May 2023
Value-Added Network (VAN)
(Last Updated On: February 6, 2024)

What is a Value-Added Network (VAN)?

A Value-Added Network (VAN) is a third-party service provider that enables companies to exchange business-to-business (B2B) electronic transactions (EDI), such as purchase orders and invoices, with their trading partners.

In simple terms, a VAN acts as a middleman between businesses and ensures that the data exchanged between the parties, is transmitted securely and accurately.

In addition to basic transmission services, VANs may also offer value-added services, such as translation between different data formats, data mapping, and data validation. Moreover, VANs often provide security features, such as encryption and digital signatures, to ensure the confidentiality and integrity of the data being transmitted.

VANs are particularly useful for businesses that have numerous trading partners and need to exchange a large volume of electronic documents. By using a VAN, businesses can reduce the complexity of managing multiple connections to their trading partners, as well as reduce the costs associated with setting up and maintaining their own EDI infrastructure.

Dive into the world of EDI (Electronic Data Interchange) with our insightful video explanation.

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The History of VAN

VANs have been around since the early 1970s, when they were first used to connect large corporations with their suppliers and customers. These early VANs were typically owned and operated by telecommunication companies, such as AT&T and MCI.

Over time, the industry evolved to include third-party VAN providers, which offered a wider range of value-added services to businesses. Today, VANs are an essential part of the global supply chain, facilitating the exchange of electronic documents between companies in different industries and countries.

How VANs Work

VANs allow companies to exchange EDI documents and other data electronically.

Here’s a simplified step-by-step breakdown of how a business partner exchanges EDI via a VAN:

Let’s look at a simple example: Two business partners – partner A and partner B – want to exchange EDI messages via a value-added network (VAN).

Partner A needs to purchase something from Partner B, so he will send a Purchase Order (PO) to Partner B and Partner B will send back an Invoice.

Partner A has an ISA Qualifier/ID: 12/123456789 and owns a mailbox at VAN Provider “X”, which is their chosen VAN. Within their mailbox, there can be two sub-folders: “in” and “out”.

Partner B has an ISA Qualifier/ID of 12/987654321 and they own a mailbox at VAN Provider “Y”. Within their mailbox, there are also two sub-folders: “in” and “out”.

– When partner A needs to place an order, he creates an electronic document in X12 format (such as purchase order P/O – EDI 850) that needs to be sent to Partner B.

Partner A connects to the VAN using a secure login, and uploads the EDI X12 document into their own mailbox at VAN Provider “X”, in the “out” sub-folder. The PO message will contain the ISA segment, which looks like the following:

ISA*00*          *00*          *12*123456789   *12*987654321     *170526*1121*|*00403*100000000*0*P*>~

– The VAN “X” processes the document, checking it for errors and ensuring that it meets the agreed-upon data formatting standards.

– The VAN reads the EDI message envelop (ISA segment above), and finds to whom it is destined to (in this example to *12*987654321). They have a conversion table where they will lookup this address, to find out it is at VAN “Y”. They will connect to VAN “Y” either via a direct connection or through a partner VAN network, then connect to Partner B’s mailbox at the address specified and drop the message in the “in” sub-folder.

Partner B can then connect to their own mailbox, navigate to the “in” sub-folder, and pick up the P/O to process it.

The same process works in the opposite direction for an incoming message. In this scenario, the envelop looks like:

ISA*00*          *00*          12*987654321    **12*123456789   *170526*1121*|*00403*100000000*0*P*>~

It’s important to note that regardless of how many clients each business Partner has or whether they use different VANs, each partner only needs to connect to their own mailbox to pick up or deliver any EDI message.

The VAN will handle the delivery to the destination mailbox. Interconnectivity between VANs is standard practice, so partners generally do not need to have mailboxes on multiple VANs. Partners should inquire with their VAN to determine if there are any VANs they cannot connect to, but this is a rare occurrence.

The VAN that a partner joins will connect to other VANs where their suppliers are located to deliver/pick up messages.

Throughout this process, the VAN may provide additional services such as message tracking, error handling, and notification of message delivery. These additional services help to ensure that messages are transmitted securely and accurately, and that any issues are resolved quickly.

What Are the Types of Value-Added Networks (VANs)?

Value-Added Networks (VANs) come in different types, with the most common being one-to-one, many-to-many, and one-to-many. Businesses choose the type of VAN that integrates best with their trading partners, data requirements, transaction volumes, and industry.

A one-to-one VAN (Value-Added Network)

A one-to-one VAN (Value-Added Network) is a type of electronic data interchange (EDI) network where two trading partners or businesses use a single VAN to exchange EDI messages and documents directly with each other.

In a one-to-one VAN, the VAN acts as a facilitator, providing a secure and reliable platform for businesses to transmit their EDI transactions without the need for establishing and maintaining multiple individual connections. This simplifies the EDI process, reducing the complexity and cost associated with managing multiple connections and data transfer protocols.

One-to-one VANs are often used by companies with high transaction volumes and a need for frequent and rapid exchange of information, such as those in the retail, healthcare, and manufacturing industries. By using a one-to-one VAN, these companies can streamline their supply chain operations, improve efficiency, and reduce errors and delays in the order fulfillment process

Many-to-Many VAN (Value-Added Network)

A many-to-many VAN (Value-Added Network) is a type of electronic data interchange (EDI) network where multiple trading partners or businesses can exchange EDI messages and documents with each other through a shared VAN.

In a many-to-many VAN, the VAN acts as a central hub or intermediary, allowing businesses to connect with each other and exchange EDI transactions in a secure and standardized way.

Many-to-many VANs are particularly useful for businesses with complex supply chains involving multiple trading partners, as they allow for seamless integration and communication between different systems and platforms. They are also widely used in industries such as healthcare, retail, and finance, where data privacy and security are critical considerations.

Overall, many-to-many VANs provide a scalable and flexible solution for businesses to manage their EDI transactions, enabling them to streamline their supply chain operations, reduce costs, and improve their overall efficiency and competitiveness.

One-to-Many VAN

A one-to-many VAN (Value-Added Network) is a type of electronic data interchange (EDI) network where a single business or trading partner uses a VAN to communicate with multiple other trading partners.

One-to-many VANs are particularly useful for businesses that need to communicate with multiple suppliers or customers, as they provide a standardized and secure platform for exchanging data and messages. They are also widely used in industries such as retail, manufacturing, and healthcare, where frequent and rapid communication with trading partners is critical to the supply chain.

One-to-many VANs provide a cost-effective and efficient solution for businesses to manage their EDI transactions, enabling them to streamline their supply chain operations, reduce errors and delays, and improve their overall competitiveness.

Which Companies Use the Value Added Network (VAN)?

Many companies across different industries still use Value Added Networks (VANs) to exchange business-to-business (B2B) electronic transactions (EDI X12/EDIFACT) with their trading partners. Here are some examples of companies that use VANs:

General Motors: The automobile manufacturer uses a VAN to exchange electronic transactions with its suppliers.

Kaiser Permanente: The healthcare provider uses a VAN to exchange electronic healthcare transactions with its partners.

Procter & Gamble: The consumer goods company uses a VAN to exchange electronic transactions with its suppliers.

FedEx: The logistics company uses a VAN to exchange electronic transactions with its partners.

These are just a few examples, but many other companies in various industries use VANs to exchange EDI with their trading partners.

Choosing a VAN Provider

When choosing a VAN provider, businesses should consider a variety of factors, including the provider’s experience, pricing, reliability, and range of value-added services. It’s also important to choose a provider that offers a high level of security for data exchange, including encryption and digital signatures. Businesses should also consider the provider’s ability to integrate with their existing systems and processes, as well as their customer support and training resources.

How EDI2XML Can Help

Understanding the importance of a Value Added Network (VAN) is crucial for businesses looking to streamline their EDI processes. Choosing the right VAN provider is essential to ensure that your EDI transactions are secure, reliable, and efficient.

As a trusted EDI supplier for over 20 years, we have the expertise and experience to help you navigate any EDI issues you may face. We are committed to providing the highest level of service to our clients and offer a free 1st consultation to help you get started.

Contact us today to learn more about how we can help your business succeed in the world of EDI.

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