DEFINITION of 'Value-Added Network (VAN)'

A value-added network (VAN) is a private, hosted service that provides companies with a secure way to send and share data with its counterparties. Value-added networks were a common way to to facilitate electronic data interchange (EDI) between companies. As the internet created competition for this service with the advent of secure email, VANs responded by expanding their service offerings to include things like message encryption, secure email and management reporting. A value-added network 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 are set up with audit capabilities so that the data being exchanged is formatted correctly and validated before it is transferred to the next party. VANs are sometimes referred to as added-value networks or turnkey communications line. 

BREAKING DOWN 'Value-Added Network (VAN)'

Value-added networks are generally used by large companies for efficient supply chain management with their suppliers, or by industry consortiums or telecommunications companies. 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.

VANs in the Internet Era

The ubiquity of the internet has lessened the attraction of VANs, largely due to cost considerations. Simply put, it is often 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. These industries have unique data integrity and security concerns that make VANs a true value added solution. The data being exchanged through the VAN can be formatted to go directly into the software application of the receiving organization, an enterprise resource planning (ERP) suite for example. This direct exchange between two companies increases the speed of commerce while also reducing the chances of human errors that occur with manual data entry. VANs can also provide visibility tools which shows the delivery status of data and some corresponding workflows, allowing companies to better coordinate dependent activities through the system rather than exchanging phone calls and emails. Like many pre-internet technologies, VANs have had to reinvent themselves to remain relevant going forward. 

RELATED TERMS
  1. Interchange

    An interchange is the transfer of information between computers. ...
  2. Vancouver Stock Exchange (VAN) ...

    Vancouver Stock Exchange (VAN) .V is a defunct stock exchange ...
  3. Value Network Analysis

    Value network analysis is the assessment of the members and resources ...
  4. Big Data

    Big data refers to the growth in the volume of structured and ...
  5. Economic Network

    An economic network is a combination of individuals, groups or ...
  6. Network Effect

    The network effect is a phenomenon whereby a good or service ...
Related Articles
  1. Retirement

    The Most Popular States to Retire to in the U.S.

    Which are the most popular states to retire to in the U.S.? United Van Lines’ 40th Annual Movers Study has the answers.
  2. Trading

    "If you repeat the same mistakes... that's called self-sabotage"

    Investopedia spoke with Van Tharp, PhD about the role of psychology in trading and investing, and how he helps clients avoid common financial mistakes.
  3. Investing

    Analyst: Micron to Secure Strong Returns in 2017

    Loop Capital's Betsy Van Hees sees the U.S. chipmaker continuing to benefit from rising prices.
  4. Investing

    Alibaba's Cainiao Invests Billions in AI Vans

    Cainiao, Alibaba's logistics arm, will embed AI in delivery vans as part of $7.3 billion effort.
  5. Investing

    OIH: Market Vectors Oil Services ETF

    Take a deeper look at the Market Vectors Oil Services exchange-traded fund, a Van Eck product that tracks the performance of oil services companies.
  6. Investing

    Shell To Exit Up To 10 Countries

    Shell to continue cost cutting measures
  7. Insurance

    How Are Home Insurance Rates Determined?

    You home's value is one of the driving forces behind your home insurance premium and the amount of coverage you receive.
  8. Investing

    VF Corp. Posts In-Line Q4 Earnings, Revenue Miss

    The market leader indicates 'solid results' in Q4 while navigating an 'inconsistent' marketplace.
  9. Investing

    Facebook Signs Content Deals With Vox, Buzzfeed

    Facebook is gearing up to pay as much as $250,000 for original content and has inked deals with a handful of millennial-focused producers.
  10. Investing

    Southwest Airlines Board Sticking With Kelly For Good Reason (LUV)

    Despite calls from its unions to oust CEO Gary Kelly, the board is sticking with their leader who has been able to deliver three years of record profits.
RELATED FAQS
  1. What Was the First Mutual Fund?

    Many trace the creation of the first mutual fund back to Dutch merchant Adriaan Van Ketwich. Read Answer >>
  2. How does government regulation impact the internet sector?

    Learn about the debate on how government regulation could affect the Internet sector and where Americans stand on Internet ... Read Answer >>
  3. What is the telecommunications sector?

    The telecommunications sector is comprised of companies that transmit data in words, voice, audio or video across the globe. Read Answer >>
  4. What is the average price-to-earnings ratio in the Internet sector?

    Learn what the average price-to-earnings ratio, or P/E ratio, is for companies in the Internet sector and how the sector ... Read Answer >>
  5. How does government regulation impact the telecommunications sector?

    Read about the many ways the U.S. government regulates the telecommunications industry, including radios, telephones, TV ... Read Answer >>
  6. How Do Real Estate Agents Get Listings?

    Learn about how real estate agents get listings in top real estate markets, as well as in smaller areas, through utilizing ... Read Answer >>
Trading Center