Page 266 - Electronic Commerce

Business-to-Business Activities: Improving Efficiency and Reducing Costs

Transaction Description Transaction Set Identifiers
ASC X12 UN/EDIFACT
Ordering Transactions
Purchase Order 850 ORDERS
Purchase Order Acknowledgement 855 ORDRSP
Purchase Order Change 860 ORDCHG 241
Request for Quotation 840 REQOTE
Response to Request for Quotation 843 QUOTES

Shipping Transactions
Ship Notice/Manifest (Advance Shipping Notice) 856 DESADV
Bill of Lading (Shipment Information) 858 IFTMCS
Receiving Advice 861 RECADV Learning

Sales and Payment Transactions
Invoice 810 INVOIC Cengage
Freight Invoice 859 IFTFCC
Payment Order/Remittance Advice 820 REMADV 2015
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FIGURE 5-4 Commonly used EDI transaction sets

How EDI Works
Although the basic idea behind EDI is straightforward, its implementation can be
complicated, even in fairly simple business situations. For example, consider a company
that needs a replacement for one of its metal-cutting machines. This section describes the
steps involved in making this purchase using a paper-based system and then explains how
the process would change using EDI. In both of these examples, we assume that the vendor
uses its own vehicles instead of a common carrier to deliver the purchased machine.

Paper-Based Purchasing Process
The buyer and the vendor in this example are not using any integrated software for
business processes internally; thus, each information-processing step results in the
production of a paper document that must be delivered to the department handling the
next step. Information transfer between the buyer and vendor is also paper based and can
be delivered by mail, courier, or fax. The information flows that occur in the paper-based
version of the purchasing process example are shown in Figure 5-5.
Once the production manager in the operating unit decides that the metal-cutting
machine needs to be replaced, the following process begins:
1. The production manager completes a purchase requisition form and sends it
to Purchasing. This requisition describes the machine that is needed to per-
form the metal-cutting operation.
2. Purchasing contacts vendors to negotiate price and terms of delivery. When
Purchasing has selected a vendor, it prepares a purchase order and forwards
it to the mail room.

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