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Here is an example of how an EDI transmission works: A buyer prepares an order in his purchasing system and has it approved. Next, the EDI order is translated into an EDI document format called an 850 purchase order. The EDI 850 purchase order is then securely transmitted to the supplier either via the internet or through a VAN (Value Added Network).
The buyer’s VAN is a like an electronic post office that interconnects with the supplier's VAN. The VANs make sure that EDI transactions are sent and received. The supplier’s VAN ensures that the supplier receives the order.
The supplier’s EDI system then processes the order. Data security and control are maintained through out the transmission process using passwords, user identification and encryption. Both the buyer’s and supplier’s EDI applications edit and check the documents for accuracy.
Each trading partner has unique EDI requirements. These will include the specific kinds of EDI documents to be processed, such as the 850 purchase order used in the example above, 856 advance ship notices and 810 invoices. In fact, most any business document that one company would exchange with another company can be sent via EDI.
However, each EDI document must be exchanged with each partner in exactly the format they specify. Many partners will have an EDI implementation guide or kit that explains their specific requirements. Maps are required to translate the EDI documents from the trading partner’s format into the format that is useable by the receiving party.
EDI capability involves either buying or outsourcing the following components:
- Software for communications, mail boxing of EDI transactions, mapping and translation.
- VAN, ASYNC, BISYNC, and Internet communications as required by various partners.
- Hardware including a server or PC, communication devices and peripherals
- Secured office space and monitored security
- Data backups and redundant power for reliability
- Additional software will be needed if integration of the EDI transactions with back office systems is desired.
- A VAN will need to be contracted for ongoing EDI transmissions.
- Personnel must be trained in how to use the software and communication devices.
- Maps will need to be developed for each EDI document type to be exchanged with each partner. Maps translate the encoded EDI record into a useable format.
