Using EDI and Electronic Messages in the Supply Chain

Electronic messages, including EDI (Electronic Data Interchange) contain the combination of electronic data elements (such as quantities, names, dates, etc) which enable individual and joint management of the value chain by the participants.

These include transactions such as orders to produce, move, deliver or pay, invoices, statements, plans etc. the history of electronic messages started in the 1960′s when computer systems first had the capability to transfer data between other computer systems.

The progressive history of EDI has centered primarily on the evolution of data format standards for exchanging electronic business documents. On occasions advances in data communications and data protocols have dominated the history of EDI.

Data elements should be standard across Master Data Bases and Dynamic Data Bases as well as Messages.

What is EDI?

Electronic data interchange 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, i.e. from one trading partner to another trading partner without human intervention. It is more than mere e-mail; for instance, organizations might replace bills of lading and even cheques with appropriate EDI messages. It also refers specifically to a family of standard.

Electronic messages drive value chains by sending instructions, transactions, plans, records and information to the appropriate decision-takers. Ideally they should support standard agreed business and administrative processes and be composed of standard, technologically independent data definitions. These should follow the principles of Simpl.e.business, which increasingly underlie the work of key standards bodies such as GS1 (including the Global Commerce Initiative), UN/CEFACT and OASIS.

For example, all orders to produce, pay, move, treat, etc should follow a standard process based on “the delivery (or actioning) of one or more items (or activities) to (at) one place on one date”. In physical terms, deliveries can only be of one or more items at one place on one date. Therefore, orders, invoices, plans to order and records of actions should be structured on the same basis. So too should the structures of computer applications and data bases across the value chain which record and analyse events such as the fulfilment or receipt of orders/instructions. For example, each receiving location should receive data in the form of expectations of the receipt of one or more items from one supplier at a specific place and date/time. In this way, most value chain activities would be driven by a relatively standard set of messages and applications, to everyone’s benefit.

Messaging standards

At present, there are many so-called standard electronic messages expressed in a variety of syntax (mainly those for Electronic Data Interchange, such as EDIFACT, and those for the Internet, such as XML and now Web Services). Unfortunately, too many of these have different business meanings, because of a failure to follow the principles outlined above. Following the principles of Simpl.e.business (simple, standard processes, identities, data elements and messages, pre-alignment of master data) would enable all messages in whatever syntax to achieve the same business outcomes. An approximate comparison of message size for a Simpl.eb order with those constructed conventionally by other means yields the following results, expressed in ratios:

Simpl.eb – 10 : TRADACOMS (UK-EDI) – 30 : EANCOM (structured EDIFACT) – 80 : EDIFACT (full) – 120 : XML (full) – 200 ++

All messages would benefit from the synchronisation of Master Data. Even without this, there are major advantages to be gained through simplification and standardisation. Of immense importance is the ability to send and receive structured standard messages supporting agreed joint processes to and from known sources containing pre-defined standard identities and data elements.

Types of messages

Messages relate to:

  • Current Intentions, Instructions and Actions – Orders to Deliver, Produce, Treat, Move, etc at a specified place at a specified time. Invoices and Instructions to Pay;
  • Future Plans – to Order, Produce, Pay, etc – to be shared with value chain partners in order to reduce uncertainty;
  • Past Actions, and Results – Production, Deliveries, Treatments and Outcomes, Payments, Invoices, Inventory Levels, etc – Performance data;
  • Unfulfilled Actions – orders outstanding, deliveries yet to be made, etc;
  • Analyses of Data, etc;
  • Structured Text

The great majority of management across most value chains could be conducted cost-effectively via a relatively small number of standard messages. Too many electronic messages at present vary unnecessarily per industry or per country or per context. All messages should be constructed from the same standard data elements, which should be accessible via a global data dictionary or data element repository. Various initiatives are taking place to achieve this; but they remain too fragmented and industry-specific.

When more processes have been simplified and standardised, messages can become much more standard and compact. However, even with justifiable variations among processes, messages can and should become much more standard than they are at present, and, within messages, the great majority of data elements should have standard definitions.