. Electronic data interchange (EDI) is the structured transmission of data between organizations by electronic means.

It is used to transfer electronic documents or business data from one computer system to another computer system. EDI replaces the faxing and mailing of paper documents with specific EDI formats. It is more than mere e-mail; for instance, organizations might replace bills of lading and even cheques with appropriate EDI messages.EDI documents use specific computer record formats that are based on widely accepted standards. In 1996, the National Institute of Standards and Technology defined electronic data interchange as "the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. EDI can be formally defined as the transfer of structured data, by agreed message standards, from one computer system to another without human intervention. How EDI Works The basic process is like this: a user places an order (i.e., a document) into the computer. The order goes through an interface program. The application edits the order and relays it to the intermediate EDI files. The purchase order is changed to the EDI standard format the application can decipher. The translation program can function with several programs, allowing the receivers system to interpret the order. The modem relays the order through a value added network. The network proceeds to take the order. From the EDI format it is changed back into the senders original format. This allows the receiver to read the document. EDI example -Here is an example of how the electronic data interchange process works. A buyer prepares an order in his or her purchasing system and has it approved. -Next, the EDI order is translated into an EDI document format called an 850 purchase order. -The EDI 850 purchase order is then securely transmitted to the supplier either via the internet or through a VAN (Value Added Network). -If the purchase order is sent using a VAN, then the buyers VAN interconnects with the suppliers VAN. The VANs make sure that EDI transactions are sent securely and reliably. The suppliers VAN ensures that the supplier receives the order. -The suppliers computer system then processes the order. In the case of CovalentWorks clients, we provide VAN transportation and our servers provide all of the software and hardware required to process EDI documents. Only internet access and email are needed. -Data security and control are maintained throughout the transmission process using passwords, user identification and encryption. Both the buyers and the suppliers EDI applications edit and check the documents for accuracy. Overview of EDI benefits The EDI process provides many benefits. Computer-to-computer exchange of information is much less expensive than handling paper documents. Studies have shown that manually processing a paper-based order can cost $70 or more while processing an EDI order costs less than one dollar. Much less labor time is required Fewer errors occur because computer systems process the documents rather than processing by hand Business transactions flow faster. Information sharing becomes quicker and more effectual. The system eliminates the need to use paper. This saves money and helps preserve the environment. Data security and control are maintained throughout the transmission process

Applications of EDI tax-related data: tax information and filings;

payment information: invoices, remittance advices, payment status inquiries, payment acknowledgments; inventory control: stock level reports, resupply requests, warehouse activity reports; insurance-related data: health care claim; mortgage insurance application; product data: specifications, manufacturing instructions, reports of test results, safety data; shipping, forwarding, and receiving: shipping manifests, bills of lading, shipping status reports, receiving reports; insurance-related data: health care claim; mortgage insurance application;
International (or) cross-border TradeElectronic Funds Transfer (EFI). Health care EDI for insurance claims processing Manufacturing and Retail Procurement

Issues: Two characteristics set EDI apart from other ways of exchanging information. First, EDI only involves business-to-business transactions; individual consumers do not directly use EDI to purchase goods or services. Secondly, EDI involves transactions between computers or databases, not individuals. Therefore, individuals sending e-mail messages or sharing files over a network does not constitute EDI.
The possibility that data will be altered in transit does exist. For these reasons the use of proper encryption methods; digital signatures or bio-metrics (the use of human attributes like fingerprints or voice) to verify the identity of senders and receivers; audits that verify the accuracy of electronic records; efforts to ensure that translation software has been written correctly and not altered

Standardization and EDI The EDI standards were designed to be independent of communication and software technologies. EDI
can be transmitted using any technologies including FTP, e-mail, HTTP, AS1, AS2, etc.

The problem is that most businesses, though using the same types of data, do not use the same application programs or hardware and software platforms. If businesses are to be able to communicate their data to one another, they must have a common ground to meet on to allow the exchange of the information. Standards are the solutions to this problem. All business that conform to specific standards can share data in the formats delineated by those standards. ---- United Nations/Electronic Data Interchange For Administration, Commerce and Transport (UN/EDIFACT) is the international EDI standard developed under the United Nations The EDIFACT standard provides: a set of syntax rules to structure data an interactive exchange protocol (I-EDI) standard messages which allow multi-country and multi-industry exchange ----The Accredited Standards Committee X12 (also known as ASC X12), chartered by the American National Standards Institute in 1979 --- Tradacoms is an early standard for EDI (Electronic Data Interchange) primarily used in the UK retail sector. It was introduced in 1982 . The syntax is very similar to EDIFACT.

In EDIFACT a message is a transaction. Tradacoms uses 'Files'; with one or more examples of the message being preceded by a header message, and followed by one or more trailer messages. This avoids the duplication of common header and trailer information which can occur in a series of EDIFACT messages. --- The ODETTE standard used within the European automotive industry --- Other document standards are in existence, most notably HL7, which is used by the hospital systems and is ANSI approved.
----ANSI,EANCOM,EDIFACT,HIPPA,ODETTE,Oracle Gateway,RosettaNet,SAP,SWIFT,VDA,VICS

Drawbacks: One drawback to EDI is that companies must ensure that they have the resources in place to make an EDI program work; however, the need for buying and hiring these resources or outsourcing them may be offset by the increased efficiency that EDI provides.