Page 286 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes In addition to translation, VANs offer a wide variety of other services including data backup,
report generation, technical support, training, and the issuance of warnings if data is not properly
transmitted between parties. Depending on need, all of the services offered by a VAN may not
be required by a particular company. VANs vary in the way they charge companies. Some
charge high implementation or setup fees followed by low monthly usage fees, or vice versa.
Charges often are made based on the number of documents or characters involved in a given
transmission. In the early 2000s, although many companies still relied on VANs, the Internet
was playing a larger role in EDI. It is possible for companies to translate EDI files and send them
to another company's computer system over the Internet, via e-mail or File Transfer Protocol
(FTP). Because it is an open network and access is not terribly expensive, using the Internet for
EDI can be more cost effective for companies with limited means. It has the potential to provide
them with access to large companies who continue to rely on large, traditional EDI systems. The
low cost associated with open EDI also means that more companies are likely to participate. This
is important because the level of value for participants often increases along with their number.
However, this also presents a dilemma for large companies who have invested a considerable
sum in traditional EDI systems. Furthermore, Internet Service Providers (ISPs) usually do not
offer the kinds of EDI-specific services provided by VANs.
While the automotive and retail industries have experimented with open EDI for some time, the
efforts didn't result in widespread adoption by small suppliers, usually due to cumbersome
requirements like the installation of on-site software. Incorporating EDI into e-marketplaces
was an approach that held more potential. In March 2000, an e-marketplace called the WorldWide
Retail Exchange (WWRE) was established. It allowed suppliers and retails in various industry
sectors – including retail, general merchandise, food and drugstores – to conduct transactions
over the World Wide Web. After one year of operation, the WWRE had 53 retailer members
with combined annual turnover of $722 billion. Leading retailers, among them Kmart, Rite Aid,
Best Buy, and Target, planned to offer a Web-to-EDI translation service on WWRE so it would be
easier for smaller suppliers to do business with them. In this arrangement, the retailers send
purchase orders to a data center where they are translated to a language that can be read with a
Web browser like Internet Explorer or Netscape Navigator. Suppliers are then notified about
the PO and allowed to respond. This is a break from true EDI, since orders are handled manually
by suppliers.
In addition to the Internet, intranets (private internets) and extranets (links between intranets
and the Internet) also showed potential for EDI. According to The International Handbook of
Electronic Commerce, “The Extranet makes it possible to connect several organizations behind
virtual firewalls.”

Example: Suppliers, distributors, contractors, customers, and trusted others outside the
organization can benefit from establishing an Extranet. The Internet is used to provide access to
the public; the Intranet serves the internal business; Extranets provide a critical link between
these two extremes.
Extranets are where the majority of business activity occurs. They enable commerce through the
Web at a very low cost and allow companies to maintain one-to-one relationships with their
customers, members staff and others."

Communication Standards

As previously mentioned, when companies use EDI to exchange information, translation software
is an important part of the process. During EDI, information is usually translated to and from
one of several different standard languages, including ANSI X12 and EDIFACT. These languages
are more flexible than custom standards developed by individual companies for their specific
use.

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