Once an EDI solution has been selected and approved by the EDI steering committee the EDI project then shifts to the development phase. An EDI capable system may be viewed in five pieces. 

The first piece is the telecommunications medium, usually a Value Added Network (VAN)or more recently the Internet. The second, third and fourth pieces may be purchased together or separately.

The second piece is the telecommunications software which is not specific to EDI. On a PC, for example, this software has the same functionality as MS Windows dial-up networking.

The third piece is usually a package licensed from an EDI software company or VAN provider—the EDI translator. In the case of an incoming material release for automotive parts, the function of this piece of the EDI system is to interpret the EDI information from the X12 format into a format more readily usable by in house systems. In addition to this primary function, an EDI translation package may have several sub systems, including the handling of the EDI envelope, document management/audit trails, compliance checking, and generation of a functional acknowledgement. The functional acknowledgement is roughly equivalent to the postal service return receipt to confirm delivery.

The fourth piece, the interface, takes the final step in the translation or reformatting of the information. In the case of an inbound material release, it takes the information in the format produced by the EDI translator and then reformats to produce the format needed by the in-house system—namely the application software—which forms the fifth piece of the EDI system.

Selection of the EDI Network and Software

In its simplest form there are two main types of EDI network communication methods: those that rely on point-to-point communications and those that use value added networks.

• Point-to-Point Communications take place when lines are established using standard communication protocols between trading partners. The connection can be set up as a leased line, which is paid for on a monthly basis and is readily available for electronic data interchange, or as a dial-up line where the communication or information transfer is established in a way similar to a telephone call. A dial-up link allows senders to batch transactions and make connections to send at certain points. A dial-up link is a more cost-effective approach when the amount of transmitted data is low.
• Value Added Networks (VANs)—This is the most widely used method. Point-to- point lines frequently present a scheduling problem to trading partners. Often, it is not convenient for the receiver to get transactions when the sender chooses to transmit them. The solution to this problem is a VAN that provides a store and forward mailbox service. The sender connects with the VAN and sends its EDI transactions to the recipient’s mailbox where they are stored. The sender then disconnects from the service. When it is convenient, the recipient can connect to the network and receive those transactions from their mailbox. With this approach, both sending and receiving parties must use the same EDI standard transactions.

During the development phase, the selected system is broken into tasks for further study. The EDI team must select EDI software and possibly network providers. Neither is a trivial task. The success of the EDI system will depend on the quality of the software and network and the support provided by the vendors. Vendors can provide a great deal of useful technical advice when implementing an EDI system, therefore it is very important to select the correct one.

Choosing an EDI network service (VAN) may be more closely related to the company’s data processing operations than the modernity of the vendor’s technology. A value added network is a third party link in the EDI communications system that provides the translation software service and the temporary transaction storage service—a mailbox—for trading partners. Rather than sending data directly to trading partners, companies usually prefer to send it to the network, which routes data into the appropriate trading partner’s electronic mailbox. Mailboxes hold EDI documents until the receiving partner asks for them and many will send the recipients a message alerting them to incoming documents. Trading partners then dial into the network and retrieve transaction sets from each other. Companies are thus relieved from maintaining connections with all trading partners and scheduling transmissions individually.

One important factor to consider is"reach"—the number of the organisation's trading partners connected to the network. The network may well be the least expensive portion of EDI conversion costs. It is impossible to make general recommendations of one vendor over another. Ultimately the decision is really based upon which vendor suits the company’s particular business needs. There are several criteria which organisations should consider when evaluating vendors. Before discussing these services with a vendor a company needs to outline its trading partners and their EDI networks. If all or most of their trading partners are using one particular network, the choice may be very simple, but not necessarily definitive.

First, determine how much a VAN is expected to do. Then, determine how much each VAN is actually willing to do. Most networks promise turnkey services, but each vendor starts turning the key at different points in the implementation process. Larger buyers seeking to bring smaller suppliers online will need a VAN willing to contact, educate, assist and train suppliers, as well as to conduct tests, when their systems are in place. If this degree of service is required, it is a good idea to verify the availability of the service and any charge for it.

An organisation could broaden its customer base by choosing a VAN entrenched in its own industry, and use EDI to establish new trading partners relationships within that particular industry sector. Trade associations are excellent sources for information about EDI activity within a particular vertical industry. They deal with the maintenance of standards as they apply to a particular industry. In fulfilling this role they act as a sounding board for users’ problems and concerns and can be very helpful to novice users.

Secondly, another important criteria is a vendor’s pricing structure. For example, some vendors charge a separate fee ( in addition to the kilo character transmitted charge) for each document sent. In the transportation industry, transactions carry a much greater time value and tend to be more frequent, therefore a document charge can add a sizable amount. In other industries, the time value of transactions may be lower and transactions less frequent, making a document charge less significant.

Pricing structures will vary from vendor to vendor. Users must thoroughly understand their transaction patterns, such as frequency, volume, document size, time of day of transmission, etc., as these will all affect the pricing structure. Once the patterns have been established the next step is to price out an extended example for each vendor under consideration. Users must also be aware of any hidden charges, such as minimum record lengths. Some vendors specify record length of 128 or 512 characters. For instance, by sending 10 documents containing 10 characters, a user would incur a charge for 1280 or 5120 characters. Multiplied by a large monthly volume the difference becomes substantial.

Thirdly, consideration should be given to the vendor’s vast array of value added services, namely consulting and trading partner liaison services. EDI network vendors offer varying degrees of handholding during the implementation and support phase of an EDI project. This is a very important consideration, especially with medium-sized organisations that may not have the internal staff to dedicate to the EDI effort.

Finally, a fourth criteria for evaluation is the vendor’s involvement and influence in trade associations and EDI standards groups. Their participation is one indication of their long-term commitment to providing EDI services.

A related criteria is the vendor’s credibility in the market place. Many firms have entered the market in the past decade and consolidation within the industry is inevitable. As rates drop and interconnect surcharges disappear, value added services will become a differentiating factor. Vendors that have strong financial backing to respond to evolving customer demands will survive such a shake out. In the meantime, users must continue to voice their needs and concerns and choose the vendor that appears most willing to meet those needs.

Network service providers traditionally come from three backgrounds: time sharing / information retrieval services, public data network providers and / or EDI service bureaus. Each category possesses advantages and restrictions for EDI services.

Vendors entering the EDI market from a time sharing background generally offer a number of value added services, such as translation software packages, access to third party databases, database capture of trading information, audit reports and historical activity summaries, and archiving services.

Vendors with a public data network orientation are traditionally viewed as data movers and have extensive experience operating large packet switched networks. Users typically find it easy to work with these EDI network vendors, although they may not provide as wide a range of extra services. While these companies do not supply EDI translation software, they do provide long lists of certified software packages from third party developers. Also, these networks offer less extensive in-network translation services.

Most public data network vendors are recent entrants into the EDI arena. Furthermore, users can expect to see more newcomers in this category from network providers and hardware vendors. Although these companies are new to EDI, their entrance into the market is not trivial. They are armed with impressive network expertise and financial resources. In addition, their alliances with experienced EDI software / service providers can compensate for their lack of EDI experience. Networks also offer one stop shopping for EDI clients. They will provide everything a customer needs to set up an EDI system, software, translation, consultation, education, record keeping, reporting of EDI transactions to clients, and electronic mailboxes. Sending EDI documents through a third party (VAN) may cost more out of pocket, but the services and support provides enhanced VAN performance, thus making them very popular among trading partners today.

Legal & Audit Requirement

EDI affects the way an organisation conducts business and processes transactions. It may also require changes to organisational policies. As the system is designed, auditors should review specifications to makes sure existing company controls are maintained. As an electronic system, document storage, archiving and data recovery are vastly different to paper-based systems the same holds true for the types of audit trails that are available. Auditors must be able to understand and approve the new procedures that EDI requires.

Legal considerations also play a role. Although lawyers agree that EDI transmissions are as binding as paper documents, problems are likely to arise if legal issues are not addressed. For instance, EDI transmissions do not contain the customary terms and conventions that proper paper documents contain. Instead, companies sign EDI documents, which specify that existing terms and conditions are in effect for EDI transmissions. Legal counsel should review, draft and approve such agreements.