Electronic Data Interchange (EDI) exchanges between trading partners my occur either through a value added network (VAN) or through direct communications. VANs are usually considered the most convenient transfer solution because neither the sender nor receiver are responsible for managing the actual data transmission. The sender/receiver is only responsible for getting the data to and from the VAN. On the other hand, direct EDI transmission is far more economical especially when the trading partners are exchanging large data volumes.

Relationships

The most value-added from EDI is realized when all trading partners use EDI to exchange business transaction data. The challenge is to bring smaller, second-, third- and fourth-tier trading partners up on EDI. While 95% of the Fortune 1,000 companies are using EDI, only two percent of the 6 million businesses in the U.S. were using EDI in 1997 [Brandel, 1997].

Over the years, a "hub and spoke" approach has proliferated. In this approach, the hubs, typically larger companies, have sought to establish EDI trading relations with all trading partners to capitalize on process benefits.

Ideally, an organization would like to map/translate its business data into an EDI transaction set that can then used with many different trading partners and thus establish a one-to-many relationship between itself and its trading partners. But the reality is that each trading partner must then translate/map the EDI transaction set to its own internal data. Therefore, most relationships established with a trading partner are unique one-to-one types of relationships.

Value Added Network (VAN) Transmissions

A value-added network (VAN) is owned by a third party which receives EDI transmissions from the sender, and then translates, stores, and forwards the transaction sets to the designated trading partner over proprietary networks. The VAN also performs valuable services such as mail-box pickup notification and authentication, auditing, and providing reliable connectivity.

VANs offer their customers “Service-Level Agreements” which include such services as security (through encryption), confidentiality (each transaction remains private), data integrity (the document remains unaltered during transmission), authentication (the recipient can be sure of the sender’s identity), nonrepudiation (the sender cannot credibly deny sending the document), auditing (time-stamping), archiving, carbon copy, interconnectivity to other VANS and visibility when things go wrong [Brandel, 1997].

The sender transmits a transaction set to the VAN; then, the VAN carries the transaction set to the receiver (see Figure 1). [Frito-Lay, 2000]

 


Figure 1 --EDI Transmission via VAN

The typical VAN transmission may be modified if the sender and receiver subscribe to different VANs. This arrangement is considered an "interconnect transmission" as the data transmission occurs via an interconnect between two VANs (see Figure 2).

 


Figure 2--EDI Transmission via VAN Interconnect

There are several benefits of transmitting transaction sets via a VAN.

  • A VAN provides mailbox pick-up notification and authentication
  • A VAN ensures the security of the data transmission over proprietary lines
  • A VAN provides data archival and retransmission capability
  • A VAN handles routing and distribution of data
  • A VAN protects the integrity of the data
  • A VAN allows transaction set storage and delivery on demand

The major disadvantages of using a VAN are the cost and the difficulty of setting up VAN transmissions with small trading partners in remote parts of the world [GEIS, 2000; Frito-Lay, 2000].

Direct Communication Transmissions

Direct transaction set exchange requires that the sender and the receiver monitor traffic, maintain audit trails, and handle security. The sender establishes a direct link with the receiver and then transmits the transaction sets (see Figure 3) [Frito-Lay, 2000].


Figure 3--EDI Transmission via Direct Communications

There are several benefits of transmitting transaction sets via direct communications.

  • Direct transmission is more economical
  • Direct communication provides a means for small-to-medium enterprises (SME) to engage in a limited number of EDI exchanges

The major disadvantages of using direct communication links for EDI exchange is the responsibility of managing and monitoring the traffic and security and the fact that a one-to-one connection must be made with every receiver (trading partner)with which the sender wants to exchange data [GEIS, 2000].