EDI is the electronic exchange of structured business documents between companies. It allows information to be transferred electronically without being retyped or printed. EDI eliminates errors from manual data entry and speeds up business processes compared to paper-based systems. The key components of an EDI system include application services to integrate business applications, translation services to convert documents between internal and external formats, and communication services to transmit documents over networks. EDI systems standardize document formats and transmission protocols to allow secure information exchange between trading partners.

1. CONTENTS
1. INTRODUCTION
2.WHAT IS EDI?
3.WHY USE EDI?
4.ADVANTAGES OF EDI OVER A PAPER-BASED
DOCUMENT TRANSFER SYSTEM
5. HOW EDI WORKS?
6.EDI COMPONENTS
7.FILE TYPES.
8.EDI SERVICES.
9.CONCLUSION.

2. INTRODUCTION
Everybody uses business connections of one sort or another to
get orders, send bills, make collections, determine and pay what it
owes, move goods, and control its money. The business connections
used historically to perform these operations have been the postal
service and the telephone. A relatively new link is electronic data
communications facilities.
Your links to business connections are limited to the mail and
the telephone. Both are slow. Both terminate with that wall of people
who feed the computer and who may make errors.
What your company needs is a better link to business
connections and that is what electronic data interchange is all about.
To appreciate what electronic data interchange (EDI) means, think
about all those orders, invoices, freight bills, shipment instructions,
tracing requests, payment instructions, government reports, and the
like that your company sends out or receives every day. Think about
each as a single transaction.
WHAT IS EDI?
Traditionally, the transfer of data from one company to another
has been by paper documents. This is known as a paper-based system.
These documents have to be manually forwarded and entered to the
destination computer.
EDI is the electronic exchange of structured business
information, in standard formats, between computers, EDI eliminates
the need for a paper-based system by providing an electronic link
between companies. This reduces data entry tasks and improves
business cycle times.

3. EDI is the electronic transfer of structured business documents
in an organization--internally among groups of departments or
externally with its suppliers, customers and subsidiaries.
In EDI information is passed electronically from one computer
to another over a network without having to be read, retyped or
printed. The information transferred must have a defined structure
agreed between your company, and the company or group you send
and receive data from.
Any company or group which uses EDI is called a TRADING
PARTNER. Examples of current uses of EDI includes automatic teller
machines (ATMs) in banks where EDI is used for transferring and
withdrawing funds between different bank accounts, airline
reservation systems, stock exchange transactions and car reservation
systems.
USE OF EDI:
The data from one computer is normally not in a form suitable
to be entered directly into another computer. The data may have to be
arranged differently before it can be entered into another computer or
some items of data may not be needed at all. With EDI, all the data is
converted unto an agreed standard format before it is sent over the
network. The computer that receives the data can then extract the
information it requires.
Using EDI implies three things:
1. Information is transferred electronically rather than on
paper. This means that there is no need to enter the data
manually in the destination computer.
2. Information is transferred between trading partners who
have negotiated trading agreements and have formalized
their data transfer system.
3. Information that is transferred complies with agreed
standards for the format of the content and the transmission
control mechanisms.

4. ADVANTAGES OF EDI OVER A PAPER-BASED DOCUMENT
TRANSFER SYSTEM
This section highlights the advantages EDI has over a
traditional paper-based document transfer system.
In a Paper-based System:
 A software application generates a paper document on a form.
 Copies of the document are made. Some are passed to
internal departments to be filled, other copies are sent
to the trading partner via the postal service.
 The trading partner receives the document and retypes
the information on the form into their computer. This
retyping often introduces errors.
 The trading partner generates a paper
acknowledgement and this is sent to the originating
company.
The transfer of documents in a paper-based system could take a considerable length
of time.
In an EDI System:
 The application program generates a file, which
contains the processed document.
 The document is converted to an agreed standard
format.
 The file containing the document is sent electronically
over the network. This network links the originating
company and its trading partner.

5.  The file containing the document arrives at the trading
partner. It is translated into the correct format and
transferred to the recipient's application.
 A receipt is automatically generated and sent over the
network to the originating company.
EDI transmits documents to the trading partner's application in a very
short period of time and with no human intervention.
HOW EDI WORKS?
Regardless of the format chosen, companies using EDI
communicate with their trading partners in one of two ways: Either
they exchange data with several trading partners directly or they
interact with multiple companies through a central information
clearing-house. In the later case, all transactions are funneled through
a third party's computer system, which routes them to the appropriate
receiver's computer. This enables the sender to communicate with an
unlimited number of trading partners without worrying about
proprietary systems, audit trails, variable transmission speeds, and
general computer compatibility.
Basically, here is how EDI works:
1. Prior to any computer work, representatives of two
companies interested in exchanging data electronically meet
to specify the applications in the EDI standard, which they
will implement.
2. Each company adds EDI programs to its computer to
translate company data in standard formats for transmission,
and for the reverse translation on the data it receives.
3. Then, as often as operationally requires the two companies
exchange data electronically in the standard formats.
The data transmitted originates from records in the sender's
database after the sender confirms that the receiver is an authorized
recipient for such data. The sender composes a transmission formatted
in the EDI standards, the receiver translates the formatted message to
a computer record to be processed and used internally. All

6. transmissions are checked both electronically and functionally and the
protocol includes procedures for error detection and correction.
INFORMATION FLOW IN EDI:
1. A Company collects data for its own operational or
statistical requirements. This data is edited and added to its
own database.
2. Pertinent information is extracted by the company from its
database, summarized if necessary, constructed into EDI
transaction sets, and transmitted to the company or
organization requiring it for valid reasons.
3. The frequency for preparing this information is determined
by the operational requirements of each recipient.
4. A communications link for transmission is established
according to the standard communications protocol.
5. The recipient of the information receives the transmission
and checks it for its physical characteristics (parity, check
character, transmission mode). Retransmission is requested
if an error is detected in the physical characteristics of the
transmission.
6. The receiver checks the functional characteristics of the
data. A message is transmitted to the original sender to
acknowledge the transmission and to identify any errors
detected.
7. The receiver processes the information received according to
its own internal procedures and timing requirements.

7. EDI COMPONENTS
A typical EDI system implements a specific set of EDI by
enabling the exchange of business documents. It accepts documents
from business software applications, converts the document to a
standard format and sends it to another software application or trading
partner.
EDI system converts generic EDI messages (in EDIFACT or
any other EDI standard) format to RDBMS format and from RDBMS
format to EDI format. There are EDI application programs for
software developers to configure EDI to work with the various user
application software programs. There is normally no end-user
interaction with EDI--it is entirely within the background of the EDI
system.
RDBMS database contains the data to be translated into EDI
format and where EDI data is to be converted (and written) to . EDI
treats the application database generically--it reads and writes to the
tables and fields specified according to the message mapping created
by the |EDI Administrator during EDI message configuration. These
are done by EDI Configuration programs under the purview of EDI .
There are three main components in an EDI system:
1. Application Service- Providers the means of
integrating existing or new applications into the EDI
system.
2. Translation Service-Converts data from internal
format standards to an external format and translates
data from an external format to an internal format
standard.
3. Communication Service-Passes documents into a
network via the agreed communication protocol.

8. Internal format Transmission Tranmission TRADING
files files files PARTNER
Documents Application Tranmission Communication
Business Service Service Services
Application
FILE TYPES
EDI creates the following files as a document passes through the system:
 Internal Format File (IFF)
 External Format File (EFF)
 Transmission File
Each of these files is described in the following sections.
Internal Format File:
An internal format file (IFF) contains a single document for a
single trading partner. Internal format file is principally for EDI's own
use.

9. External Format File:
The external format file (EFF) contains the same data as the
internal format file translated into the appropriate standard document
format.
Transmission File:
A transmission file contains one or more documents for the
same trading partner. Documents of the same type are packaged
together in functional groups. The functional groups going to one
trading partner are packaged into an interchange set. An interchange
set contains one or more functional groups of documents with the
same sender and receiver.
TRADING PARTNER A
Document Type 1
1 Functional
Group
Interchange 1
Set
Document Type 2

10. 2 Functonal
2 Group
TRANSMISSION FILE
EDI SERVICES
The three EDI services all perform different tasks. The
following sections give an overview of what happens in each of three
services.
Application Service:
The Application Service provides the link between a business
application and EDI. It allows you to send document to, and receive
documents from, an EDI system.
A set of callable routines is used to transfer documents from the
business application into EDI. Documents destinations can be either
intra-company or to external companies, i.e., trading partners.
The EDI Application Service holds each incoming and outgoing
document as a single internal format file. EDI converts the document
to a standard format and sends it to the trading partner using the
relevant communication protocol. A number of different standards and
communication protocols are available.
The following list describe what happens in the Application Service:
For outgoing documents:
 The business application uses the callable routines to send a
document from the business application to the Application
Service. The document is now in the EDI system and is
called internal format file.

11.  The Application Service sends the document in the internal
format file to the Translation Service.
For incoming documents:
 The Application Service receives an internal format file
from the Translation Service.
 The Application Service makes the data in the internal
format file available in database so that the business
application can fetch the document from EDI. A callable
interface is used to do this.
APPLICATION SERVICE
File server
Internal
Formal File
Callable
Routines Internal
Format File
Translation Service:
 Converts outgoing documents from an internal format file to
an agreed external format.
 Translates incoming documents from an external format to
the EDI internal format file.
The external document standards that an EDI system supports
are EDIFACT, X12, TDCC, and ODETTE

12. The following lists describe what happens in the Translation
Service:
For outgoing documents:
 The Translation Service receives a document in the internal
format file from the Application Service. It converts the
internal format file to the appropriate external standard
(either EDIFACT, X12, TDCC, or ODETTE). The file is
now an external format file.
 The Translation Service combines one or more external
format files into a transmission file.
 The Translation Service now sends the transmission file to
the Communication Service.
For incoming documents:
 The Translation Service receives a document n the
transmission file from the Communication Service.
 Separates the transmission file to produce external format
files.
 It translates each external format file, which may be in an
external standard (either EDIFACT, X12, TDCC, or
ODETTE) to the internal format file. The file is now an
internal format file.
 The translation Service now sends the internal format file to
the Application Service.
Communication Service:
The Communication Services sends and receives transmission
files to and from the trading partners either directly or by using a
third-party service called a Value Added Network (VAN).
The following lists describe what happens in the Communication Service:
For outgoing documents:

13.  The Communication Service receives a transmission file
from the Translation Service. It checks the file to see which
trading partner it has to be sent to. When it has identified the
type of connection to be used for this trading partner it
determines which gateway to use.
 The Communication Service sends the transmission file to
the trading partner.
For incoming documents:
 The Communication Service receives a transmission file
from the trading partner. The file arrives through one of the
gateways that EDI supports.
 The Communication Service sends the transmission file to
the Translation Service.
FILE SERVER
INTERNAL FORMAT
FILE
DOCUMENTS
BUSINESS CALLABLE
APPLICATIONS
DOCUMENTS ROUTINES
INTERNAL
FORMAT FILE
MANAGEMENT INTERFACE

14. APPLICATION SERVICE
Translation Service:
 Converts outgoing documents from an internal format
file to an agreed external format.
 Translates incoming documents from an external
format to the EDI internal format file.
MANAGEMENT INTERFACE
INTERNAL TRANSMISSION
FORMAT FILE FILE SERVER FILE
INTERNAL C TRANSMISSION
FORMAT FILE
TFB FILE
T TFS

15. C = CONVERTER.
T =TRANSLATOR.
TFB =TRANSMISSION FILE BUILDER.
TFS =TRANSMISSION FILE SPLITTER.
CONCLUSION:
By eliminating the paper based documents the EDI was
introduced. It is the new technology that overcomes the
traditional paper based documents. By using EDI we can
transmit the data at electron speed. So it is a time sparing
process and also low cost as compared with telephone
system.
Even though there are more advantages with EDI there
are some disadvantages also. To feed the data into
computer, work is compulsory. By comparing with

16. computer speed human speed is a bottleneck. And also
errors may occur at the time of data feeding. These errors
can change the managerial decisions.
Another problem if we want send more data urgently,
first we feed it into computer and then send it to the
destination. To feed more data requires more time. Even
though the telephone cost is very high as compared to EDI
process, we must use telephone facility in these cases. So
in these cased we can't use EDI system.