Unit 31: E-business Operations

Session 9

Learning Outcomes 2-3 Describe the use of VANs (Value Added Networks) for EDI

2-4 Evaluate the advantages of using of the internet for b2b

Topics
Review of Last session Group Report Lecture
Value Added Networks, VANs Advantages of using the internet for

b2b

Review of Last Session

Topics Discussed
The purchase process of b2c The purchase process of b2b Activities of professional buyer Different company purchases Risks Electronic Transactions Electronic Data Interchange

Test of Baseline Knowledge

Test of Baseline Knowledge Review

What are Value Added Networks (VANs)? What are the functions of VANs? How are VANs related to EDI? Name a standard EDI transaction set; a VAN; a Trading network How do VANs earn? What are Transaction Logs ? What are the advantages of using the internet vs. VANs for b2b What is XML?

CRITERIA 2-3

Describe the use of VANs (Value Added Networks) for EDI

Value Added Networks

Standard EDI transaction sets Specialist network organisations service Buyer Supplier Network VANs charge for services Availability of transaction logs with a 3rd party involved

Value Added Networks

A private network used by a company primarily for routing, storing and delivering electronic data interchange (EDI) messages. A value-added network (VAN) also provides other services such as message encryption, retransmission and support.

VANs may be operated by large companies for efficient supply chain management with their suppliers, or by industry consortiums and telecom providers.

Creation of VAN
A VAN is created when a network provider leases communications lines from a common carrier (such as a telephone company), enhances them by adding services and improvements that facilitate businessto-business application integration, and then resells the network connection and services to others for a fee. Company-created Third Party

Functions of VANs
1. 2. 3. 4. 5. 6. provides EDI transaction services, security, document interchange assistance, standard message formats, communication protocols, and communication parameters for EDI.

Diagram

VAN

Diagram
Client 1

VAN
Client 2

Client 3

VANs and EDI

VANs emerged as a way to connect supply chain participants. They offered store-and-forward mailboxes that provided protocol conversion, security and guaranteed delivery. EDI VANs proved to be too costly for most businesses. Expensive setup fees associated with EDI software and exorbitant per-transaction fees. When the Internet and the World Wide Web entered the picture, along with standards like ebXML.

WSN Diagram

Transaction Standards
ANSI ASC X12 (American National StandardsX12) X12 is a standard that defines many different types of documents, including air shipments, student loan applications, injury and illness reports, and shipment and billing notices. The ANSI (American National Standards Institute) assigned responsibility for development of EDI standards to the ASC (Accredited Standards Committee) X12 organization in 1979.

PRODUCT/PRICING TRANSACTIONS
Price Sales Catalog Price Authorization Acknowledgement/Status Specification/Technical Information Request For Quotation Response To Request For Quotation Electronic Bid Form 832 845 841 840 843 833

ORDERING TRANSACTIONS
Purchase Order Purchase Order Acknowledgement Purchase Order Change Purchase Order Change Acknowledgement Order Status Inquiry Order Status Report Contract Award 850 855 860 865 869 870 836

MATERIALS MANAGEMENT TRANSACTIONS

Planning Schedule/Material Release Shipping Schedule Production Sequence Ship Notice/manifest (ASN) Report of Test Results Material Safety Data Sheet Contract Award 830 862 866 856 863 848 836 858 861 842

SHIPPING/RECEIVING TRANSACTIONS
Shipment Information (Bill of Lading) Receiving Advice Non-conformance Information-Disposition Transaction, Cause/Correction

INVENTORY MANAGEMENT TRANSACTIONS

Inventory Inquiry/Advice Product Transfer and Resale Report Product Transfer Account Adjustment Response To Product Transfer Account Adjustment 846 867 844 849 810 859 820 823 821 997 824 838

FINANCIAL TRANSACTIONS
Invoice Freight Invoice Payment order/Remittance Advice (EFT) Lockbox Financial Information Reporting

CONTROL TRANSACTIONS
Functional Acknowledgement Application Advice Trading Partner Profile

Transaction Standards
UN/EDIFACT UN/EDIFACT (United Nations/Electronic Data Interchange for Administration Commerce and Transport) is an international set of EDI standards that are published by the United Nations Trade Data Interchange Directory (UNTDID). The standards include syntax rules and implementation guidelines; message design guidelines, directory sets defining messages, data elements, and code sets, among other definitions.

PRODUCT/PRICING TRANSACTIONS
Price Sales Catalog Price Authorization Acknowledgement/Status Specification/Technical Information Request For Quotation Response To Request For Quotation Electronic Bid Form PRICAT ATHSTS PRDSPE REQOTE QUOTES --

ORDERING TRANSACTIONS
Purchase Order Purchase Order Acknowledgement Purchase Order Change Purchase Order Change Acknowledgement Order Status Inquiry Order Status Report Contract Award ORDERS ORDRSP ORDCHG ORDRSP ORSSTA ORDREP --

MATERIALS MANAGEMENT TRANSACTIONS

Planning Schedule/Material Release Shipping Schedule Production Sequence Ship Notice/manifest (ASN) Report of Test Results Material Safety Data Sheet Contract Award DELFOR DELJIT -DESADV QALITY ---

SHIPPING/RECEIVING TRANSACTIONS
Shipment Information (Bill of Lading) Receiving Advice Non-conformance Information-Disposition Transaction, Cause/Correction Trading Partner Profile IFTMCS RECADV NONCON PARTIN

INVENTORY MANAGEMENT TRANSACTIONS

Inventory Inquiry/Advice Product Transfer and Resale Report Product Transfer Account Adjustment Response To Product Transfer Account Adjustment INVRPT SLSRPT --INVOIC IFTMCS REMADV --CONTRL BANSTA PARTIN

FINANCIAL TRANSACTIONS
Invoice Freight Invoice Payment order/Remittance Advice (EFT) Lockbox Financial Information Reporting

CONTROL TRANSACTIONS
Functional Acknowledgement Application Advice Trading Partner Profile

Transaction Standards
Open-EDI The ISO (International Standards Organization) and IEC (International Electrical Committee) are developing an EDI reference model under a joint committee called Open-EDI.

The goal of Open-EDI is to allow electronic transactions among "multiple autonomous organizations" that may or may not have any prior business relationships.

GSX formerly GE Information Systems

IBM Global Services

Rationale
Many enterprise buying organizations find that managing their supply base can be very challenging and expensive if to maintain their own site. Point-to-point communications in multiple technologies required by different suppliers are expensive and time-consuming to manage. Buyers can utilize transaction capabilities for reliable translation and delivery of business documents using trading networks.

Sample Trading Networks

Ariba.com Connectory.com Triangle Area Buyer-Supplier Network Buyer Supplier Connection Tradekey.com Bayantrade.com

Charges
Set-up Fee ($5,000 to $10,000) Monthly Fee ($100 to $ 1,000) Consumables ($1,000 to $10,000) Per Kilobyte used ($0.50 to $1.00) Per transaction (% of transaction) Subscription fee ($2,000 to $ 10,000) Maintenance Charges (20% of set-up)

UN Rules
To ensure the validity and enforceability of transactions completed through the use of EDI, Section 2.6 requires trading partners to store and retain:
(a) the Messages communicated (both sent and received) and (b) records relating to those Messages.

Those records may include histories or logs of the communications as well as databases containing extracts of certain portions of the Messages.

UN Rules
The record storage requirements which may be specified in the Technical Annex should be developed based upon the commercial or legal requirements under which each party conducts its affairs. The objective is to provide the necessary requirements which can best assure each trading partner that both required and desired records will exist when needed. National laws and regulations may differ considerably regarding the readability, durability or integrity of electronic records.

UN Rules
No specific time requirements or storage formats are indicated; however, trading partners are encouraged to specify details regarding both matters, in order that the appropriate records can be recovered for review in the event of any future disagreements or disputes.

Otherwise, the Agreement imposes no restrictions on the internal procedures used by a party to comply with the requirements of Section 2.6.

Types of Transaction logs

Paper print out Data storage (soft copy)
Report format Raw data

Third Party
VANs responsibility 3rd party data storage Buyer and seller hard and soft copies

Criteria 2-4

Advantages of using the internet for b2b

Advantages
a standard communication network across the world which can be used for b2b between buyers and sellers, avoiding the costs charges by VANs Security making it accessible to organisations enabling a more competitive global marketplace. Other developments

Standard Communication Network

There is no standard communication or protocol Programmers utilize a Protocol Suite or a combination of standard communication protocols

Standard Communication Network

Avoiding Cost by VANs

Minimal charge Minimal or no subscription fee Percentage of transaction is lower Lower monthly subscription

Security
Network layer security IPsec Protocol Electronic mail security (E-mail) Pretty Good Privacy (PGP) Multipurpose Internet Mail Extensions (MIME) Firewalls

Accessibility
Global Access 24 x 7 access Any terminal Authorized Person

Competitiveness
Strategic alliances Up-to-date/ minute decisions Fluctuating prices and terms Expedient delivery of services

Other Developments - XML

A flexible markup language for structured electronic documents. XML is based on SGML (standard generalized markup language), an international standard for electronic documents. XML is commonly used by data-exchange services (like blog feeds) to send information between otherwise incompatible systems.

See you next meeting

END OF SESSION