E - COMMERCE - VALUE ADDED NETWORKS

INTRODUCTION

Electronic Data Interchange (EDI) Value-Added Networks, more commonly known as

VANs, date back to the 1980s and those now almost unimaginable years before the Internet.
Originally consisting of secure phone lines used to transfer important or confidential data,
VANs have since evolved to incorporate Internet functionality, but continue to provide similar
services, including data transfer, storage, encryption and format conversion. Depending on
the nature of your e-commerce business, a VAN may be a good choice for you.

Advantages: Safety and Reliability

As a system specifically designed for secure data transfer, the information architecture
behind most VANs, including everything from encryption methods to safe data transfer
protocols, tends to be far more sophisticated than your average firewall or network security
set-up. Naturally, such a level of security is probably unnecessary for most data, but may be a
critical advantage for an e-commerce business that handles confidential data like credit card
information, bank account details or proprietary design information for manufacturers. VANs
also tend to be more reliable than secure e-mail servers or other systems that experience
periodic outages.

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DEFINITION of 'Value-Added Network (VAN)'

A private network provider hired by a company to facilitate electronic data

interchange (EDI) and/or provide other network services such as message encryption, secure
email and management reporting. A Value-Added Network (VAN) simplifies the
communications process by reducing the number of parties with which a company needs to
communicate. The VAN accomplishes this by acting as an intermediary between business
partners that share standards based or proprietary data. VANs may be operated by large
companies for efficient supply chain management with their suppliers, or by industry
consortiums or telcos.

BREAKING DOWN 'Value-Added Network (VAN)'

VANs usually operate in a mailbox setting, wherein a company sends a transaction to

a VAN and the VAN places it in the receiver's mailbox. The receiver contacts the VAN and
picks up the transaction, and then sends a transaction of its own. The system is similar to
email, except that it is used for standardized structured data rather than unstructured text. The
ubiquity of the internet has lessened the attraction of VANs, largely due to cost
considerations, since it is much more cost-effective to move data over the internet than to pay
the minimum monthly fees and per-character charges included in typical VAN contracts.
VANs have countered the challenge from the internet by focusing on specific industry
verticals such as healthcare, retail and manufacturing, and by expanding the range of services
they offer customers.

A transfer of information from one computer to another electronically. In business this

typically refers to a Electronic Data Interchange (EDI), which is a system used to
communicate business and financial transactions between parties. EDI usually takes the form
of direct transactions between computers, databases and order systems.

BREAKING DOWN 'Interchange'

The development of the internet gave EDI a real shot in the arm. Nevertheless, many
EDI transactions use XML format instead of traditional EDI data formats such as X12 or
EDIFACT. These transaction are sent via web using standard http protocol. Interchange can
also refer to a web application server for e-commerce which is used to build customized e-
commerce solutions.

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Value-Added and Non-Value-Added Activities in Managerial Accounting

A value-added network, or VAN, involves the use of a common carriers phone lines
to allow business-to-business network communication; the network is value-added because
it has various services and enhancements that improve the way business applications
communicate with each other. The use of a VAN provides communication channels among
supply chain and trading partners by allowing the transmission of data and its translation
between formats. The automated communications achieved through a VAN can help a
business and its trading partners engage in more effective e-commerce transactions through
the encryption, retransmission, and support of messages, but from a small businesss cost
perspective, the implementation of a VAN can also be expensive and a resource-intensive
endeavor.

Faster Transaction Processing

In comparison to manual transaction processing, a VAN can improve the speed at

which transactions are completed. By transmitting data electronically, information moves
instantly from point A to point B, providing faster access to operating information. Though a
VAN transports messages similar to a cable Internet connection, its value comes in the form
of audit information added to messages. Data may be modified as it passes through an error
detection and correction process, and during conversion between communication protocols,
such as TCP and FTP. Unlike a slower and paper-intensive manual system, a VANs efficient
way of handling transactions and communications can improve your bottom line results. The
benefits related to the use of a VAN benefit all the parties involved, which can lead to
stronger business relationships.

Better Communications

Compared to a manual processing system, a VAN reduces the costs associated with
business communications. It decreases the need for paper transfers, and allows tasks such as
ordering inventory and processing payments to be completed more efficiently through
electronic means. Todays VAN provides a host of Web services, such as network
performance monitoring and directory management. It also supports Web technology
standards, such as XML. VANs have evolved to accommodate the latest e-commerce
applications, but their basic principle of providing dependable and secure communications
across a network endures.

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Cost of Implementation

Like many technology upgrades or implementations, the addition of a VAN may not
be cost effective for many small to medium-sized businesses. Its important that
knowledgeable personnel are involved in the conversion to a VAN, and these individuals
should also provide training to your staff on the applications the network will support.
Another option is to obtain VAN services from a third party that specializes in these types of
IT solutions. All of these considerations can carry a prohibitive price tag that may be out of
reach for certain businesses.

Ongoing Network Support

A VAN, like most computer technologies, requires ongoing technical support and
maintenance. Your business may need to hire experienced staff to manage an in-house
network, or may need to utilize the services of an independent support provider for an
outsourced network solution. Ongoing maintenance increases the cost of using the network
and adds complexities to your operations that need to be managed appropriately. Ultimately,
your company will only benefit if the advantages derived from a VAN outweigh its
disadvantages.

Advantages: New Internet-Age Features

As VANs have entered the Internet age and struggled to keep up with online security
solutions like XML coding, VAN providers have introduced a number of new services that
can be very useful for e-commerce businesses. Transaction Delivery Networks (TDNs), for
example, are a new variety of Internet-based VAN that guarantees secure data transactions
from one point to another, with added features like enhanced encryption, guaranteed server
availability and delivery success notifications. Many modern VANs can also be programmed
to automatically generate certain types of data transfers, like factory orders or customer
notifications.

Disadvantages: Cost and Installation

The added features available on a VAN are not free. In fact, many of the most
sophisticated VANs can be quite expensive, charging subscription costs or data-transfer rates.
Setting up a VAN in your e-commerce business can also be rather complex and costly, often
requiring new equipment or employee training as data management processes change.

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CONCLUSION

Given the added cost of contracting the service, VAN systems are most often found in
larger corporations and e-commerce sites. A small business with a VAN, therefore, may be
able to streamline communication and transactions with the bigger players in the field, a
considerable advantage in some sectors, such as e-commerce resellers. Having a VAN,
however, can also make communication more complicated with small players that rely on
simpler data-transfer methods. Small businesses are often forced to keep their old systems
running after contracting a VAN in order to communicate with some of their smaller partners
and affiliates.

REFERENCES

http://smallbusiness.chron.com/advantages-disadvantages-using-valueadded-network-
electronic-commerce-communication-47221.html
http://searchnetworking.techtarget.com/definition/value-added-network
https://www.techwalla.com/articles/advantages-disadvantages-of-using-a-value-
added-network-for-electronic-commerce-communication
https://boldvan.com/blog/the-advantages-of-using-an-edi-value-added-network-van/
http://blog.meetopal.com/post/2015/05/20/what-is-a-value-added