ELECTRONIC DATA INTERCHANGE

ELECTRONIC DATA INTERCHANGE

EDI is the electronic exchange of business documents in a standard, computer processable, universally accepted format between trading partners. It is a standard for the electronic exchange of business documents, such as invoices and purchase orders.EDI consists of standardized electronic message formats for common business documents such as purchase order, request for quotation, bills of lading, invoice and similar documents. 

BENEFITS OF EDI

1. Cost of processing EDI documents is much lower than processing paper documents.
2. Improving in over all quality can be achieved through better record keeping, fewer errors in data, reduced processing time and less reliance on human interpretation of data.
3. Information system can be managed more effectively and efficiently
4. Inventory level can be reduced.EdI permits faster and accurate filling and exchange of orders help to reduce the unwanted level of inventory.
5. Data is to be entered only at the source. There is no need of feeding data frequently since transfer of information from computer to computer is automatic
6. Customer relations are improved through better quality and speed of service
7. Business relation with trading partners can be maintained and improved.

WORKING OF EDI

The idea behind EDI is very simple.EDI allows a business application on the computer of one organization to commerce directly with the business application on the computer of another company, This exchange of information should be independent of hardware, software or the nature of implementation at either of these firms.

DRAWBACKS OF EDI

Even though EDI is very useful to communicate data format between organizations, it has not been widely accepted because of some specific limitations. The following are the important limitation of EDI

1. High cost: One of the severe criticisms leveled against EDI is its high cost. EDI applications are costly to develop and operate.
2. Limited Accessibility: Edi application does not allow consumers to communicate and transact with suppliers in an easy and direct way. Networking facilities require certain software to access and communicate form through EDI.
3. Rigid requirements; Edi applications require highly structured protocols software etc for information interchange.EDI insists up on transacting parties to follow rigid agreements about the structured and meaning of data. These agreements are time consuming to negotiate, rigid and difficult to maintain. This restricts new and small companies to experiment EDI for improving their communication capability.
4. Partial solutions: EDI application suggests only partial solutions to organization in their transacting process .Complete automation of transacting process is difficult to materialize in the constantly changing business environment. There will be time gap between placing order for products and the final settlement of bills. This may lead to discrepancies between transaction and it may take more time and delay in reconciling the transactions.
5. Closed world: the scope of EDI applications is very limited. The concept of closed world is outdated consequent on the popularity of World Wide Web which makes it easier for organization to enter in to open web related market place.