3. Traditional EDI

Traditional EDI system contains two major components: (1) EDI translation software that converts and maps EDI formats to/from internal business applications, and (2) communication channels that deliver EDI documents to the desired trading partners.

3.1 Conversion of EDI Documents

Over the years, different industries (and countries) have developed their own EDI standards. To translate EDI documents, one must first know what EDI standards the trading partner is using.

EDI standards define the document formats that enable trading partners to speak the same language when conducting business activities with each other. Yet, each company usually has its own internal or proprietary data formats, business logic, and business flow which are typically unique. Therefore, a key requirement of EDI translation software is the ability to integrate the incoming EDI formats with internal business applications [6]. That is, EDI translation software basically converts the internal proprietary format to the one that conforms to a standard acceptable to the trading partners; conversely, it maps incoming standard formats into the proprietary formats recognized by internal business applications. The functionality of translation software could be obtained in three ways: lease or purchase software from a vendor; have a third party (such as a VAN) perform the translation; or develop software in-house. The first two alternatives are usually the most cost- and time-effective [2] as they are easy to install, maintain, and expand.

Business documents, once converted by the translator, are ready to deliver via communication channels, as described in the next subsection.

3.2 Communication Channels

Trading partners traditionally exchange EDI documents via direct link, private or proprietary networks, and third-party VANs [1].

Direct link networks, including leased lines, are the most straight-forward communication method. They allow a company to dial up and connect directly to partners' computers. They are most cost-effective alternative for transmitting high volumes of data and are thus very appealing to those large companies that must transmit huge amounts of data daily. With direct link, each trading partner provides its own technical support to address issues such as protocol and speed conversion, because different computer systems use different communication protocols and transmission speeds. In addition, companies must have phone lines available at the same time, deal with substantial administrative overheads to ensure reliable delivery, provide audit control and recovery procedures in case of communication link failure or unavailability, and so on. These issues are compounded when the number of direct-linked trading partners increases. As a result, direct link network is only applicable to large companies that must transmit high volumes of data daily.

A Private or Propriety Network, usually provided by a hub company, is a closed network only available to its trading partners (the spokes). The hub handles protocol conversion and administrative overheads so that the spokes can dial up to the hub private network without conversion and pay only the cost of a telephone call. This type of network is limited and is only available to those trading partners that have a close relationship. An automobile manufacturer and its part suppliers are a typical example. When this type of network is used, the hub company provides technical supports to both itself and its spokes.

A Value-Added Network plays an intermediary role analogous to a post office or delivery service that provides reliable delivery of documents in a secure environment. VANs provide the following value added services to support EDI: mailboxing, protocol conversion, standard conversion, reliability, security, administration, implementation assistance, etc.

Mailbox services were the initial business provided by VANs, where incoming EDI documents from senders were stored in recipients' mailboxes, from which they could be retrieved at any time, or delivered directly into a recipient's system if requested by the recipient. Building upon mailbox services, a VAN supports administration functions such as audit and control of exchanged documents, message tracking, reports, and billing services. For those companies that do not have in-house EDI translation software, a VAN offers in-network translation services that convert formats between different EDI standards (e.g., X12 and EDIFACT), between EDI formats and proprietary formats, and between EDI formats and other media formats, namely E-mail, FAX, Telex, and a hard copy.

In the traditional EDI environment, most companies exchange EDI documents via VANs. Despite the popularity, convenience, and flexibility of VANs, their costs are frequently the dominant expense of EDI, as described in the next section.