Any methodology that enables the computer-to-computer exchange of business documents falls under the heading of Electronic Data Interchange (EDI).
What are the two basic approaches to EDI?
The first approach is to create business documents that adhere to one of the EDI standards such as ANSI X12, which is primarily used in the United States, or EDIFACT, which is used in the rest of the world. These standards define exactly where each piece of data is to be located in the electronic business document.
The second approach enables the creation of electronic business documents in a more flexible way, one that is not bound by the strict rules of data location. The XML language is designed to provide such flexibility. XML is not a standard at all. It is a powerful language that gives a company a great deal of flexibility in defining and constructing documents, such as the types of business documents defined by ANSI and EDIFACT (e.g., purchase orders, invoices, remittance advices).
For example, RosettaNet is a standard that uses the XML language. It was developed by a consortium of major computer, consumer electronics, semi-conductor manufacturers, and telecommunication and logistics companies. It facilitates some industry-wide global supply chain processes. Also, within an enterprise, XML is heavily used for sharing data among various system components. Moreover, internal system integration software is often designed based on XML.
There’s a major structural difference between an EDI standards-based business document and one that is constructed using XML. The ANSI or EDIFACT document is based upon strict rules governing the position of data within a file, whereas the data in an XML file is not bound to a specific location but is instead identified by tags, such as “<quantity>300 </quantity>” to indicate a quantity value of 300.
These tags result in XML files being much larger than their comparable ANSI or EDIFACT files. However, these tags also tend to make an XML-based business document more readable because the tag identifies the type of information that follows. This readability feature comes in handy for troubleshooting when human intervention is necessary.
At one point, it was forecast that XML would replace EDI. However, many businesses that have invested in EDI have found that it is efficient and works well, so they see no need to spend the money to reinvent this particular wheel. Thus, EDI remains a mainstay for business and I don’t see that changing much in the foreseeable future.