| Have you heard someone mention EDI
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| | trading partners. And VAN services such
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| (Electronic Data Interchange) or
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| | as
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| eCommerce
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| | "Message Disposition Notifications"
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| and wondered what it was? Simply put,
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| | (MDNs) are built right into the software
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| eCommerce is the exchange of information
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| | products.Benefits of EDI
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| about trading goods, services, or money
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| | Consider a very simple non-EDI-based
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| from computer to computer. For example,
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| | purchase: A buyer decides he needs 365
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| the purchase of a widget over the
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| | widgets. He creates a purchase order,
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| internet, paying a bill, tracking an
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| | prints it out and pops it in the mail.
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| overnight
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| | When
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| package delivery, or receiving a
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| | the supplier gets the order, she types
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| paycheck electronically.Now imagine
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| | it into her company's computer system.
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| you're a company. You want to do the
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| | The
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| same transactions, but
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| | inventory guy pulls the order and ships
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| thousands of time a day. That is where
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| | out the widgets. Next, the supplier
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| EDI steps in. EDI is an agreed upon
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| | prints
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| message standard that exchanges
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| | out and mails an invoice. It's not hard
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| information from one computer application
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| | to imagine that this process could take
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| to
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| | several days. EDI has the potential to
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| another with the minimum of human
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| | cut massive amounts of time out of the
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| intervention. And 95% of all eCommerce
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| | process. Sending documents, such as
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| uses
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| | purchase orders or invoices,
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| EDI to exchange that information. It
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| | electronically
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| can be done with special software via
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| | takes minutes, not days, and shipments
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| e-mail,
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| | can often go out the day the order comes
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| across the Internet, or by customized
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| | in.Moreover, the electronic format does
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| connections. And it goes beyond just
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| | not need to be re-keyed upon arrival.
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| purchasing goods and submitting
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| | And
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| invoices. A company can request
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| | that is the part of the biggest benefit
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| information
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| | of EDI. This saves a tremendous amount
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| about inventory levels in it's
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| | of
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| suppliers' and customers' warehouses,
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| | labor time, and means that no data entry
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| receive an order
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| | errors are introduced into your system by
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| status; and send funds electronically
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| |
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| along with automatic notification that an
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| | your staff. Cycle times are reduced,
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|
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| | and data entry backlogs are almost
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| invoice was paid. These are just a few
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| | completely
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| of the many types of automated
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| | eliminated. This allows for very quick
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| transactionsEDI is not something new. As
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| | order processing. A proper system can
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| a matter of fact, it is much older than
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| | easily
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| you might
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| | handle receiving an order and shipping
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| think. Yet to some industries it is
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| | that order with its invoice the same day.
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| only a few years old. And the health
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| |
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| industry of
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| | Studies indicate that the average
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| the United States had to be mandated by
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| | reduction in turn around time is about
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| the Federal government before they dared
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| | 40% for
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| venture into EDI.Who uses EDI? And how
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| | most business functions like order
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| and where did it all start? What are the
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| | fulfillment, procurement, manufacturing,
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| benefits? What are
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| | logistics and finance.This often allows
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| the costs? What are the legalities?
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| | a company that first implements EDI to
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| And why, with all the apparent
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| | handle far greater volumes
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| advantages, do
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| | without adding personnel and other
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| some industries balk at switching to
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| | costs. This means increased sales and
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| EDI? Well let's start at the beginning
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| | increased revenues once the initial
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| to see
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| | investment in EDI is recaptured.
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| how it all came about.Who uses EDI?
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| | These savings come from:
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| About 90% of the fortune 1000 companies
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| | - No data entry errors from your
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| currently use EDI. Companies such as
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| | operators
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| American Airlines, BMW, Coca-Cola,
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| | - No mail time
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| Dunkin Donuts, Eastman Kodak, Federal
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| | - Reduced labor processing costs and
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| Express, Gordmans, Heinz, InFocus,
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| | time
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| JCPenney, Kohls, Lowes, Macys, Nike,
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| | - Reduced lead times
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| Openheimer, Prudential Insurance, Queens
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| | - Reduced order cycle time
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| City Government, Radio Shack, Staples,
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| | - Reduced inventory carrying costs
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| Texaco, United Airlines, Verizon,
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| | - No filing and other processing of
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| Wachovia, and Yokohama Tires to name but
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| | paperworkEDI improves margins by meeting
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| a few.
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| | customer demands and consequently
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| EDI is widely used in manufacturing,
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| | strengthening relationships. It also
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| shipping, warehousing, utilities,
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| | allows time and effort to be focused on
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| pharmaceuticals, construction,
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| | other
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| petroleum, metals, food processing,
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| | internal priorities.Studies have shown
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| banking,
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| | that processing a purchase order or
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| insurance, retailing, government, health
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| | invoice costs most
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| care, and textiles among other
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| | companies about $5 in paper, postage,
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| industries.Any company that buys or sells
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| | handling, direct labor and other such
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| goods or services can potentially use
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| | odds
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| EDI. Because it
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| | and ends of direct costs. With EDI this
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| supports the entire business cycle, EDI
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| | can be reduced to about 50 cents;
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| can streamline the relationship that any
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| | sometimes as little as 13 cents,
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| company has with its customers,
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| | depending on how the EDI document is
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| distributors, suppliers, and so forth.
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| | transmitted.
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| According to
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| | If your direct handling costs are
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| a recent study, the number of companies
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| | greater, the savings is greater.Another
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| using EDI is projected to quadruple
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| | benefit is the implementation of
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| within
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| | Just-In-Time (JIT) order process
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| the next six years.History of EDI
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| | methodology. With Just-in-Time, a
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| The first recorded EDI dates back to the
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| | company can avoid stock-outs and/or
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| 1850s when the railroads and Western
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| | obsolete
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| Union used the telegraph to communicate
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| | inventories, reduce lead times on
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| business information. Starting there,
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| | ordering from suppliers and reduce
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| Samuel Morse's patented code was the
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| | inventory
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| single method used to communicate across
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| | carrying costs. Whether implementing a
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| the lines.In 1948 during the Berlin
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| | subset or the whole of JIT process
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| Airlift, thousands of tons of food and
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| | methodology, EDI is what makes
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| consumables were
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| | Just-In-Time possible and allows it to be
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| needed to be air freighted. The task of
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| | feasible.
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| coordinating these consignments (which
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| | With the proper agreements between
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| arrived with differing manifests,
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| | trading partners, a manufacturer can
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| languages and numbers of copies) was
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| | determine the current sales of their
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| addressed
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| | buyers and their buyers' current
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| by devising a standard manifest.In the
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| | inventory
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| late 1950's and early 1960's the rise of
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| | levels. Therefore the manufacturer can
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| computer enabled companies to store
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| | forecast probable future sales and plan
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| and process data electronically,
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| | production and their own purchasing
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| companies needed an expedient method to
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| | accordingly. Obviously there will
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| communicate the data. This method was
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| | occasionally
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| realized by the widespread use of
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| | be wild fluctuations that will disturb
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| computer telecommunications. Using
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| | this scenario, but it does help the
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| telecommunications, companies could
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| | manufacturer
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| transmit data electronically over
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| | to accurately plan production, and the
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| telephone lines, and have the data input
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| | purchaser to know that their needs will
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| directly
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| | more
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| into a trading partner's business
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| | likely be met by their
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| application. These electronic
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| | suppliers.Just-In-Time helps the
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| interchanges
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| | manufacturer communicate quickly and
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| improved response time, reduced
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| | inexpensively with
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| paperwork, and eliminated the potential
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| | their suppliers, who may be using the
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| for
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| | same forecasting to meet the requirements
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| transcription errors. Computer
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| | of
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| telecommunications, however, only solved
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| | their customers.Disadvantages of EDI
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| part of
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| | The biggest disadvantage implementing
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| the problem.
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| | EDI is it reveals inefficient business
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| Early electronic interchanges were based
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| | practices. If a company's business
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| on proprietary formats agreed between two
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| | process was inefficient before EDI, they
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|
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| | will be
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| trading partners. Due to differing
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| | multiply with the implementation of EDI.
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| document formats, it was difficult for a
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| | The original purpose of EDI was to save
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| company
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| | money and time. When used improperly,
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| to exchange data electronically with
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| | EDI does neither, and actually wastes
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| many trading partners. What was needed
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| | both.Costs of EDI
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| was a
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| | Prices for EDI applications vary from
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| standard format for the data being
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| | free (for very simple one-function
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| exchanged. In 1968 the United States
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| | products) to
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| Transportation Data Coordinating
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| | several thousands of dollars for
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| Committee (TDCC) was formed, to
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| | full-function applications. The final
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| coordinate the
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| | price you pay
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| development of translation rules among
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| | depends upon several things:
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| four existing sets of industry-specific
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| | The Expected Volume of Electronic
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| standards.In the mid 1970's, it was
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| | Documents. Generally speaking,
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| clear that the TDCC standards were not
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| | low cost EDI packages handle only a few
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| enough, and work
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| | documents and trading partners. Midrange
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| began for national EDI standards. The
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| Electronic Data Interchange Association
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| | EDI packages can be a little more
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| (EDIA), a non-profit organization set
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| | expensive, but handle a much larger
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| out to serve as an administrator for
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| | volume of
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| several
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| | EDI. If you anticipate multiple
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| different industry groups. Each industry
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| | documents or trading partners, a midrange
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| served has a committee to determine new
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| | EDI
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| standards, modify existing ones, and
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| | system is a much better choice.The
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| pass the information on to the EDIA for
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| | Amplitude of the EDI Translation
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| publication and distribution. EDIA was
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| | Software. Some products look
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| asked to develop a set of standards
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| | like a bargain, but as your EDI needs
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| applicable to the grocery industry. The
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| | grow, hidden costs (such as having to
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| first such standard is The Uniform
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| | purchase new transaction sets) suddenly
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| Communication Standard (UCS) which was
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| | appear. You may pay more for a program
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| applied to an actual transaction by the
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| | with an integrated mapper, but you'll
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| Quaker Oats Company in 1981.In 1979 the
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| | avoid purchasing overlays and maps in the
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| American National Standards Institute
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| (ANSI) Accredited Standards
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| | future.Implementation Time. Some
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| Committee (ASC) was formed. It included
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| | applications are easier to learn and use
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| representatives from transportation,
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| | than others. But as above, the easier
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| government & computer manufacturer
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| | to lean the less the software package can
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| industries, The committee's first
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| meeting
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| | handle. The more time you spend in
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| took place in Rosslyn, Virginia with the
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| | training, the more time it takes to get
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| goal to create a set of standard data
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| | into
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| formats
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| | production mode. If your time frame is
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| based on the TDCC structure that:
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| | tight, and you are sure the documents you
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| - were hardware independent;
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| |
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| - were unambiguous, such that they could
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| | will be using are static, look for a
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| be used by all trading partners;
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| | translator that doesn't require training
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| - reduced the labor-intensive tasks of
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| | before
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| exchanging data (e.g., data re-entry);
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| | implementation.
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| - allowed the sender of the data to
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| |
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| control the exchange, including knowing
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| | Fees vary from Software Company to
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| if and
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| | Software Company. Ignoring
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| when the recipient received the
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| | the hidden costs mentioned above, you
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| transaction.In 1982, Version 1 of the
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| | can expect the following ongoing charges:
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| ANSI ASC certified release of draft X.12
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| |
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| standards was
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| |
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| published.At about the same time, the
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| | Maintenance Fees. Most companies charge
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| U.K. Department of Customs and Excise,
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| | an annual maintenance
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| with the
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| | fee that is usually a percentage of the
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| assistance of SITPRO (the British
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| | translator's list price. This fee should
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| Simplification of Trade Procedures
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| | include
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| Board), was
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| | software updates, standards updates,
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| developing its own standards for
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| | technical support, and customer
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| documents used in international trade,
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| | service.VAN Charges. If you use a Value
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| called
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| | Added Network (VAN), you will be
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| Tradacoms. These were later extended by
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| | billed for transmitting data similar to
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| the United Nations Economic Commission
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| | making a long distance phone call. Some
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| for Europe (UNECE) into what became
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| | also
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| known as the GTDI (General-purpose Trade
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| | bill you for connect time. A fast modem
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| Data Interchange standards), and were
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| | helps to lower transmission costs.Mailbox
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| gradually accepted by some 2,000 British
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| | Fee. Most VANs charge a monthly fee for
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| exporting organizations.Problems created
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| | maintaining a
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| by the trans-Atlantic use of two
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| | mailbox on their network. Some base
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| different (and largely
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| | billing on the document (25 cents per
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| incompatible) sets of standardized
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| | document transmitted). Others charge
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| documents have been addressed by the
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| | based upon the number of characters in
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| formation of a United Nations Joint
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| | each
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| European and North American working party
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| | document.
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|
| |
| |
|
| (UN-JEDI), which began the development
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| | EDI can at times take much longer than
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| of the Electronic Data Interchange for
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| | expected. Remember, you are working with
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| Administration, Commerce and Transport
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| |
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| (EDIFACT) document translation
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| | another company and you have no control
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| standards.Early on, Value Added Networks
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| | over their priorities or business
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| (VANs) served as an "electronic post
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| | practices.
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| office" for
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| | Your priority may be to implement a
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| buyers and suppliers that needed to
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| | Purchase Order (850) with Wal-mart, but
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| exchange data. For example, Company A
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| | their
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| could
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| | priority may be implementing the Advance
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| send an electronic purchase order to the
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| | Ship Notice (856). You need to
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| VAN and Company B could go to the VAN
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| | implement a Remittance Advice (820) with
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| to pick it up. If Company B claimed it
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| | Wachovia yet their Remittance Advice
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| did not receive the purchase order, the
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| | specialist is on Maternity leave and her
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| VAN
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| | replacement only knows Lockbox
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| would serve as a third-party
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| | (823).Despite its few disadvantages, EDI
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| intermediary and would validate whether
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| | has proven to be a powerful backbone that
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| the purchase
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| | supports today's Electronic Commerce.
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| order had in fact been picked up or not.
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| | Companies all over the world utilize
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| That is the type of "value-add" these
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| | EDI's
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| networks provided.Despite the benefits,
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| | versatility and flexibility to
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| VAN EDI had limited adoption because it
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| | communicate with each other. And with
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| was cost-prohibitive
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| | the promise of
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| for most companies to deploy. Before
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| | the Web, which offers much lower
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| Internet EDI became available,
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| | connectivity costs, and the lower costs
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| approximately
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| | of PCs and
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| 80% of the suppliers in any given supply
| |
| | simpler software, EDI is opening its
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| chain were communicating with their
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| | doors to smaller companies. Moreover,
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| customers manually via fax, telephone
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| | XML, an
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| and snail mail because they could not
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| | open standard for sharing data, is
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| afford
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| | starting to appear as a method of EDI
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| the investment required for VAN EDI.
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| | coding
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| This resulted in inefficiencies
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| | standards, which could provide technical
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| throughout the
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| | clarity across industries and nations
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| supply chain including: lost or
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| | around the world.Christopher Alexander
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| mis-keyed purchase orders, late invoices,
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| | is a lead developer at CE InterWeb
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| out-of-
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| | Solutions and a Managing
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| stocks, etc.With the advent of secure
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| | Partner at Consolidated Energies.He has
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| Internet EDI, companies of every size are
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| | been developing advanced eCommerce
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| now able to
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| | applications with EDI since 1997.
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| transact electronically with their
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| |
|
