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

    A transfer of information from one computer to another electronically. ...
  2. Bourse

    A bourse is a market organized for the purpose of buying and ...
  3. Value-Added Reseller

    A value-added reseller is a firm that enhances the value of third ...
  4. Value Network Analysis

    Value network analysis is the assessment of the members and resources ...
  5. Distribution Network

    A distribution network is a company's interconnected group of ...
  6. Network Effect

    The network effect is a phenomenon whereby a good or service ...
Related Articles
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Investing

    Analyst: Micron to Deliver Q1 Earnings Beat

    Betsy Can Hees of Loop Capital sees continuing benefits from strength in NAND and DRAM market.
  6. Investing

    RSX: Market Vectors Russia ETF

    Learn about Market Vectors Russia ETF, its top holdings, as well as cyclical and political risks associated with investing in the Russian market.
  7. Personal Finance

    A Day In The Life Of An Actuary

    We take a look at the typical workday of three actuaries who work for different types of companies and who are at different stages in their careers.
  8. Investing

    4 Networking Stocks that You Must Own (AKAM, CSCO)

    Understand how networking stocks fit into the technology sector. Learn about four leading networking companies that investors should own in 2015.
  9. Investing

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

    The market leader indicates 'solid results' in Q4 while navigating an 'inconsistent' marketplace.
RELATED FAQS
  1. How do Internet companies profit if they give away their services for free?

    Learn how companies in the Internet sector make a profit when service, content and user applications are offered at no cost ... Read Answer >>
  2. Why is the price to sales ratio commonly used for comparing companies in the Internet ...

    Find out why Internet stocks are valued, traded and compared to each other based on the price to sales ratio versus other ... Read Answer >>
Hot Definitions
  1. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  2. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  3. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  4. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
  5. Price Elasticity of Demand

    Price elasticity of demand is a measure of the change in the quantity demanded or purchased of a product in relation to its ...
  6. Sharpe Ratio

    The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.
Trading Center