Step 3—Solution Development
After the EDI steering committee has selected and approved the appropriate EDI solution, the project then moves into development. During this stage, five important pieces of the EDI system play a role in its launch:
- Telecommunications Medium
- Telecommunications Software
- EDI Translator
- EDI Interface
- EDI Application Software
- Telecommunications Medium
This first piece of EDI is most commonly a value added network (VAN) or the Internet. - Telecommunications Software
This piece is not specific to the EDI system; however, it plays an important role in the execution of an EDI solution. Usually, the functionality of this software mimics MS Windows dial-up networking. - EDI Translator
The primary function of the EDI translator is to convert the data sent via EDI from the X12 format into a format that is more compatible with in-house systems and applications. In addition to this primary function, an EDI translation package may have several subsystems including the handling of the EDI envelope, document management/audit trails, compliance checking, and generation of a functional acknowledgement. The functional acknowledgement is roughly equivalent to the postal service return receipt to confirm delivery. The EDI translator is usually a package licensed from an EDI software company or VAN provider. - EDI Interface
The EDI interface completes the final translation and reformatting of the transferred data. When the EDI translator completes the conversion of the data, the interface reformats the data into a format that can be easily used by the in-house EDI application software. - EDI Application Software
The EDI application software selection is a very important aspect to the success of the EDI project. Choosing the right software package is crucial.
Choosing an EDI Network
EDI network communications exist in two primary methods: point-to-point communications and value added networks (VANs).
- Point-to-Point (P2P) Communications—P2P communications occur between trading partners when lines are established using standard communication protocols. The connection can be set up as a leased line, which is paid for on a monthly basis and is readily available for electronic data interchange; or as a dial-up line, where the communication or information transfer is established in a way similar to a telephone call. A dial-up link allows senders to batch transactions and make connections to send at certain points. A dial-up link is a more cost-effective approach when the amount of transmitted data is low. Point-to-point lines frequently present a scheduling problem to trading partners. Often, it is not convenient for the receiver to get transactions when the sender chooses to transmit them.
- Value added networks (VANs)—VANs are the most widely used method. VANs provide a store-and-forward mailbox service. The sender connects with the VAN and sends its EDI transactions to the recipient’s mailbox where they are stored. The sender then disconnects from the service. When it is convenient, the recipient connects to the network and receives those transactions from its mailbox. With this approach, both sending and receiving parties must use the same EDI standard transactions.
Deciding what type of EDI network depends on several variables. The following considerations must be made when choosing the network type for your EDI system:
- In-house data processing operations—This aspect to business operations can be a more significant factor in choosing an EDI network service (VAN) than how modern the technology the vendor is using. When using a VAN, trading partners are free to connect with the network, transmit or receive data, and then disconnect as the data is not actually sent to the trading partner, but to the server that routes the data into the correct mailbox.
- Number of partners in the EDI trading community—The reach of the network is also an important consideration. A good tip is to list the members of the trading community and the EDI networks they use before speaking with an EDI outsourcing vendor.
Choosing an EDI Vendor
It’s important at this stage to identify and communicate your expectations of what the VAN is required to provide. You must also determine how you will begin using an EDI solution. Some turnkey programs simply turn the system on at different stages of the implementation process. Larger companies that are adding smaller suppliers to their trading community will include training and education to the process to ensure all systems are working properly for all partners. If your company requires this level of service during EDI implementation, it is important that you discuss this with vendors to ensure availability and determine the cost.
An organization could broaden its customer base by choosing a VAN entrenched in its own industry, and use EDI to establish new trading partner relationships within that particular industry sector. If this is a goal for your company, trade associations are excellent sources for information about EDI activity within a particular vertical industry. They deal with the maintenance of standards as they apply to a particular industry. In fulfilling this role they act as a sounding board for users’ problems and concerns and can be very helpful to novice users.
Pricing is an important consideration when choosing an EDI vendor. Depending on frequency, size, volume, or even time of day, pricing can vary greatly. For example, some vendors charge a separate fee (in addition to the kilo character transmitted charge) for each document sent. Prior to contacting a vendor, it is important to establish transmission patterns so that the vendor can build out a pricing structure based on this information. It is also important to be aware that hidden charges may exist and any limitations or ceilings on the number of transmissions need to be discussed at this stage.
It is equally important to consider the vendor’s added services. Additional offerings such as consulting and community liaison services add value and can benefit your EDI system.
Finally, before you select a vendor for EDI services, evaluate their involvement and consideration for EDI standards. Participation in such groups is an indication that they are concerned with providing quality EDI services. Along these same lines, your company will find it useful to evaluate the vendor’s reputation and credibility in the industry as well as if it has strong financial backing, which may indicate longevity in the industry.
Network service providers traditionally come from three backgrounds: time-sharing / information retrieval services, public data network providers, and EDI service bureaus. Each category has advantages and restrictions for EDI services.
Vendors entering the EDI market from a time-sharing background generally offer a number of value added services such as translation software packages, access to third party databases, database capture of trading information, audit reports and historical activity summaries, and archiving services.
Vendors with a public data network orientation are traditionally viewed as data movers and have extensive experience operating large packet switched networks. Users typically find it easy to work with these EDI network vendors, although they may not provide as wide a range of extra services. While these companies do not supply EDI translation software, they do provide long lists of certified software packages from third party developers. These networks offer less extensive in-network translation services.
Most public data network vendors are recent entrants into the EDI arena. Users can expect to see more newcomers in this category from network providers and hardware vendors. Although these companies are new to EDI, their entrance into the market is not trivial. They are armed with impressive network expertise and financial resources. In addition, their alliances with experienced EDI software / service providers can compensate for their lack of EDI experience. Networks also offer one-stop-shopping for EDI clients. They will provide everything a customer needs to set up an EDI system: software, translation, consultation, education, record keeping, reporting of EDI transactions to clients, and electronic mailboxes.
Sending EDI documents through a third party (VAN) may cost more out of pocket, but the services and support provide enhanced VAN performance, thus making them very popular among trading partners today.
Legal Requirements for EDI
EDI implementation can change more than just the way a business conducts daily processes and communications. Through the integration of an EDI system, a company also may experience changes in the organizational policies. For example, EDI integration may change the way documents are stored, how they are archived, and how they are recovered. Auditors must understand and endorse these new procedures.
Moreover, EDI changes the way legal considerations are carried out as well. Instead of each document containing the terms and conditions of an agreement, these same legal conditions are addressed with EDI documents that outline and establish what terms are in effect throughout the EDI transmissions. It is important for the legal counsel to draft, review, and approve these terms.