Electronic Data Interchange is product of the two most rapidly advancing technologies in modern times, namely computing and telecommunications. EDI may be most easily understood as the replacement of paper-based purchase orders with electronic equivalents. Why does a company choose EDI? EDI enhances the company?s capability to reduce the administrative costs of doing business. Electronically transmitting documents in a standard format is a way to increase speed, accuracy, integrity, dependability, and timeliness of data. EDI has various benefits such as it:

Eliminates manual preparation and transfer of paper documents

Reduces paper costs, storage requirements and handling overhead

Increases data accuracy

Improves quality of products, services and customer services

Improves relationship with suppliers and customers

Reduces order lead times and operating costs

Improve data security and product delivery

Creates better procedures

Although there are various benefits which EDI compells to companies, there are some drawbacks of EDI as well. Understanding business
objectives and setting realistic expectations are very important to reduce any drawbacks. It is very easy for people unfamiliar with EDI to think of
it as a magic technology which can simply be installed and forgotten about. The reality is much different. Knowing customers will also be helpful in
order to benefit. EDI also cannot funciton without standards.

The technologies potential impact will depend on how fully integrated EDI is in your system. The more EDI is used within a system, the more
benefits you will see. However, if EDI is only partly used then it may not be worth implementing in your organization.

Companies have become more competitive by offering a higher quality product at a better price. They?ve done it by implementing electronic data
interchange as the way to conduct business.
 
 
 
 

Emerging Technology

The basic definition of Electronic Data Interchange (EDI) is the business to business, computer to computer exchange of information in a
standard format without human intervention. EDI allows a cable network to transmit documents so that it eliminates the need for paper
documents, which can get lost. In addition, it enables companies to forge closer and more effective links with their trading partners. The most
common example of EDI usage is a customer sending orders to its suppliers.

EDI requires a large number of choices. What are the business objectives? What tools should be used? How large is the scope? It is important to
restate that EDI is only an enabling tool. If that tool is implemented without carefully defining objectives, it will not live up to expectations. It also
can slow down the speed, lower accuracy, complicate a business and frustrate its users. The main goal of EDI is to provide operational efficientcy
and cost savings by replacing expensive manual and paper intensive processes with electronic transfer of information with intelligent computer
systems.

The general requirements for EDI are reviewed by each step. The first step in any sequence of EDI is the collection and organization of data
without printing out purchase orders which the system builds an electronic file of purchase orders. The next step is to translate this electronic file
into a standard format. The third step is the Value Added Network (VAN) will process each file, routing it to the appropriate electronic mailbox
for each manufacturer. The manufacturer retrieves the files from their electronic mailboxes at their convenience, and translating the file from the
standard format into the specific format required by its application software. Finally, each manufacturer will process the order received in their
internal application systems.

Since EDI is becoming popular for conducting business in many areas, more and more businesses are integrating EDI into their system. Although
integrating EDI into an existing computing and communications environment is not complicated, there are a number of issues that should be
considered before attempting to integrate EDI. Among these are the computing environment, the communication environment, the data
management environment and the organization's security requirements.

Many companies are using EDI to survive in the market competitions. Companies such as General Mills, Dannon Yogurt, Super Value
Supermarkets, and Sainsbury Supermarkets have used EDI to propel themselves into the electronic market of the future.

Many companies are making EDI a condition of doing business. Several advantages could be realized by supporting customer, eliminating non
value added data entry, verifying receipt of documents, reducing lead times, inventory levels, and increasing sales by exchanging documents
electronically. It eliminates manual preparation and transfer of paper documents which would reduce paper costs, storage requirements and
handling overhead. Saving unnecessary re-capture of data leads to faster transfer of data, far fewer errors, less time wasted on
exception-handling, and hence a more stream-lined business process. Benefits can be achieved in such areas as inventory management,
transport and distribution, administration and cash management. EDI can be used to automate existing processes. The opportunity can be taken to
rationalize procedures, and thereby reduce costs, and improve the speed and quality of services. The ability to support a prospective customer an
EDI project can be used to secure new business.

To implement EDI in a business, the various types of tools are required. There is a comprehensive set of public standards that define the
syntactical requirements for a wide variety of EDI transaction types, so that virtually any business need can be addressed within the guidelines of
an internationally accepted set of standards. Before the existence of national and international standards, companies wishing to exchange
information were left pretty much to themselves to determine mutually acceptable formats for the interchange of data. While this did provide some
of standards, real problems arose when equally stubborn partners with proprietary standards collided with each other. An inevitable consequence
was increased cost for EDI implementation.

EDI cannot be undertaken without software, or a service that will provide for the use of the software. For EDI users, there is a broad range of
options available, whether for low-cost first-time implementation or for the in the integration of EDI into a comprehensive portfolio of existing
software.

Design and development of computer software is an expensive and time-consuming process. The annual cost of software licensing for
third-party software will be substantially less than the cost of developing and maintaining packages internally. Implementing EDI in a business
need not be difficult, and the benefits can be substantial. It is important from the outset to understand that EDI is a tool. As a company's
management team begins to plan its EDI strategy a careful assessment of the problems the company wishes to address is critical. Without a
strategic analysis it is very easy to solve the wrong problem. If some company, for example, successfully implements a project that reduces retail
order processing time from days to hours, but has failed to understand that reducing delivery time from weeks to days is the real problem. Seeking
objectives of mutual benefit is very important since EDI is first an enterprise requiring partnership.

For initial EDI projects, limited objectives with perceivable benefits should be sought out. Much of the work of planning an implementation can be
eased if objectives have been carefully defined. A more realistic initial project would be to automate customer order processes, along with
providing order confirmations and delivery notifications. An even more realistic objective would be to implement a project that can be undertaken
as a pilot project and will be easier to implement with minimal impact. The success of the pilot will surely be an asset in selling expansion of the
project to company-wide application.

An important aspect of implementation planning is involving all concerned parties at all steps of the project. Good communication is essential, so
that newly installed EDI capabilities will change the way business is done, not disrupt it. One of the most valuable ways of providing good
communication and project management is to define an EDI coordinator's position. This position should be filled by an individual with strong
knowledge of both the business requirements being addressed, and the technical requirements of EDI. A critical step in implementation planning
is the testing process. Users must be comfortable that the process actually works reliably before they are actually committed to depending on
their new EDI function. It must be proven beyond doubt by carefully constructed testing and validation procedures. Since data is being transferred
to another trading partner, it will be necessary to assure both internal and external users that correct information is being traded.

In any project, it is necessary to know what the true cost of implementation will be, and it is no different with EDI implementations. There are
various kinds of costs need to be considered before implementation planning. Another requirement of implementation can be found in training.
Most companies understand that training is an integral part implementing any new process or procedure in their business. EDI is no exception.
Training will be required in the user community because job functions will change. General understanding of EDI, technical hardware and
software training, and user training for certification in new procedures are essential in training.
 
 

Technology Potential Impact

EDI's direct impact is to reduce the amount of data capture and transcription. This generally results in a decreased incidence of errors, less time
spent on exception handling, and fewer data-caused delays in the business process. Benefits can be attained in such areas as inventory
management, transport and distribution, administration and cash management.

Strategic implications of EDI may be realized in any of three ways: A defense, threat, or a facilitator. Using EDI as a defense would be to raise the
barriers of entry so that the existing players are protected. This involves having a close group of users who have rules that prevent unwanted
entrants from coming in. This kind of cartel will need to deal with anti-monopoly agencies and attempts by competitors to disband it.

Using EDI as a threat to attack competitors within the industry may be done in two ways. The first will work best for large dominant organizations
that establish an EDI scheme and require that its business partners use this system. The second approach is when an alliance is formed between
a number of corporations generally along the industrial value-chain so that its members have a competitive advantage over the competitors.

When a facilitative approach is used it is very different from the aggressive approach. Companies agree to tacitly agree to suspend competition in
specific areas and have negotiations with other companies in the industry. The competition does not disappear but if properly implemented the
benefits should disproportionately fall on the agreed members.

According to Steven Bell, U.S. business-to-business Internet commerce will grow $1.3 trillion by 2003 or more than 9% of all U.S. business trade
(December, 1998, "FORRESTER"). Rather than replacing old EDI with new Web-based solutions, most EDI-enabled businesses will move EDI
to Internet-based extranets. This shift of entrenched EDI to the Internet will impact businesses plans to migrate trade to Internet commerce, but
whether EDI actually accelerates or impedes the move will depend on how EDI is used within the industry.
 
 
 
 

 Annotated Bibiliography
 

1. No Author. (1998). Introduction to EDI. [Online]. Available:
http://www.support.geis.com/edi/edipindx.html [April 8th, 1999]

This site explains a little bit about general EDI definition. It focuses on intensive introduction to EDI such as how it works, traditional
implementation, traditional benefits and the downside of traditional EDI as well. This site explains traditional benefits of EDI in terms of speed,
accuracy and economy. The downside of traditional EDI has been explained in terms of expense, networking complexity and other alternatives.

2. Bryan Ducharme, vice president, The Kodiak Group, Inc. (May 1998).
EDI-Enabling Your Customers. [Online]. Available:
http://www.kodiakgroup.com/other/bryandoc.html [April 8th, 1999]

This site tells about importance of EDI and its successful strategies as a productivity tool. Customer EDI enabling strategies are listed since it
needs to be carefully planned and executed in order to be of real value to both parties. The author talks about ten different strategies such as know
your customers, setting realistic expectations, sales strategy and incentives, education, technical support, EDI kits, Internet EDI options, Internet
as an EDI VAN, EDI-based homepage, and EDI outsourcing providers. It gives a summary of the article at the end.

3. No Author. (1998). EDI-Does it really pay?. [Online]. Available:
http://www.autoidnews.com/technologies/concepts/edi.txt [April 9th, 1999]

This site mainly talks about benefits of EDI. Some of the benefits are discussed; it eliminates manual preparation and paper documents, increases
data accuracy, reduces storage requirements, improves quality and data security, and etc. It is important for providers to understand benefits of
EDI while they are implementing a system. Contribution of EDI are also listed, for example, EDI contributed 99% reduction in paper and
accuracy.

4. Roger Clarke, Principal, Xamax Consultancy Pty Ltd. (Dec. 1998).
Electronic Data Interchange (EDI): An Introduction. [Online]. Available:
http://www.anu.edu.au/people/Roger.Clarke/EC/EDIIntro.html [April 9th, 1999]

This site talks about general information of EDI such as definition, architecture, benefits and history. It also talks about the essential elements of
EDI which supports structured business messages and transmits them electronically between computer applications rather than between people.

5. Johnson Technologies. (1999). EDI Implementation. [Online]. Available:
http://www.johnsontech.com/ediimp.htm [April 8th, 1999]

This is EDI page of Johnson Tech which tells about adaptation of EDI and success stories of EDI. This company site interviewed a couple of
different companies who are benefited from practicing EDI. William Dunne, BC Liquor Distribution, Future Electronics and General Mills are
main companies that this site mentioned for their success stories of EDI.

6. State Farm. (1999). EDI. [Online]. Available:
http://www4.statefarm.com/edi/index.htm [April 7th, 1999]

It tells the reason(s) why some of companies would choose EDI. It also provides its implementation guides which are technical documents
defining the implementation process. Implementation guides define how the EDI standards are used.

7.  Steven Bell. (December, 1999). EDI IMPACT ON BUSINESS INTERNET
COMMERCE. [Online]. Available: http://www.e-comtools.com/forrester_edi.htm
[April 8th, 1999]

     This site talks about EDI impacts on business Internet Commerce. It gives statistical data to show how much EDI improved business
     activities.

8.  No Author.  (September 1999). EDI. [Online].  Available:
http://www.whatis.com/edi.htm [April 8th, 1999]

This site mainly talks about definition of EDI. It also defines data elements, a data segment, and trading partners to support the term EDI.