Page 270 - Electronic Commerce

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

7. When the machine arrives, the buyer’s Receiving Department checks it against
the invoice information on its computer system. If the machine is in good con-
dition and matches the specifications shown in the buyer’s system, Receiving
sends a message to Accounting confirming that the machine has been received
in good order. It then delivers the machine to the operating unit.
8. The buyer’s Accounting Department system compares all details in the
purchase order data, receiving data, and decoded invoice transaction set from
245
the vendor. If all the details match, the accounting system notifies its bank to
reduce the buyer’s account and increase the vendor’s account by the amount
of the invoice. The EDI network may provide services that perform this task.
As you can see by comparing the paper-based purchasing process in Figure 5-5 to the
EDI purchasing process in Figure 5-6, the departments are exchanging the same messages
among themselves, but EDI reduces paper flow and streamlines the interchange of
information among departments within a company and between companies. The paper-
based system has 18 individual steps compared to the eight steps required to complete this
transaction using EDI. The three key elements (shown in Figure 5-6) that alter the process
so dramatically are the EDI network (instead of the mail service) that connects the two
companies and the two EDI translator computers that handle the conversion of data from
the formats used internally by the buyer and the vendor to standard EDI transaction sets.

Value-Added Networks
Trading partners can implement the EDI network and EDI translation processes in several
ways. Each of these ways uses one of two basic approaches: direct connection or indirect
connection. The first approach, called direct connection EDI, requires each business in
the network to operate its own on-site EDI translator computer (as shown in Figure 5-6).
These EDI translator computers are then connected directly to each other using leased
telecommunication lines. Because dedicated leased-lines are expensive, only a few very
large companies still use direct connection EDI, which is illustrated in Figure 5-7.

Warehouse Bank Motor freight carrier
Air freight carrier

Retailer
Spare parts Learning
manufacturer
Cengage

2015
Distributor Finished goods
Wholesaler manufacturer ©
FIGURE 5-7 Direct connection EDI

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