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Many businesses wrestle with the question of where best to exchange electronic documents (purchase orders, invoices, status, etc.) with their suppliers and customers. There are a variety of options, but basically it comes down to either using a 3rd-party Value Added Network (VAN) or directly connecting to trading partners using the internet. Originally businesses conducted Business-to-Business (B2B) eCommerce through Value Added Networks (VAN) using some form of Electronic Data Exchange (EDI). VANs are still a viable option, but B2B eCommerce has now expanded to the internet where trading partners exchange electronic documents directly in a variety of formats to include EDI / EDIFACT.

Considerations for Exchanging Electronic Documents over the Internet or Through VANs.

There are many factors to evaluate when deciding to use a VAN or use EDI over the Internet. Below are some key considerations.

• Costs. VANs usually cost more and charge by the transaction. The more volume you have the less cost per transaction, but the overall costs go up as your transaction volume increases. Doing EDI over the Internet does require technical expertise. This cost in technical expertise will increase depending on the number of trading partners and types of transactions. Transaction volumes are not usually a major cost factor when it comes to EDI over the internet.
• Security. Every business that exchanges information with other businesses needs an on-going data security program. VANs have a lot of security expertise. The question is how much security do you need for your data, and how much outside security expertise do you need, if any.
• Flexibility. VANs increasingly offer more and more value added services. These B2B eCommerce and supply chain information services can provide you a lot of flexibility and even a competitive edge. At the same time a long-term, fixed-cost contract with a VAN can become a severe constraint as lower cost alternatives over time become available for B2B eCommerce services.

Deciding Whether to Use a VAN or the Internet. There are no easy answers, but here are some rules of thumbs:

• Small Company With Small Number of Trading Partners. Tough choices. Many times your large trading partners will have several B2B eCommerce options for you and even assist you with getting setup for free. Just ask. A third-party consultant, a VAN, buying EDI software or, if you have a programmer on staff, may be an option. Need to evaluate the startup costs and on-going costs. Again, ask your largest trading partners for advice. Many times, large companies have a whole web site dedicated to helping trading partners get setup to exchange electronic documents.
• Medium-Size Company A third party consultant or software as a service (SAAS) vendor that caters to your industry and your major trading partners may be the best answer. Medium-size companies should look for every opportunity to exchange electronic documents over the internet. VAN charges for small and medium companies can be expensive. If you have an IT staff, it is also time to start building up your expertise to exchange EDI, XML, or proprietary-formatted documents over the internet. As the number of your trading partners grow, you should look for every cost-effective opportunity to setup trading partner relationships directly in order to exchange electronic documents over the internet.
• Large Companies With Hundreds of Suppliers. Invest in IT staff and software to exchange business documents over the internet. Software includes EDI translation software and managed file transfer software. Maintain relationships with one or more VANs. As a minimum, use VANs for connectivity with suppliers that are not cost effective to connect over the internet and with major trading partners that opt for a VAN / B2B eCommerce portal only solution. Additionally, VANs are offering more value added services such as supply chain information services and software, data synchronization, and matching services such as matching purchase orders and invoices. Some of these offerings may be cost effective or offer you a competitive advantage.

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The history of Electronic Data Interchange (EDI) started in the 1960’s when computer systems first had the capability to transfer data between other computer systems. The progressive history of EDI has centered primarily on the evolution of data format standards for exchanging electronic business documents. On occasions advances in data communications and data protocols have dominated the history of EDI. See timeline below on the history of EDI.

1965: First EDI Messages. Holland-America Steamship Line sends shipping manifests as telex messages that are automatically converted into computer data.

1968: Transportation Data Coordinating Committee (TDDC) Formed. A group of railroad companies concerned with the quality of inter-company exchanges of transportation data formed TDDC to study the problem and to improve it.

1973: FTP Protocol Published. The File Transfer Protocol (FTP) enabled file transfers between Internet sites.

1975: First TDCC Standard Published. Ed Guilbert, a member of the TDCC, is referred to as the Father of EDI, and was involved in coordinating the development of translation rules among four existing sets of industry-specific standards.

1975: Telenet, the first Value Added Network (VAN) Started. Telenet, the first commercial packet-switching network and civilian equivalent of ARPANET, was born. Telenet represented the first value-added network, or VAN — so named because of the extras it offered beyond the basic service of linking computers.

1978: TDCC renamed EDIA and Received ANSI Charter. TDCC was renamed the Electronic Data Interchange Association (EDIA), received a charter from the American National Standards Institute (ANSI) and became the ANSI X12 Committee, which gradually extended and replaced those created by the TDCC.

1981: ANSI X12 Published. EDI data standards now existed for transportation (air, motor, ocean, rail), banking, warehouse, food industry, and drug industry.

1982: EDI Mandated for Automotive Industry. GM and Ford mandate EDI for suppliers.

1985: EDIFACT EDI Standard Created. The EDIFACT EDI standard was created under the auspices of the United Nations to enable a broader global EDI trading capability.

1996: EDI over the Internet (EDIINT) Formed The Uniform Code Council (UCC) started EDI over the Internet (EDIINT) program. EDIINT was set up to standardize the communications of EDI data over the Internet.

2001: AS2 Communication Standard Created. EDIINT published the AS2 standard which supports communications of EDI using the HTTP protocol.

2004: Wal-Mart Implements AS2 Over Internet. Wal-Mart sets trend for EDI over the internet by migrating thousands of their suppliers to AS2 using iSoft.

To be continued …

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Electronic Data Exchange (EDI) documents are electronic documents that contain the same information as would be found in a paper document. For example, an EDI 850 is an electronic purchase order that would contain the same information as found on a purchase order form. EDI document standards support most business and organizations that have a need to exchange electronic business documents. Besides typical business documents, EDI supports medicine, transportation, and construction industries.

Major EDI Document Standards.

There are four major sets of EDI standards to include UN/EDIFACT (International Standard), ANSI ASC X12 (US), TRADACOMS (UK), and ODETTE (European automotive industry). All these major EDI standards emerged in the mid-’80s.

EDIFACT. EDIFACT is an United Nations sponsored standard that is the commonly accepted Electronic Document Exchange (EDI) standard outside of North America. EDIFACT messages are defined and maintained by work groups at the UN. See the EDIFactory listing of EDIFACT Messages with complete descriptions.

ANSI ASC X12. ANSI ASC X12 is the U.S. national standards body for EDI standards. ANSI ASC X12 stands for the “American National Standards Institute Accredited Standards Committee X12″. X12 is the sequential designation assigned by ANSI at the time of accreditation. See EDIGenie.com for a EDI X12 Document Listing with Descriptions.

EDI Document Types Definitions.

EDI Standards. EDI standards such as X12 describe pieces of information that are mandatory and optional for a particular electronic document. Additionally, the standard describes the data structure and rules for a given electronic document. These rules provide general rules for trading partners to exchange a particular set of electronic documents.

EDI Guideline Specifications. In order for two or more trading partners to exchange EDI with each other, they need to agree on exactly how they will implement a given EDI document. Normally, one of the trading partners will provide an EDI implementation guideline that the trading partners will use to implement the EDI standard. Normally, the larger trading partner, like a large retailer or a transportation carrier, will provide an EDI guideline that most trading partners can agree with and implement a specific EDI interface.

HIPPA. The Health Insurance Portability and Accountability Act (HIPAA) was enacted by the U.S. Congress in 1996. HIPPA requires the establishment of national standards for electronic health care transactions and national identifiers for providers, health insurance plans, and employers. The HIPAA/EDI provision has an open-ended mandate for healthcare organizations to exchange X12 EDI documents. This includes filing electronic claims. HIPAA is a key catalyst for implementing EDI within the healthcare industry. See Wikipedia for more on HIPAA.

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