Logistics Management 

Electronic Data Interchange (EDI) is the computer-to-computer interchange of transactions between two business or trading partners. Businesspeople currently spend roughly 60% of their working day dealing with documents, many of them computer-generated. "If computers could directly and routinely communicate all the documents that computer applications create, communications would be more timely and efficient. You would use your computer primarily to read, search and print portions of electronically distributed documents. Documents would become active elements of communication."'

EDI is a key weapon in time-based competition, and, as companies move toward integrated partnerships with suppliers and customers, the timely, electronic interchange of information with these partners becomes more critical. The market for EDI software, data transport and network services and professional services was estimated to be $368 million, but is expected to grow to $1.68 billion by 1996, an astonishing growth rate of"37% per year.^{2 If you're not currently using EDI or actively planning on using it, you can be sure that your competition will be using it very soon. And if your competition in the Far East isn't already using it, consider the fact that the EDI market is growing at 48% per year in the Pacific Rim.}

EDI can be used to speed up the process of exchanging computerized information that is currently fully exchanged via paper, such as your purchasing system to the supplier's order entry/manufacturing system, or to fully capture information that is currently entered into your systems in summary form. For example, a Fortune 500 manufacturer is currently working on irjiplementa-tion of EDI payment of all freight invoices and will capitalize on the additional information given by EDI to determine the price and reliability of different freight vendors for different types of shipments. This will serve as the basis for decisions about future freight movements.

There are many different standards for the electronic documents traded between partners via EDI. Many of these standards were originally developed by trade organizations for different industries, such as WINS for warehousing, TDCC for transportation and AIAG for automotive manufacturing. In the U.S., these standards are published under the umbrella of the American National Standards Institute, the ANSI X. 12 standard. In Europe, the primary standards organization for EDI is the United Nations EDI for Administration, Commerce, and Trade, or UN/EDIFACT.

All of these standards consider a set of related documents going from one trading partner to another a functional group. Specifications set forth the standards for addressing the functional group to be transmitted from one partner to another, just like addressing an envelope to mail paper documents from one company to another. Functional groups can be sent directly from one trading partner to another, but many value-added network companies such as GE Information Services, MCI, Sprint and AT&T provide services to electronically mail the functional groups between

trading partners. The value-added services can also include archiving of messages between the trading partners.

Each type of document traded between partners is called a transaction set. For example, the 110 transaction set is an invoice for air freight services, and the 820 transaction is a remittance advice to indicate which invoices are being paid via a particular check or electronic funds transfer.

Each transaction set is further broken down into segments that serve a particular purpose. The standards specify which segments are mandatory and which are optional, and how many of them can be in a transaction set, and any conditions on the order of the segments. For example, each transaction must begin with an ST (start of transaction) segment and end with an SE (end of transaction) segment. Each 110 transaction set must contain one and only one B3 segment that indicates, among other things, the invoice number and invoice date. Each 110 transaction set may have multiple loops consisting of Nl, N2, N3 and N4 segments to indicate the addresses of the shipper, receiver and bill to party for each freight shipment on the invoice.

Each segment consists of multiple elements that contain a single piece of data. The standards specify the order of the elements, whether the elements are mandatory or optional, and minimum and maximum lengths of the elements. For example, the B3 segment in an invoice must contain the invoice number in its first element. The Nl address segment must contain the first line of the address in element 1 with a length of 1 to 35 characters, and may optionally contain a second address segment of 1 to 35 characters. The ST segment must contain the transaction type as its first element and a sequential control number as its second element, and the SE segment must contain a count of the total number of segments in the transaction set.

To be Continued

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