EDI Frequently Asked Questions

1. What is EDI?

   • The computer-to-computer electronic exchange of machine-processable business documents in a standard format.
   • An electronic alternative to paper, fax, and phone-based transactions used by companies to communicate with one another.

2. What are EDI Drivers?

   • Ability to strengthen partnerships
   • Improve business processes
   • A communication tool to allow new ways to do business
   • A preferred way of doing business among Fortune 500 companies
   • A business basic for the industry

3. How is EDI Used?

1. • EDI is used as a strategic tool to reduce expenses, streamline business procedures, and create a competitive advantage.

2. How is EDI Started?
   Usually Reactive or Proactive.
   

   REACTIVE	PROACTIVE
   Lack of understanding No direction Lack of regulated program “Jury Rig” third-party solution	Clearly defined business need Defined Corporate direction Controlled program “Selected” trading partners Impartial “third-party” input

3. How does EDI Work?
   Purchase Ordering Example

   1. The buyer enters order information into the production database, which generates a purchase order on the computer. The order information is then channeled through a number of interface programs.
   2. The interface software programs perform edits and checks on the document and direct the order data into predefined EDI intermediate files.
   3. The EDI intermediate files contain information in a form that the EDI translation software can read.
   4. The translation software is a set of programs that translates the interface file data into a document formatted according to EDI standards that the supplier’s computer can recognize.
   5. The electronic document now consists of a file that contains the order data in a predefined, recognizable order.
   6. The communications software adds appropriate communications protocols to the EDI document in preparation for transmission via telephone lines.
   7. Using a modem and telephone line, the buyer transmits the EDI purchase order to a VAN (Value added network). Think of this as a mailbox.
   8. The communications software on the supplier’s computer picks up the document from the VAN, interprets and/or converts the communications protocols to open the electronic document.
   9. The purchase order is now in a standard, recognizable format in a file and is available to the supplier’s computer.
   10. The supplier’s translation software interprets the documents from the EDI format and places the order information in EDI intermediate file(s).
   11. The EDI intermediate files contain the translated purchase order information.
   12. The interface programs perform edits and checks before the data is integrated with the supplier’s production database.
   13. The application software on the supplier’s computer can now process the buyer’s order.

4. What is the most common EDI cycle?

   • Customer transmits EDI 850 (purchase order)
   • Supplier transmits EDI 997 (functional acknowledgement)
   • Supplier transmits EDI 856 (advance ship notice)
   • Customer transmits EDI 997 (functional acknowledgement)
   • Supplier transmits EDI 810 (electronic invoice)
   • Customer transmits EDI 997 (functional acknowledgement)
   • Customer transmits EFT (Electronic Funds Transfer) Payment

5. What are EDI Benefits?

   • Builds closer business partnerships
   • Reduces/eliminates manual handling of data, errors and rework
   • Transfers information faster and more accurately
   • Automates routine transactions
   • Improves productivity and business controls
   • Reduces costs
   • Shortens transaction processing cycles
   • Enhances data accuracy
   • Lowers inventory levels
   • Contributes to better in-stock positions
   • Lowers freight costs
   • Provides Quick Response capability
   • Improves cash-flow management
   • Creates a competitive advantage

6. What are EDI Benefits Summary/Requirements?
   

   Benefits	Requires	Business Process Examples
   1. Operational	EDI transactions	Ordering - Purchase Order Purchase Order Acknowledgement
   2. Tactical	Internal Process Re-engineering	Forecasting - based on SIT - Availability - Increased inventory turns
   3. Strategic	Internal and External Process Re-engineering	Quick Response - Market Share Supply Chain Mgmt - Sustained Profits

7. What is the Link between EDI and Profits?
   

   EDI the tool	EDI the features	EDI the benefits
   Shared forecasts	Inventory turns increase	Cut costs!
   Transaction automation	Reduced labor	Cut costs!
   Integration with systems	Fewer errors, rework, less paper	Cut costs!
   Electronic payments	Better cash flow	Cut costs!
   Shared sales and inventory data	Improved availability	Increase sales!
   Integration and high speed data transfer	Access to quality information	Increase sales!
   Transaction automation	People add value	Increase sales!

8. Why move to EDI?

   • Allow machines to process business transactions while people develop and enhance business relationships
   • Strengthen internal and external business relationships through “information partnering”
   • Promote Electronic Commerce through EDI and other information solutions
   • Improve the supply chain by making accurate information available quickly and inexpensively
   • Reduce operating costs by re-designing business processes and automating routine tasks

Source: sap-edi.com
———————
ABAPer, mail: abap.community@gmail.com http://abaplearner.blogspot.com