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EDI coming of age: for big industry and government groups, paperless exchange is the way to go.


Electronic data interchange is coming of age. Spurred by such major firms as General Motors and Ford, the paperless computer-to-computer exchange of business documents between organizations is growing at a 40% annual rate.

An estimated 10,000 U.S. companies have already implemented EDI systems. Much of the growth comes from the proliferation of hub programs, where large corporations systematically encourage, andsometimes even coerce, their suppliers into adopting EDI. In Detroit, for instancE, the Big Three automakers have told suppliers to begin implementing EDI--or else. Primary suppliers, in turn, have made EDI a condition for their vendors. As a result, the Automotive Industry Action Group, which among other things develops EDI standards for the industry, says all of its 812 members are active in EDI.

EDI is also becoming standard business practice in retailing, banking, and a number of other major industries. Wal-Mart Stores now has 1800 suppliers linked electronically to its computer systems in Bentonville, Ark.

Underscoring banking interest in EDI, 46 financial institutions have joined the Bankers Electronic Data Interchange Council of the NACHA (National Automated Clearing House Association). Market researcher International Resource Development Inc. (IRD) of New Canaan, Conn., expects that, over the next few years, standards for EDI and electronic funds transfer (EFT) will become more closely integrated. This will take users a step closer to the concept of "electronic information interchange," which combines electronic mail, EDI, EFT, and electronic point-of-sale into a single integrated approach to transmitting information.

THE U.S. government is also embracing EDI to improve its procurement, transportation and other logistics activities. Last summer, the Department of Defense mandated that all DOD agencies migrate to EDI trading relationships with their suppliers. The Defense Traffic Management Command and the Defense Logistics Agency have initiated pilots, and other programs are on the way.

Global Interest Builds

International interest in EDI is growing, especially in the Pacific Rim. In particular, EDI promises to play a major role as Europe becomes a single market after 1992. At a recent EDI symposium in London, EDI was hailed by a deputy cabinet minister as crucial to Britain's ability to compete in the 1992 European single market. The former chairman of one of Europe's largest chemical companies claimed EDI was one of his chief strategic directions.

According to IRD, the current European market for EDI is about a third that of the U.S. but is growing at the more rapid pace of 55% per year. This higher growth rate is likely to continue for another two to three years before dropping to a more leisurely rate of 45-50%, IRD researchers say.

Reflecting the growing internationalization of EDI, British Telecom last year acquired McDonnell Douglas' EDI-Net along with its other network service offerings. This acquisition was answered a month later by AT&T's $280-million purchase of Istel, a major U.K. vendor.

Fueling this global interest in EDI are its proven cost-cutting and strategic benefits. "EDI strengthens a company's bottom line," says Ben Milbrandt, government consultant on EDI. "It improves inventory management, reduces labor cost, and creates alliance between trading partners." EDI also helps reduce inventory.

It has been estimated that as much as 70% of printed computer output is re-keyed into another computer, EDI not only saves on this clerical expense but eliminates re-keying errors and reduces transaction cycle time. Also, by communicating with suppliers electronically, firms can implement an aggressive "just-in-time" inventory management policy.

However, the most important aspect of EDI is the fact that the exchange takes place not just between computers but between computer applications. "Integrating with the business applications that generate and receive business transactions is the key to both the benefits and the cost savings of EDI," says Brian Dearing, manager, worldwide EDI product marketing, GE Information Services. "It is application integration that saves money by eliminating clerical costs and errors, helps reduce investment by allowing a more aggressive inventory management policy, and enhances revenues by linking customer ordering directly with inventory-control systems to provide superior customer service."

Industries Merge Efforts

The EDI concept originated in the transportation industry, where companies were forced to produce tremendous amounts of paperwork to mange their shipments. This paperwork included tracing requests and shipping instructions they received from manufacturers, wholesale distributors, and retailers. EDI was implemented and proved to be a tremendous advantage. Soon the grocery industry, which depends on transportation companies to move its goods to distributors and to market, adopted EDI, to be followed by the automotive, drug, and chemical industries.

Some of the impetus came from the development of inexpensive, powerful micros and the availability of affordable EDI software. Another factor fueling growth was the migration from industry-specific EDI implementations to the use of common standards.

The Transportation Data Coordinating Committee (TDCC) created the first EDI message standards to streamline document flow between shippers and carriers. Standards were later developed within several other industries, including the grocery and automative fields. As interest in EDI widened, the American National Standards Institute (ANSI) charted a committee to develop more general-purpose standards.

In 1978, the X.12 committee undertook the design of generic message standards which could be used by all industries. The committee published its first standards, encompassing three or four document types in 1983, and has since developed message standards for over 30 different document types. This past year saw the consolidation of the industry-specific efforts under the ANSI banner when the grocery, warehouse, and transportation groups decided to join X.12. These moves followed a meeting between TDCC and X.12 committees to pool their efforts.

In late 1985, members of X.12 opened a dialogue with their European counterparts on the subject of international EDI standards. The two years of effort which ensued led to the collaboration on, and publication of, and international EDI syntax standard by the International Standards Organization. This standard, ISO 9735, is now referred to as EDIFACT (EDI For Administrative, Commerce and Transport). EDIFACT message standards arenow being developed under the auspices of the United Nations.

According to Dan Codman, a principal with The APL Group Inc. of Wilton, Conn., the EDIFACT syntax/architecture is quite similar to that of X.12. codman served on the X.12 International Project Team which worked with the Europeans to give EDIFACT the same kind of EDI capability for worldwide use that X.12 and TDCC developed for use in North America. Codman notes that some needs are different, so EDIFACT and X.12 are unlikely to be identical. The goal is to make them compatible. A parallel effort isunderway to develop standard EDI messages that represent common business documents based on the agreed architecture.

VANs Await X.400

EDI implementation poses two primary challenges:

* translating your in-house data into and out of the public standard formats.

* and communicating messages in the public standard format to and from your trading partners.

Software for PCs and larger processors takes care of the former; as for communications, while companies can use their own networks to carry the transactions, it's more convenient and often more cost-effective to rely on value-added network (VAN) suppliers.

An increasing number of VAN suppliers offers multi-media distribution services. This allows EDI-capable companies to send transmissions which can then be converted to electronic mail, fax, or paper format for distribution to non-EDI-capable trading partners. When the worldwide X.400 standard is complete, all this traffic will be carried using the same X.400 enveloping structure. X.400 will also help EDI users by resolving interconnect issues.

According to market researcher Input Inc. of Mountain View, Calif., GE Information Services is the largest network service supplier with 6000 EDI customers. This compares to BT/Tymnet's 1200 and AT&T/Istel's 1000. In the U.K., Istel runs neck and neck with another major EDI VAN, International Network Services, a 60/40 joint venture between International Computers and GE Information Services.

With standards coming into place, the major computer suppliers have entered the EDI market. Last April, IBM released a full family of EDI software, complementing the network-based EDI services available since 1985 on the IBM Information Network. Meanwhile, Digital Equipment introduced an international EDI software product, called DEC/EDI, which provides EDI access to business applications resident on both Digital and non-Digital computer systems. It also plans to provide connections for DEC/EDI users to GE Information Services' EDI Express network service.

The EDI Express system electronically transmits invoices, purchase orders, freight bills, and other critical business documents in a variety of public and private formats, protocols, and access methods. It is available via the GE IS worldwide teleprocessing network with a local telephone call in over 750 cities around the world. The documents are delivered to your own electronic mailbox, which you control, so that no one has direct access to your computer. If sender and receiver formats differ, the EDI Express system will perform the translation automatically.

The Rockville, Md., firm also offers a microcomputer software package, the EDI PC system, which electronically prepares and exchanges business data in standardized document formats. It can be used either as a stand-alone work-station or a front-end to an in-house host computer. Another software package, the EDI Central system, runs on mainframe computers and allows you to translate EDI-Formatted documents to and from your internal business-system application formats.

Last December, GE IS introduced a mainframe-based EDI/EFT service for banks to offer their corporate clients. With the BPS Central system, a bank can accept electronic payment/order remittance advice from EDI users, reformat it into an ACH (Automated Clearing Houe) payments instruction format, and forward it to a third party's bank through the ACH network for settlement.

With another service, the Design Express system, GE IS also provides electronic processing and transmission of engineering/manufacturing product-definition data and related information from computer to computer between trading partners around the world. The system provides for data security with data encryption/decryption and data authentication.

BT Tymnet's EDI Net is a store-and-forward, store-and-retrieve service that validates, processes, and delivers EDI messages to trading partners on Tymnet or other third-party networks. Reportedly, EDI Net offers access to more third-party EDI networks than any other service. There's also a choice of over 20 mainframe and micro translation software packages certified for EDI Net.

Telenet's integrated EDI solution includes message distribution through its public data network and value-added store-and-forward capabilities.

Control Data's Redinet supports all X.12 and related standards and allows transmission of non-standard private-format data. This gives trading partners on Redinet the flexibility to exchange business data in the absence of a formal, approved standard.

Western Union integrates EDI with its EasyLink electronic-mail service so users can employ the same access facilities, mailboxes, and status reports when sending or receiving EDI transactions, textual messages, proprietary EDI, and binary files. WU interconnects with other third-party EDI networks and supports a wide range of EDI translation software packages. It supports X.12, TDCC, and EDIFACT standards and provides access via hundreds of domestic access points and toll-free 800 service.

In December, the Upper Saddle River, N.J., firm enhanced its EDI service to provide FreeForm Conversion capability to EDI users whose trading partners require paper-based records to support existing trading relationships. With FreeForm Conversion, recipients can accept EDI-generated transaction sets without making an immediate investment in translation software or computer hardware.

After 20 years in EDI, Sears began offering an EDI service over the Sears Communications Network last July. In December, the Schaumburg, Ill., firm introduced a financial EDI service that provides electronic funds transfer services to help companies automate their corporate payables. To provide the financial EDI services, the Sears Communications Co. has created alliances with an initial group of eight leading U.S. banks. These banks and Sears support a variety of data formats as needed by customers, their financial institutions, and suppliers. The Sears Merchandise Group is the first user of the system, implementing it for a portion of the company's corporate payables with a select group of Sear's merchandise suppliers.

Since acquiring Istel, AT&T has made no move to introduce the U.K. firm's EDI services in this country. AT&T Mail is offering an integrated electronic mail/EDI service, along with a variety of other services, and is working with third-party vendors on EDI translation software. AT&T and Telecom Canada recently established the first North American X.400 interconnection between two EDI network suppliers.

The Bell operating companies are also beginning to offer EDI services. Bell Atlantic became the first when it signed a four-year agreement with Atlanta-based Harbinger EDI Services to offer EDI software and transmission services, starting in early 1990. According to John Seazholtz, vice president of technology and information services, Bell Atlantic will use its packet data network in conjunction with Harbinger's software to offer a privately labeled Bell Atlantic EDI capability. "Bell Atlantic will be working with its large corporate customers to extend the benefits of EDI to their smaller trading partners," he says.

IBM's EDI offerings include hardware, software, EDI networking, and support. Known as the IBM expEDIte family, the offerings include EDI translation software, EDI communications software and services for the IBM Information Network, and custom consulting, education, and turnkey solutions for trading partners from IBM's System Integration Division.

Digital Equipment's DEC/EDI software is built on a distributed architecture, enabling an organization to establish a corporate EDI service which can support rapid accommodation of new applications and increased trading volume. DEC/EDI can reside on a single computer system or be distributed across multiple systems in a Digital network. Information can be moved across the network using Digital's Mailbus electronic messaging capabilities or via Decnet/OSI networking software.

DEC/EDI employs a gateway, which takes data such as invoices and purchase orders from various applications and translates them into standard EDI formats. Once formatted, the data is sent to external trading partners or subsidiaries via the appropriate VAN. DEC/EDI also allows an organization to trade directly without using a VAN. Mechanisms for this include the X.400 standard for electronic messaging and the Odette File Transfer Protocol. DEC/EDI also provides end-to-end management of the EDI environment.
COPYRIGHT 1990 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:electronic data interchange
Author:Edwards, Morris
Publication:Communications News
Date:Feb 1, 1990
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