partners receive the data, they keystroke the information received into
a local application and then perform more data entry by entering a response into a
local application. The resultant paper document is then mailed to the purchaser.
The procedure is both time consuming and labor intensive because data from both
trading partners has to be entered twice, once at the point of creation and once at
the point of entry to the foreign system. In addition, the originator must await a
paper response sent by mail.

6.2 EDI flow

EDI data is key in only one time, at the original point of entry. The data is then
translated into a standard format electronically and sent to the trading partner
electronically. At the receiving end, the data fields are mapped into local
applications, and the only data entry required is for new data that may be needed
to respond to the data received.

Time for transmission is also very fast in comparison to postal mail. Even on a slow
modem connection, the time is considerably shorter than through the postal
service.

7. Standards

Although communications and document standards are both critical, document

standards are the heart of EDI (Kimberly, 1991).

7.1 The role of standards

Standards are a necessary part of EDI. Every business has application files that are
used to manipulate their data in ways that are familiar to the business. The problem
is that most businesses, though using the same types of data, do not use the same
application programs or hardware and software platforms. If businesses are to be
able to communicate their data to one another, they must have a common ground
to meet on to allow the exchange of the information. Standards are the solutions to
this problem. All business that conform to specific standards can share data in the
formats delineated by those standards.

7.2 ANSI ASC X12

The American National Standards Institute's Accredited Standards Committee X12

(ANSI ASC X12) is the accepted standard for EDI transactions in the United States.
The ANSI ASC X12 committee has the mandate to develop variable-length data
formats for standard business transactions. The committee was accredited in 1980,
and the X12 standard has been evolving ever since. One of the requirements placed
on the committee was and is to keep the standard open to interindustry
applications. This requirement makes the standard more complex than an industry-
specific standard, but the advantages easily overcome the disadvantage of
complexity.

With a single standard, a business has multiple functionality and only has to use
one standard for each business function.

7.3 EDIFACT

The International Standards Organization (ISO), an organization within the United

Nations, has developed the EDI standard that is used in Europe. The Electronic
Document Interchange for Administration, Commerce, and Transportation (EDIFACT)
is the UN standard that the whole world has agreed to eventually adopt. The actual
implementation of EDIFACT within the U.S. has been moving at a snail's pace. The
standard appears to currently be taking the same route that metric standards have
taken. Everyone agrees that EDIFACT is the international standard, but tried and
true X12 standards are not abandoned in favor of EDIFACT.

7.4 Other document standards

Other document standards are in existence, most notably HL7, which is used by the
hospital systems and is ANSI approved.

8. Security

One of the major roles that is provided by the data communications technology is
the ability to apply security to EDI transactions so that the transactions will not be
tampered with or observed, depending on the level of security needed. The security
modules that are discussed in this section are depicted in figure 3.

Figure 3: Data Communications Security

8.1 Confidentiality

Confidentiality requires that all communications between parties are restricted to

the parties involved in the transaction. This confidentiality is an essential
component in user privacy, as well as in protection of proprietary information and
as a deterrent to theft of information services. Confidentiality is concerned with the
unauthorized viewing of confidential or proprietary data that one or both of the
trading partners does not want known by others. Confidentiality is provided by
encryption.

Encryption is the scrambling of data so that it indecipherable to anyone except the

intended recipient. Encryption prevents snoopers, hackers, and other prying eyes
from viewing data that is transmitted over telecommunications channels. There are
two basic encryption schemes, private-key and public-key encryption. Encryption, in
general, is cumbersome and expensive.

Private-key encryption requires that both sending and receiving parties have the
same private-encryption keys. The sender encrypts the data using his key. The
receiver then decrypts the message using his identical key. There are several
disadvantages to private-key encryption. In order to remain secure, the keys must
be changed periodically and the users must be in synch as to the actual keys being
used.

Public-key encryption is gaining wide spread acceptance as the preferred encryption

technology. With public-key encryption, a message recipient generates a matched
set of keys, one public key and one private key. The recipient broadcasts the public
key to all senders or to a public location where the key can be easily retrieved. Any
sender who needs to send the receiver an encrypted message uses the recipient's
public key to encrypt the message. The private key, which is held in private by the
recipient is the only key that can decipher messages encrypted with the matched
public key. This schema requires that the private key cannot be generated from the
public key.

Public key technology is the direction encryption technology is currently headed.

With the advent of X.500, databases will be built to store public keys and enhance
the technology significantly.
8.2 Authentication

Both parties should feel comfortable that they are communicating with the party
with whom they think they are doing business. A normal means of providing
authentication is through the use of passwords.

The latest technology to provide authentication is through the use of digital

certificates that function much like ID cards. The digital certificate has multiple
functions, including browser authentication.

8.3 Data Integrity

Data sent as part of a transaction should not be modifiable in transit. Similarly, it

should not be possible to modify data in storage. Data integrity is a guarantee that
what was sent by the sender is actually what is received by the receiver. This is
necessary if there is a need to ensure that the data has not been changed either
inadvertently or maliciously. However, authentication schemes do not hide data
from prying eyes.

Providing data integrity is generally cumbersome and not used unless one of the
trading partners requires it. The normal mechanism for acquiring data integrity is
for the sender to run an algorithm against the data that is being transmitted and to
transmit the result of the algorithm separately from the transmission. Upon receipt
of the transmission, the receiver runs the identical algorithm and then compares the
results. If the results are identical, then data has not been modified.

8.4 Nonrepudiation

Neither party should be able to deny having participated in a transaction after the
fact. The current technology ensures this through the use of digital signatures.

Electronic signatures are the computerized version of the signature function.

Signatures are needed in some business applications for authorization purposes. For
example, a contracting officer may have a specified spending limit, say $25,000. If
that contracting officer decides to place an order for $30,000, the seller may not
have the authority to fill the order because the signature of the contracting officer's
supervisor is needed on all orders over $25,000. The authorization limits normally
will have been agreed upon through a trading partner agreement.

A digital signature algorithm can be used to generate digital signatures. The digital
signature itself is used to detect unauthorized modification to data and to
authenticate the identity of the signature. The digital signature is also useful to the
recipient as a nonrepudiation device whereby the recipient can prove to a third
party that the signature was in fact generated by the signatory. Thus the signatory
cannot repudiate the signature at a later date.

9. Value-added networks

As seen in the previous discussions, setting up to use EDI involves considerable

expense. For small businesses and businesses that do low volumes between each
other the cost is not always worth the efficiencies achieved. Commercial Value-
added networks (VANs) make the burdens of the communications complexities easy
by offering their communications services to prospective EDI users (Bort and
Bielfeldt, 1996).

9.1 Connectivity

VANs establish communications paths between their customers and with other
VANs. By using these services a business does not have to worry about the myriad
of communications complexities from having trading partners using different
hardware, software, and transport mechanisms. The typical buyer-VAN-seller
connection is depicted in figure 4.

Figure 4: Value-Added Network Connection

Likewise, EDI software is not inexpensive. A business with an X12 translator still
needs personnel on board that understand X12 and can use the software
effectively. Value-added services offer the traditional VAN services and add to that
the translation services required to create an X12 file. These services allow the
typical business to enter the EDI arena at minimal cost and maximum efficiency.
9.2 Delivery

Mailbox software is the most important feature offered by VANs. The electronic
mailbox is used for both store-and-retrieve and store-and-forward operations. In
both cases, the sender of the EDI message transmits the electronic message to the
VAN on its own time schedule. The VAN then acts on the message depending on
whether the service is store-and-retrieve or store-and-forward.

Store-and-retrieve service allows the VAN to store the message in the receiver's
mail box. The receiver then retrieves its messages based upon the needs and
schedules of the receiver. This service enables the sender and receiver to
communicate, but at different times of the day, instead of simultaneously.

Store-and-forward service allows the VAN to forward messages to the receiver when
the business need is not for immediate or event-driven notification. Event-driven
mailbox services can be handled by forwarding of the message to the receiver or by
immediate notification from the VAN to the receiver that a message has been
stored that meets the prearranged criteria for event-driven notification.

9.3 Security

Generally, a VAN provides security at several levels for its mailbox customers.
Access control is normally provided by a login and password sequence.

Messages are screened for the individual customer to ensure that they were sent by
authorized trading partners of the customer. This service also checks for message
types and formats, and ensures they are acceptable to the customer.

Some VANs offer cryptography services. The cryptography is used to authenticate

and encrypt messages to ensure confidentiality. This service requires that the
encryption be done at the customer site to be of any real value.

9.4 Audit and control

One of the features a VAN can offer a customer is a usage accounting data option
whereby the VAN reports how much traffic comes to the customer in a given time
period. Transmission status reports to clarify status of an individual transaction are
also available (Canis, 1995).

Many trading partners require acknowledgment for transactions received, and VANs
can provide automatic sending of acknowledgments. The VAN can also track the
transaction traffic. If specific transactions need to be tracked, the VAN can provide
an audit trail of the requested data.

9.5 Value-added services

In the typical EDI implementation, both sender and receiver employ the services of
a VAN because it eliminates the need to support different communications
configurations between themselves and their trading partners. Using VANs also
reduces the cost of communications equipment and staff to support the multiple
configurations.

Still, not all trading partners will use the same VANs. This is not an issue because
VANs interconnect regularly with each other. The standard VAN interconnection is
through bisynchronous modem connections.

Most VANs offer translation services so that customers do not have the need to
purchase or maintain translation software. Normally if these services are used, the
customer will supply the formats for the data and the VAN will map the data itself.

VANs have the capability to respond to presence of data and can fax or e-mail a
notification to the customer if data is in the customer's mailbox.

10. Effects and level of automation

The benefits associated with EDI often cause overblown expectations. EDI, in and of
itself, is just another way to format and transfer data. The real use of EDI and the
amount of value to be gained from its implementation depend upon whether or not
EDI is integrated into the overall data processing effort of the organization.
The effects of EDI depend greatly on the level of automation within an organization.
If the organization is only using EDI to send data in a format required by a trading
partner, the effect is much more limited than if EDI is integrated into the back-end
processes of the organization. EDI applications that are fed by back-end processes
and the databases that support these processes and then, in turn, feed the EDI data
received back into the databases and back-end processes have a huge impact on
the total level of automation within the organization.

The well-known list of EDI-related benefits--lower costs, higher productivity, and

reduced order-cycle times--is attainable. But if the automation level of the
organization is not high and is not integrated, the effects of EDI will be lessened
considerably.

11. Conclusions and future of EDI

EDI is well established as effective technology got reducing costs and increasing
efficiency. EDI technologies are approximately the same age as Internet
technologies. In the past, the technologies have been mutually exclusive, but this is
rapidly changing. As the two technological communities begin to merge and as the
business community sees the advantages of this merger, EDI and the Internet will
eventually become ubiquitous.

EDI users are already seeing dramatic cost savings by moving their traffic from the
traditional VAN services to the Internet. As EDI working groups within the Internet
Engineering Task Force create interoperability standards for the use of EDI over the
Internet and as security issues are addressed, EDI over the Internet will be part of
normal business. The EDI working group already has a charter for an interoperability
standard for process-to-process EDI. Once that standard is in place, real-time EDI
over the Internet will replace normal time-delayed, batch-style interactions.