Electronic data interchange (EDI) is the electronic transfer of business documents such as purchase orders, invoices, and bills of lading between companies using a structured, machine-readable data format. A manufacturer using EDI can transmit purchase orders directly from its company computer to a supplier’s company computer over a telecommunications network or the INTERNET, eliminating the time-consuming and expensive manual processing of paper documents. By streamlining data flow within an organization, companies can reduce inventory, lower labor costs, shorten CYCLE TIME, and enhance customer service. The U.S. shipping industry first implemented electronic data interchange in the 1970s. EDI grew rapidly in the 1980s, especially in large manufacturing industries such as the automotive sector. For example, as a key step in streamlining their manufacturing processes to remain competitive, General Motors Corporation, Chrysler Corporation, and Ford Motor Company implemented EDI. They also expected their suppliers to use EDI to automate the procurement cycle, reducing inventory in support of a just-in-time (JIT) production philosophy. However, EDI was often complex and expensive to implement, since large companies typically used many suppliers. It was common for each company to use different types of computer systems and software packages and to require different features from an EDI application, all of which complicated EDI implementation. Generally only large companies could afford to implement EDI, sometimes with only limited success. In the mid-1990s the growth of the Internet fueled the first attempts at E-COMMERCE, introducing a simpler, less-expensive way for smaller companies to conduct business transactions electronically. Today implementing Web-based EDI is a viable alternative for small and medium-sized companies pressured by their larger customers who prefer to complete their business transactions electronically using EDI. In the future it is likely that businesses not using EDI will be at a competitive disadvantage, as CORPORATIONs continue to embrace flatter, decentralized organizational structures in an effort to remain competitive in the global marketplace. The EDI process itself is quite simple: companies, or trading partners, first agree on the specific format of each EDI transaction, including the format, content, and structure of the business document. Standardized formatting ensures that each trading partner’s computer can correctly interpret the data it sends or receives. Document content standards such as ANSI X.12 or EDIFACT typically provide the standard format for EDI transmissions. Most American companies adhere to the American National Standards Institute (ANSI) X.12 standard, while global business partners use the international EDI for Administration, Commerce, and Trade (EDIFACT) standard supported by the United Nations. Computer software applications translate each trading partner’s documents into the proper standardized format. After translating the business document into machine-readable form, one business partner can electronically transmit it to the other. A direct telecommunication line between trading partners, telecommunication lines via an intermediary value-added network (VAN), and the Internet are all methods used to transmit electronic data. Using a third-party value-added network, companies can transmit all of their EDI transactions for all of their trading partners at the same time. The VAN separates the EDI transactions by company and places them in each trading partner’s electronic mailbox. At regular intervals, each trading partner’s company computer dials the VAN’s computer and extracts any pending EDI transactions. Translation software then transforms the EDI transaction into the specific format used internally by the trading partner. Increasingly, smaller companies are turning to the Internet for EDI transmissions. Web-based EDI uses the Hypertext Markup Language (HTML) as a document format standard and maintains security during transaction transmission over the Web through the Secure Hypertext Transfer Protocol (SHTTP) or Secure Sockets Layer (SSL) protocol. As more vendors embrace the concept of e-commerce and offer inexpensive Web-based EDI software and VAN services, Web-based EDI has become a less costly and more attractive alternative to traditional EDI for even the smallest companies.