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Ask 10 people to define EDI and you’ll likely get 10 different answers. To some people, it’s electronic commerce. To others, it’s XML or VAN.

In reality, EDI is exactly what its name implies – electronic data interchange – the exchange of data from one computer system to another.

Because EDI enables distributors to reduce costs by increasing transaction speed and lowering the occurrence of human key-in error, distributors need to understand this generic concept and its various components in order to make informed choices about how they conduct business electronically.

A communication form
EDI, like human communication, requires a common language with rules determining its usage. These rules are important to avoid confusion. People might understand when someone violates the rules, but computers lack that intuition and must operate within a predefined set of rules. For instance, you know what a customer means when he asks for a flathead, three-quarter-inch screwdriver, but a computer might search for a flathead screwdriver three-quarters of an inch long.

Even with a common language and fixed rules, cultural differences can further complicate effective EDI. Take, for example, the case of two distributors that buy and sell drill bits. One distributor calls a certain sized bit a 1/4-in. drill bit while the other calls the same item a quarter-inch drill bit. It’s obvious to us that these are the same items, but their business systems require translation software to understand the difference in terms and locate the needed inventory.

Another key aspect of effective EDI is security. People expect the information they send to safely reach its destination without other computers accessing the data and distributing it to other sources. Computers utilize security software to keep messages safe and messaging software to get messages to their intended destination.

Finally, there must be a shared communication method to exchange information. A common language and all the translation, security and messaging software in the world won’t facilitate EDI if the systems involved in the process use different methods to communicate.

Speak the same language
Until a few years ago, most computers used ANSII X.12 as the standard defined language for EDI. Recently, extensible markup language (XML) was introduced as an alternative to ANSII X.12.

ANSII X.12 transactions are divided into sets defined by numbers. For example, the number 850 designates a purchase order. In ANSII X.12, a complete purchase order transaction looks like this:

ST|850|000038934~
BEG|00|SA|1055487||20001027~
CUR|BY|USD~
REF|EX|CC1232~
FOB|PP~
DTM|106|20001027~
N9|L1|SHIP INSTRUCTIONS~
MSG|WILL DELIVER MON. - SAT.~
MSG|NOT SUNDAY~
N1|BT|P21 ACCLAIM BRANCH 1|92| 1~
N3|19 WEST COLLEGE AVE~
N4|YARDLEY|PA|19067~
N1|ST|PROPHET 21, BR#1|92|BR#01~
N3|19 WEST COLLEGE AVE~
N4|YARDLEY|PA|19067~
PO1|1|10|EA|8.51|UM|IN|LOT 12121|
   UI|TPCX11111|MG|123456|UP|
   12345611111~
PID|F||||1" DRILL BIT~
PID|F||||TEST DESC 2~
DTM|106|20001027~
CTT|1|10~
SE|21|000038934~

With XML, the rules applied to the language don’t need to be defined ahead of time. In other words, while ANSII X.12 requires that each data element is not only defined but also entered into the transaction in a specific order, XML can define the data elements as they appear in the transaction. For example, the following two XML transactions are identical:

Transaction 1:
//Price/$8.50/Price //Customer/
Acme/Customer//Item Code/1 inch drill
bit/Item Code//

Transaction 2:
//Item Code/1 inch drill bit/Item
Code//Customer/Acme/Customer//
Price/$8.50/Price//

As you can see, the data element definition is part of the transaction. This is much easier for distributors and saves them from having to remember specific rules for every type transaction they place.

Does this mean XML will replace ANSII X.12 as a language for EDI? Most likely not. Distributors have invested millions of dollars over many years in transaction software using ANSII X.12. Fortunately, as XML grows in popularity, distributors can take advantage of cost-effective products and services that translate ANSII X.12 to XML and vice versa, just as someone might convert English to Spanish.

It’s all in the translation
In addition to needing a common language, EDI traditionally required translation maps for each transaction. Translation maps solve problems caused by differences in what distributors call the same products. The distributors selling the three-quarter-inch drill bits would each create a map for their computer systems defining what each called the products they wanted to exchange. While these maps free distributors from changing what they call every item they stock, creating these maps is complicated and time consuming. What’s more, once set up, they must be continually maintained and updated.

Security and messaging
To be effective, EDI transactions must reach the intended recipient only once. Say a distributor uses EDI to submit a purchase order to a supplier for an item destined for a very good customer. For some reason, the supplier never gets the transaction. The distributor’s computer shows the transaction was sent, but the supplier’s computer has no record of it. The material never arrives and the distributor not only loses the order, but the customer as well.

The next example is even scarier. Using EDI, a distributor creates and sends a monthly purchase order for a major manufacturing line. The value of the order is $1 million. A few days later, the material arrives at the distributor’s warehouse. The following day, the order arrives again – at a cost of an additional $1 million! When the distributor calls the supplier, he’s told they received two identical purchase orders on two different days. Apparently, the transaction was duplicated. While this does not happen often, it does occur.

The final example of the need for EDI security could literally mean the success or failure of a company. Say a supplier required a distributor to report point-of-sale data via EDI and an unscrupulous competitor intercepted that data. Now, the competitor knows who bought the products, how much and at what price.

VANs vs. the Internet
Fortunately, the method distributors choose to conduct EDI can save sleepless nights worrying about the security of the information they exchange. Selecting a method to conduct EDI is among the most important decisions a distributor can make.

Currently, there are two primary methods for conducting EDI, value-added networks (VANs) and the Internet. Each has its advantages and disadvantages.

VANs. Historically, VANs have been the method of choice for EDI transactions. What makes VANs attractive is that they inherently take care of the messaging, mailbox and security requirements for successful EDI. In addition, most VANs interconnect with each other, enabling distributors on different VANs to conduct EDI transactions. If VANs were not interconnected, each distributor would have to join the VAN of every other distributor it wanted to do business with – a time-consuming and costly process.

Unfortunately, VANs charge for each transaction they process. This service charge may be several times higher than the value the distributor receives from the transaction itself and has therefore kept companies from embracing EDI.

The Internet. The Internet appears to be a much more cost-effective solution. Most distributors have a dedicated Internet connection, so conducting EDI transactions over the Internet does not add to their operating costs.

An added benefit the Internet provides is real-time flow of information. VANs typically communicate in a batch process in which a distributor submits a transaction to a VAN, where it’s processed and held with other transactions before being sent to its final destination. Because the Internet provides a direct connection in real time, information flows faster.

Security and messaging
VANs inherently provide security and messaging for EDI transactions. Unfortunately, the Internet cannot offer the same. More unfortunate is the increasing trend among distributors to take the risk and choose the reduced costs of using the Internet as their preferred method of EDI. Because the Internet is a public network, it’s easy for people to not only view transactions as they cross the Internet, but also divert or corrupt those transactions. However, cost-effective security and messaging software solutions can combat this.

From the security side, virtual private networks (VPNs) create electronic “tunnels” between distributors. These tunnels allow only the individuals sending and receiving data to see it, providing guaranteed security over the Internet. Today, many routers (the device used by computers to connect to the Internet) have VPN software built in.

As for messaging, several different messaging software products are on the market to help distributors conduct EDI transactions over the Internet. The popular IBM MQ Series software is available for almost all computer platforms. Every time a transaction is sent, MQ Series software waits until it receives a message from the receiving computer that the message has arrived. If it does not receive the message, it continues to resend it until it gets through. Messaging software also keeps logs, making it easy to track a message as it moves through the process.

Internet trading networks
Internet trading networks mitigate the security and messaging concerns of using the Internet for EDI without sacrificing the cost savings of VANs. Like VANs, Internet trading networks provide security and messaging software. Unlike VANs, they are cost-effective. In addition, Internet trading networks enable distributors to conduct EDI transactions with other distributors using VANs.

An added benefit of Internet trading networks is the elimination of complex and costly translation mapping. Upon joining an Internet trading network, a distributor creates one map of all of its stock and non-stock items. This map is placed on the network, which completes the necessary translations before moving the transaction on to the appropriate trading partner, all in a matter of seconds.

EDI has been touted for its ability to enable distributors to reduce costs by increasing transaction speed and lowering the occurrence of key-in error. VANs, with their complexity and high costs, never gained the critical mass needed to become a mainstream way of doing business. With the Internet – specifically Internet trading networks – replacing VANs and cutting down on the complexity and costs, more and more distributors will conduct business electronically.

Doug Levin is executive vice president of Prophet 21. He can be reached at 800-PROPHET or at .

This article originally appeared in the March/April 2002 issue of Progressive Distributor. Copyright 2002.

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