Electronic Data Interchange Transmission
Electronic Data Interchange Transmission:
Trading partners are free to use any method for the transmission of documents. In the past one of the more popular methods was the usage
of a bisync modem to communicate through a value added network (VAN). Some organizations have used direct modem to modem connections
and bulletin board systems (BBS), and recently there has been a move towards using some of the many Internet protocols for transmission,
but most EDI is still transmitted using a VAN. In the healthcare industry, a VAN is referred to as a "clearinghouse".
Value Added Networks:
In the most basic form, a VAN (value added network) acts as a regional post office. They receive transactions, examine the 'from' and the 'to'
information, and route the transaction to the final recipient. VANs provide a number of additional services, e.g. retransmitting documents,
providing third party audit information, acting as a gateway for different transmission methods, and handling telecommunications support.
Because of these and other services VANs provide, businesses frequently use a VAN even when both trading partners are using Internet-based protocols.
Healthcare clearinghouses perform many of the same functions as a VAN, but have additional legal restrictions that govern protected healthcare
information.
VANs also provide an advantage with certificate replacement in AS2 transmissions. Because each node in a traditionally business-related AS2
transmission usually involves a security certificate, routing a large number of partners through a VAN can make certificate replacement much easier.
Internet/AS2:
Until recently, the Internet transmission was handled by nonstandard methods between trading partners usually involving FTP or email attachments.
There are also standards for embedding EDI documents into XML. Many organizations are migrating to this protocol to reduce costs. For example,
Wal-Mart is now requiring its trading partners to switch to the AS2 protocol (Wal-Mart EDI Requirement).
AS2 (Applicability Statement 2) is the draft specification standard by which vendor applications communicate EDI or other business-to-business
data (such as XML) over the Internet using HTTP, a standard used by the World Wide Web. AS2 provides security for the transport payload through
digital signatures and data encryption, and ensures reliable, non-repudiable delivery through the use of receipts.
EDI via the Internet (Web EDI):
The Internet, as with VAN providers, uses its own communications protocols to ensure that EDI documents are transmitted securely.
The most popular protocols are File Transfer Protocol Secure (FTPS), Hyper Text Transport Protocol Secure (HTTPS), and AS2.
The Internet has provided a means for any company, no matter how small or where they are located in the world, to become part of a major supply
chain initiative hosted by a global retailer or manufacturing company. Many companies around the world have shifted production of labour
intensive parts to low-cost, emerging regions such as China and Eastern Europe. Web-based EDI, or webEDI, allows a company to interact with
its suppliers in these regions without the worrying of implementing a complex EDI infrastructure.
In its simplest form, webEDI enables small to medium-sized businesses to receive, turn around, create and manage electronic documents using
just a web browser. This service seamlessly transforms your data into EDI format and transmits it to your trading partner.
Simple pre-populated forms enable businesses to communicate and comply with their trading partners' requirements using built-in business rules.
Using a friendly web-based interface, EDI transactions can be received, edited and sent as easily as an email. You will also be able to receive
EDI documents and send EDI invoices and shipping documents with no software to install. All you require is an Internet connection. WebEDI has
the added advantages that it is accessible anywhere in the world and you do not need a dedicated IT person to manage any software installation.
Even though VANs offer a very secure and reliable service to companies wishing to trade electronically, the Internet is making EDI more
available to all. This is especially important in the emerging markets where IT awareness and infrastructure are very limited. WebEDI is
traditionally based around the "hub and spoke'"model, with major trading partners or Application Service Providers (ASPs) being the hubs
and smaller partners being the spokes.
Hubs or ASPs implement EDI using email or virtual mailboxes
Trading partners can send EDI messages directly to a web-enabled EDI messaging site, via the hub. EDI messages are simply sent using a web browser
Systems that are currently being developed will enable EDI messages to be displayed in a web browser and directed via open standard XML,
directly into the user's accounts system
WebEDI-based users can interact with VANs without incurring the costs of setting up a dedicated VAN connection
EDI Outsourcing:
Operating an EDI program is becoming increasingly complex as companies face a wider range of requirements from trading partners.
Many companies have chosen to outsource their EDI needs to an integration service provider that offers the people, processes,
and technology to operate a robust EDI program.
People - Skilled people with both technical and business expertise who can support and deliver a B2B program that meets current
and future business objectives
Processes - Best-practice processes for implementing or extending the use of B2B e-commerce in an organization, managing a B2B
program on an ongoing basis, and quickly and easily bringing new trading partners onto a B2B network
Technology - The comprehensive infrastructure needed to exchange EDI transactions with partners, translate business documents
between any of the many EDI e-commerce standards now in use, and provide reporting and visibility into B2B processes and networks
Interpreting data:
Often missing from the EDI specifications (referred to as EDI Implementation Guidelines) are real world descriptions of how the
information should be interpreted by the business receiving it. For example, suppose candy is packaged in a large box that contains
5 display boxes and each display box contains 24 boxes of candy packaged for the consumer. If an EDI document says to ship 10 boxes
of candy it may not be clear whether to ship 10 consumer packaged boxes, 240 consumer packaged boxes or 1200 consumer packaged boxes.
It is not enough for two parties to agree to use a particular qualifier indicating case, pack, box or each; they must also agree on
what that particular qualifier means.
EDI translation software provides the interface between internal systems and the EDI format sent/received. For an "inbound" document
the EDI solution will receive the file (either via a Value Added Network or directly using protocols such as FTP or AS2),
take the received EDI file (commonly referred to as a "mailbag"), validate that the trading partner who is sending the file is a
valid trading partner, that the structure of the file meets the EDI standards and that the individual fields of information
conforms to the agreed upon standards. Typically the translator will either create a file of either fixed length, variable length
or XML tagged format or "print" the received EDI document (for non-integrated EDI environments). The next step is to convert/transform
the file that the translator creates into a format that can be imported into a company's back-end business systems or ERP.
This can be accomplished by using a custom program, an integrated proprietary "mapper" or to use an integrated standards based
graphical "mapper" using a standard data transformation language such as XSLT. The final step is to import the transformed file
(or database) into the company's back-end enterprise resource planning (ERP).
For an "outbound" document the process for integrated EDI is to export a file (or read a database) from a company's back-end ERP,
transform the file to the appropriate format for the translator. The translation software will then "validate" the EDI file sent
to ensure that it meets the standard agreed upon by the trading partners, convert the file into "EDI" format (adding in the
appropriate identifiers and control structures) and send the file to the trading partner (using the appropriate communications protocol).
Another critical component of any EDI translation software is a complete "audit" of all the steps to move business documents
between trading partners. The audit ensures that any transaction (which in reality is a business document) can be tracked to
ensure that they are not lost. In case of a retailer sending a Purchase Order to a supplier, if the Purchase Order is "lost"
anywhere in the business process, the effect is devastating to both businesses. To the supplier, they do not fulfill the order
as they have not received it thereby losing business and damaging the business relationship with their retail client. For the retailer,
they have a stock outage and the effect is lost sales, reduced customer service and ultimately lower profits.
In EDI terminology "inbound" and "outbound" refer to the direction of transmission of an EDI document in relation to a particular
system, not the direction of merchandise, money or other things represented by the document. For example, an EDI document that
tells a warehouse to perform an outbound shipment is an inbound document in relation to the warehouse computer system.
It is an outbound document in relation to the manufacturer or dealer that transmitted the document.
Advantages of using EDI over paper systems:
EDI and other similar technologies save a company money by providing an alternative to, or replacing information flows that
require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc. Even when paper
documents are maintained in parallel with EDI exchange, e.g. printed shipping manifests, electronic exchange and the use
of data from that exchange reduces the handling costs of sorting, distributing, organizing, and searching paper documents.
EDI and similar technologies allow a company to take advantage of the benefits of storing and manipulating data electronically
without the cost of manual entry. Another advantage of EDI is reduced errors, such as shipping and billing errors,
because EDI eliminates the need to rekey documents on the destination side. One very important advantage of EDI over paper
documents is the speed in which the trading partner receives and incorporates the information into their system thus greatly
reducing cycle times. For this reason, EDI can be an important component of just-in-time production systems.
According to the 2008 Aberdeen report "A Comparison of Supplier Enablement around the Word", only 34% of purchase orders are
transmitted electronically in North America. In EMEA, 36% of orders are transmitted electronically and in APAC, 41% of orders
are transmitted electronically. They also report that the average paper requisition to order costs a company $37.45 in North America,
$42.90 in EMEA and $23.90 in APAC. With an EDI requisition to order costs are reduced to $23.83 in North America, $34.05 in EMEA and 14.78 in APAC.
Barriers to implementation:
There are a few barriers to adopting electronic data interchange. One of the most significant barriers is the accompanying business
process change. Existing business processes built around slow paper handling may not be suited for EDI and would require changes
to accommodate automated processing of business documents. For example, a business may receive the bulk of their goods by 1 or 2
day shipping and all of their invoices by mail. The existing process may therefore assume that goods are typically received before
the invoice. With EDI, the invoice will typically be sent when the goods ship and will therefore require a process that handles
large numbers of invoices whose corresponding goods have not yet been received.
Another significant barrier is the cost in time and money in the initial set-up. The preliminary expenses and time that arise from
the implementation, customization and training can be costly and therefore may discourage some businesses. The key is to determine
what method of integration is right for your company which will determine the cost of implementation. For a business that only
receives one P.O. per year from a client, fully integrated EDI may not make economic sense. In this case, businesses may
implement inexpensive "rip and read" solutions or use outsourced EDI solutions provided by EDI "Service Bureaus". For other
businesses, the implementation of an integrated EDI solution may be necessary as increases in trading volumes brought on by EDI
force them to re-implement their order processing business processes.
The key hindrance to a successful implementation of EDI is the perception many businesses have of the nature of EDI. Many view EDI
from the technical perspective that EDI is a data format; it would be more accurate to take the business view that EDI is a system
for exchanging business documents with external entities, and integrating the data from those documents into the company's internal
systems. Successful implementations of EDI take into account the effect externally generated information will have on their internal
systems and validate the business information received. For example, allowing a supplier to update a retailer's Accounts Payables
system without appropriate checks and balances would be a recipe for disaster. Businesses new to the implementation of EDI should
take pains to avoid such pitfalls.
Increased efficiency and cost savings drive the adoption of EDI for most trading partners. But even if a company would not choose
to use EDI on their own, pressures from larger trading partners (called hubs) often force smaller trading partners to use EDI.
An example of this is Wal-Mart`s insistence on using EDI with all of its trading partners; any partner not willing to use EDI
with Wal-Mart will not be able to do business with the company.
Examples of Disadvantages of EDI:
United States Health Care Systems:
The United States health care system consists of thousands of different companies and other entities. In 1996, the Health Insurance
Portability and Accountability Act (HIPAA) was enacted. In short, it set down standard transaction sets for specific EDI transactions
and mandated electronic support for every insurance company in the United States for these transactions. While the benefits of EDI are
numerous and only increase with increased volume, the drawbacks, though not directly related to EDI itself, include managerial problems
in the support, maintenance and implementation of EDI transactions.
1.Though an EDI standard exists for health care transactions, the standard allows for variation between implementation, which gives
way to the existence of Companion Guides, detailing each company's variation.
2.Each entity may have a different method of delivery, ranging from dial-up BBS systems; mailing hard media such as a CD-ROM or
tape backup; or FTP. Some entities may elect not to support different methods of delivery depending on a trading partner's expected volume.
3.Due to varying implementation on nearly all points of EDI including contact, registration, submission and testing of transactions
between different entities in US health care, the existence of EDI clearinghouses has sprung up. An EDI clearinghouse is one entity
agreeing to act as a middle-man between multiple entities and their end-clients, such as between medical providers and insurance
companies they accept coverage from. They may act as a value-added network and attempt to conform their different supported entities
to one submission standard. One such example is Emdeon. An EDI clearinghouse will not cover all health care entities, though they may
cover a large portion, and they may not cover all HIPAA-mandated transactions for all of their supported entities.
4.Because of the above points, one single computer application cannot handle all health care entities. Though this may not be necessary,
it can lead to an obvious management headache as a company attempts to register itself with various EDI partners.
This all comes at a massive cost in time and management as a company may attempt to support a broad range of transactions with a
broad range of entities. This example is an extension of the lack of strict standards across implementations, transactions and methods.
See Also:
References
- Bergeron, François; Louis Raymond (1992). "The advantages of electronic data interchange". ACM SIGMIS Database. 19..31. http://doi.acm.org/10.1145/146553.146556.
- Kantor, Michael; James H. Burrows (1996-04-29). "ELECTRONIC DATA INTERCHANGE (EDI)". National Institute of Standards and Technology. http://www.itl.nist.gov/fipspubs/fip161-2.htm. Retrieved on 2008-05-13.
- North Dakota Medicaid Companion Guide
- Wisconsin Medicaid EDI Information
- Nebraska Medicaid Submission Requirements
- Wikipedia.org
