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ACG 5458 EDI Issues

ACG 5458 EDI Issues. EDI, Electronic Commerce, and the Internet. Traditional EDI Systems Value Added Networks (VANs) Financial EDI EDI Systems and the Internet. What is EDI?. EDI refers to the exchange of electronic business documents between applications Traditional EDI Characteristics:

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ACG 5458 EDI Issues

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  1. ACG 5458 EDI Issues

  2. EDI, Electronic Commerce, and the Internet • Traditional EDI Systems • Value Added Networks (VANs) • Financial EDI • EDI Systems and the Internet

  3. What is EDI? EDI refers to the exchange of electronic business documents between applications Traditional EDI Characteristics: • Identified trading partners • Expensive initial investments • Dedicated leased line or utilization of a Value Added Network (VAN) • Standard, inflexible data sharing • US standard: ANSI’s x12 • UN standard: EDIFACT • Batch connectivity • Low transaction costs

  4. EDI Growth • During the 1990’s, EDI use grew 30% each year • Currently growing at 15% per year • 1999 total EDI transaction value $3 trillion • Estimated 2003 value $4 trillion

  5. Buying CompanyFULL EDI Selling Company 1) Identify Need 2) Research Vendors 3) Select Vendor 4) Place Order EDI 5) Receive purchase order prepare sales order, check credit, and check inventory 6) Pick and ship inventory shipping notification bill of lading 7) Receive inventory (verify accuracy) 9)Receive Invoice (verify accuracy) 10) Prepare check and remittance advice 11) Mail check and remittance advice EDI 8) Prepare and send Invoice 12) Receive Payment prepare deposit and update records

  6. VANs Value Added Networks (VANs) • Third-party network services • EDI translation software • Security assurances • Independent audit trails • Reliable transmission (redundant systems) • EDI systems development assistance • Employee training • Exact, explicit contracts with trading partners • Authorized data sharing

  7. ANSI ASC X12 Formatting Interchange Control Header – electronic envelope Functional Group Header – type of document Transaction Set Header – specific document Data Segment Header – fields identified Data Elements – contents of field Data Segment Footer – end of fields Transaction Set Footer – end of document Functional Group Footer – end of document set Interchange Control Footer – close the envelope

  8. Response to RFQ (843) Department of Defense Trading Partner Purchase Order (850) Request for Quotation (840) Contract Award (838) PO Acknowledgment (855) PO Change (860) PO Change Acknowledgment (865) Order Status Inquiry (869) Order Status Report (870) Shipping Schedule (862) Shipping Notice (858) Receiving Advice (861) Invoice (810) Payment Order (820) Material Safety Data Sheet (848) Project Cost Reporting (839) Sample Transaction Sets

  9. Advantages of EDI • Lower processing costs • Tighter relationships between suppliers and customers • Lowered error rates • Decreased lead and cycle times • Decreased inventory shortages and problems • Increased product differentiation • Better information for all trading partners

  10. EDI Systems and the Internet Utilizing the Internet (involving Browsers and a markup language, e.g., HTML) for electronic transactions: • Much lower initial investment costs • More connectivity: greater sharing and tracking of data • Allows for new partners • More flexibility with XML (See next slide) • Creates serious security concerns • Risk of loss of packets or sniffed packets • Loss of third-party audit trails and authentication • Electronic Data Interchange – Internet Integration (EDIINT) group currently defining standards for encryption and digital certificates

  11. Full Web-EDI w/ Intelligent Agents Fully Integrated EDI Partially Integrated Web-based EDI Sharing of Data Partially Integrated EDI Non-EDI systems Connectivity Comparison of EDI systems

  12. EDI-Web Browser Translation Software • Many VANs providing services • Standard is XML (Extensible Markup Language) • Provides a universal data format • Allows data objects to be serialized into text streams • Is easy to parse, so it can be used to pass data between processes • Allows for custom tags, which can be passed easily over a variety of network protocols • Has companion standards to support browser presentation, hyperlinks, and querying

  13. Implications for the Accounting Profession • EDI/Internet Solutions increase the demand for accountants to know • How the audit has become more complex • The risks surrounding Internet business processes • Reliance on data from the Value Added Network • Trading partners’ data integrity and system reliability • Encryption of data • Authentication of trading partners • Digital Signatures and Nonrepudiation • Firewalls

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