Implementing Electronic Data Interchange

Implementing Electronic Data Interchange Electronic data interchange (EDI) is the direct electronic transmission, computer to computer, of standard business forms, such as purchase orders, advanced shipping notices, invoices, and the like, between two organizations.(1) In the purchasing environment, the electronic communication takes place between a buying and a selling firm. Purchasing documents are transmitted "over the wire," eliminating the need to generate hard copies and distribute them manually. The growing popularity of EDI is due largely to four factors: (1) the emergence of a broadly accepted standard, ANSI X12; (2) the development of relatively inexpensive computer hardware; (3) the growing proliferation of EDI software; and (4) an increasingly competitive purchasing and manufacturing environment.(2) By utilizing EDI in purchasing, for all practical purposes, a buyer and a supplier work together in a `real-time' environment that has the potential to reduce costly incoming material delays by shortening procurement lead times. Communication becomes more timely and more efficient. This allows the buyer and the supplier both to become more market reactive, thereby strengthening their competitive position. Automation of purchasing activities through the use of EDI reduces the total cost of purchases, and thereby positively impacts corporate profitability. EDI creates a paperless purchasing environment, reduces administrative and clerical needs, reduces inventory levels, improves data accuracy, and generally increases purchasing productivity. All the previously mentioned benefits have been demonstrated in practice as proven advantages of EDI operation.(3) What cannot be ignored, however, is the profound impact EDI has on a manufacturing operating system. In addition to its use in purchasing, the EDI technology can be transferred and adapted for use by a variety of operating units within an organization. The EDI logic supports just-in-time manufacturing concepts, automatic identification systems (bar coding), statistical process control and other efforts designed to more fully integrate the materials management and manufacturing systems.(4) The ripple effect initiated by EDI implementation likely will be felt throughout a firm for many years. This article is the second in a two part series that presents the results of a major research project which was funded by the Computer Information Systems and Technology Group of the National Association of Purchasing Management and Michigan State University. The project focused on the implementation of electronic data interchange in a purchasing environment. Twenty-five firms and a group of third-party network providers participated in the development of the material concerning the implementation of EDI. The firms were chosen based on their level of experience in the utilization of EDI. The participating firms were all leaders in EDI applications and represented a wide range of industries. A summary profile of the 25 participating firms and an interview topic summary were presented in the previous article.(5) Input for the research was also obtained from the Automotive Industry Action Group (AIAG), the Transportation Distribution Coordination Committee (TDCC), and five Third Party Value-Added Networks. This article presents a framework, based on the empirical research findings, that can help managers find patterns and trends in the EDI system design and installation process. This information, in turn, can be used to develop a useful model for EDI implementation within their own firms. THE EDI IMPLEMENTATION MODEL The implementation of EDI, like any other planned innovation, is a change process. Personnel with implementation responsibility should be aware of two major considerations that can influence the success of their efforts. First, EDI implementation will affect a number of organizational sub-systems, and second, there are principles established through an examination of numerous EDI implementations that are useful in guiding this organizational change. …