EDI: What is it? 
 ____ ____ __ ___ 
 
     In today's business environment, intense competition is forcing  
     business to look at new ways of doing business. Leaders are  
     constantly looking for new methods that will allow their business  
     to do things faster, cheaper and better than before. 
 
 
     The problem with most approaches is that they often sacrifice one  
     objective in favor of another. It's one thing to cut costs in  
     your operation, but that often increases the time it takes to  
     service the customer. Also, depending on how cost reductions are  
     achieved, you end up providing an inferior product. 
 
 
     Electronic Data Interchange, or EDI, is a tool that will allow  
     you to achieve significant improvements in all three objectives.   
     EDI can speed up many business functions while cutting cost in a  
     number of areas.  By reducing unnecessary delays, you have more  
     time to produce a better product and can provide your customers  
     with improved service. 
 
 
     In today's competitive world, speed is weapon you can use against  
     the competition. By providing your product or service faster than  
     the competition you can not only win increased business, but  
     reduce sales loss due to price competition. 
 
 
     Before I describe what EDI is, I will first describe what it is  
     not.  EDI is not new and it is not dependent on any one  
     technology. While the buzz-word, EDI, may sound new, EDI has been  
     with us since the late 1960's. 
 
 
     While EDI has benefited enormously from advances in technology,  
     EDI is not technology dependent.  There are preferred ways to  
     implement EDI in your business, but there are many approaches to  
     choose from. The approach you choose should be driven from your   
     business case, not a particular implementation or technology. 
 
 
     So what is Electronic Data Interchange? EDI is paperless document  
     transfer between companies.  What's a document?  A document is  
     any form  of communication, usually paper,  sent between two  
     companies. Examples include: 
 
 
          Purchase Orders 
 
 
          Invoices 
 
 
          Shipping notices 
 
 
          Export/Import information  
 
 
          Carrier-to-carrier waybills 
 
 
          Funds Transfers 
 
 
          Design specifications 
 
 
          Health Insurance Claims 
 
 
     EDI is a data processing concept independent of communication  
     protocols or transmission media.  EDI is a logical outgrowth of  
     the standard computerization going on within businesses for the  
     last several decades. The type of electronic communication  
     between departments within a business is now being extended to  
     reach out to other business, or trading partners. 
 
 
     EDI is computer-to-computer communication. Contrast this with the  
     other form of communications we've discussed in this book,  
     Electronic mail.  E-mail is person-to-person communications over  
     a computer.  A person creates a text message which is sent to  
     another person. While this form of communications is electronic,  
     it still requires people to interpret the message. 
 
 
     EDI replaces human-readable, paper or electronic based documents  
     with machine readable, electronically coded documents. With EDI,  
     the sending computer creates  the message and receiving computer  
     interprets the message without human involvement. 
 
 
     Let's take a standard business transaction, a purchase order and  
     explore how and where EDI fits into the picture. Without EDI the  
     process might look something like this: 
 
 
          The Customer determines a need to purchase an item and  
          creates a purchase order document. Often these documents are  
          produced by a computer. 
 
 
          The PO is sent to the supplier via either the Post Office,  
          Express mail, Electronic Mail or FAX. 
 
 
          In either case, it takes a person at the supplier to receive  
          and interpret that purchase order. 
 
 
          The PO is then transcribed into the supplier's computerized  
          order system. 
 
 
     An EDI implementation simplifies the process to: 
 
 
          The customer's computer system  creates and sends the  
          electronic PO. 
 
 
 
          The supplier's computer receives the PO and places the order  
          directly into it's system. 
 
 
     What is clear by the example is the time saved by eliminating the  
     post office and the people cost saved by removing the people in  
     the process.  What is perhaps a subtle  area of  savings is the  
     cost due to errors.  How much would it cost if the order entry  
     clerk added an additional zero to the quantity field? 
 
 
     I'll discuss more benefits in detail later.  First, let's look at  
     the history of EDI. 
 
 
History 
 _______ 
 
     Since the 1960s, many companies developed in-house computer  
     systems  and internal networks to streamline business functions.  
     A typical example is the order processing system which can  
     process customer's orders with greater speed.  Still, the speed  
     in which a business could respond was determine by the  
     communication link between the company and it's customers.  That  
     communication link consist of the postal service and the  
     telephone and remains a slow and costly process even today. 
 
 
     Some  business executives were working on methods to shortcut the  
     conventional  communication link. Electronic communications was a  
     prime consideration in circumventing the paperwork/telephone  
     problems. It soon because clear that linking up to other business  
     electronically had one major initial problem, information format. 
 
 
     Very few companies use the same paper document format.  One  
     company's Purchase Order form looks different from another.  The  
     same holds true with computer systems.  Information stored in one  
     companies computer system may be in a different format than that  
     required by others. 
 
 
     People can deal with format problems with relative ease.  When an  
     order processing clerk receives an purchase order form in an  
     unfamiliar format, it's not a difficult task to analyze the new  
     form and interpret the required information.   Computers do not  
     have that ability  and require information in a specific format  
     and in an exact order. You do not want your system to interpret   
     your trading partners purchase order number  as the quantity  
     ordered. That could easily happen if the two companies do not  
     agree on a format and sequence of information they exchange with  
     one another. 
 
 
     A supplier serving one customer can follow that customer's  
     formats and rules for EDI.  The problem arises when one supplier  
     has to deal with different rules from different customers.  
     Systems can be developed to interpret an electronic transaction  
     from Company A different from Company B.  This approach, however,  
     is extremely costly to develop and maintain and it  doesn't solve  
     the problem when Company C comes along and wants to do business  
     electronically.  A better approach would be to support standards  
     that all customers and suppliers could adopt.   
 
 
     EDI standards are a set of formats and protocols, much like a  
     language, that trading partners agree to communicate with to each  
     other.  A good analogy can be found in the airline industry.  All  
     over the world there are airlines and airports in different   
     countries.  Pilots and crew may converse in their native tongue,  
     but English is required for all aircraft to control tower  
     communications.  Could you imagine the confusion if there was not  
     standard language? 
 
 
     The Transportation Data Coordinating Committee 
      ___ ______________ ____ ____________ _________ 
 
          The Transportation Industry recognized the need for industry  
          standards early and formed the Transportation Data  
          Coordinating Committee in 1968.  The TDCC was formed as a  
          non-profit organization in Washington DC and organizes data  
          standards, formats codes and protocols for the  
          transportation industry.  The ground rules the TDCC began  
          it's standards development were: 
 
 
               The EDI interface must be insensitive to computer  
               equipment internal architecture. 
 
 
               The EDI interface should be responsive to end users  
               needs. 
 
 
               EDI should leave the choice of communication speeds and  
               services to the using parties to select. 
 
 
          Several hundred people worked in teams to develop these  
          standards.  These teams consisted of shippers, railroads,  
          motor carriers, forwarders, ocean carriers, air carriers and  
          banks. The end product was the publication of the TDCC  
          Electronic Data Interchange Standards.  These standards were  
          first used in the rail lines and later across motor  
          carriers.  TDCC estimates that 90% of all rail waybills were  
          electronically interchanged between railroads by 1985.   
          Today, the usage of  TDCC's EDI standards include: 
 
 
               Export/import information for international shipments 
 
 
               carrier-to-carrier waybill exchange 
 
 
 
               Reservation or pickup requests 
 
 
               Shipment information from shipper to carrier 
 
 
               Freight bill data, carrier to payer 
 
 
               Shipment tracing information 
 
 
               payment data, payer to bank, bank to bank, bank to  
               payee. 
 
 
     Private Company Standards 
      _______ _______ _________ 
 
          A few major companies, such as General Motors and Kmart,  
          charged into the EDI arena and developed their own  
          standards. GM's EDI involvement was an outgrowth of their  
          "Just-in-time" plant inventory approach.  With Just-in-time  
          inventory, each plant stocked only those parts required for  
          one days production. Because of the low inventory levels, GM  
          needed a fast reliable way to order parts so that they  
          arrived at their loading docks just-in-time for assembly.  
          This approach allowed  GM to save millions in inventory  
          costs. EDI was the enabling technology without which Just-in- 
          time inventory would not be possible. 
 
 
          We should note here that while GM saved millions, the  
          inventory cost didn't disappear. The burden of inventory was  
           shifted to the suppliers. Some of these suppliers were  
          large enough to absorb these costs, but many were not.  This  
          put many suppliers in tough situations as GM was requiring  
          EDI connections of suppliers  providing production material  
          to Just-in-time plants. 
 
 
          To complicate matter even more, Ford and Chrysler adopted  
          similar plans which led to confusion throughout the  
          Automotive Industry.  Also, several large suppliers, such as  
          Rockwell, wanted to use EDI with their own suppliers.  The  
          question was who's standard should they use? 
 
 
     Private Industry Standards 
      _______ ________ _________ 
 
          Relief came to the auto industry in the form of the  
          Automotive Industry Action Group, a trade association for  
          the industry.  The AIAG worked with the automakers and  
          suppliers to develop an EDI standard for the entire  
          industry. 
 
 
          Other industries have taken the same approach of developing   
          specific standards of their own. Industry specific EDI  
          standards development associations include: 
 
 
               Automotive Industry Action Group 
 
 
               General Trade Document Interchange 
 
 
               National Automated Clearinghouse Association 
 
 
               National Wholesale Druggist Association 
 
 
               Transportation Data Coordinating Council 
 
 
          Many other industries are also developing EDI standards and  
          many are using the TDCC standards as a base. The Grocery  
          Industry's Uniform Communications Standards and the  
          Warehouse Information Network as examples of TDCC  
          derivatives. 
 
 
          Even the collection of industry specific standards is not  
          enough since few business operate in a single industry.  For  
          example, a telephone manufacturer in the Communication  
          Industry must buy plastics from the Chemical Industry. Once  
          again, the need for further standardization exists. 
 
 
     ANSI X12 Standards 
      ____ ___ _________ 
 
          The American National Standards Institute (ANSI) chartered a  
          committee to develop inter-industry EDI standards. This  
          committee, known as the X12 Business Data Interchange  
          Committee, is  using the TDCC standards as their base  
          structure.  The X12 committee has added many transactions to  
          the list provided by the TDCC.  The most common transactions  
          are the purchase order and the invoice.  
 
 
          Also, the TDCC is serving as the Secretariat for the X12  
          committee. All data field names, types, formats and lengths  
          are defined in a data dictionary.  The TDCC maintains this  
          data dictionary and provides quarterly updates. With the  
          data dictionary available, everyone supporting X12 standards  
          knows exactly what format  each field or data element on   
          should use. For example, the Purchase Order Number is  
          defined as being from 2 to 30 characters in length.  A 31  
          character PO number is not allowed. 
 
 
          Industries working with X12 standards include:  
          telecommunications, electronics, chemical, auto, metals,  
          textile and aerospace. Individual industries may use a  
          subset of the overall X12 standard.  The format and meaning  
          of the individual data elements remains constant, but  
 
          different industries have chosen to implement some fields in  
          a different order, or to exclude certain information not  
          appropriate for their industry 
 
 
          Conversion from industry specific standards to X12 has not  
          been easy.  Once an industry has an investment in one  
          approach, it takes time to convert to another.  The Grocery  
          industry established their industry specific UCS standard in  
          the early '80s and has been the most notable holdout from  
          X12 acceptance. The approach in the grocery industry has  
          been "If it's not broken, don't fix it." 
 
 
          Even with X12 standards, many EDI trading partners are  
          finding it necessary to translate documents from one X12  
          subset to another. Additionally, as more companies move to  
          X12, there is a great need to translate their standard X12  
          transactions into industry specific standards whence they  
          came. Conversion is often required  in order to communicate  
          with trading partners that have not yet made the step to  
          X12.  This translation of formats can occur either at the  
          originator, the destination, or a 3rd party intermediary. 
 
 
How does it work? 
 ___ ____ __ _____ 
 
     EDI is implemented in software and is conceptually an interface  
     between the sender's  and the receivers internal computer  
     programs.   These company specific  internal programs may be  
     operating on different types of computers and may use different  
     internal data structures. This interface between sender and  
     receiver is implemented in at least the two trading partners  
     systems, and often in a third, intermediary. 
 
 
     We'll, use the transmission of a purchase order to illustrate how  
     EDI works.  The buying party's purchase order  system generates a  
     PO and passes it to the EDI software.  The EDI software converts  
     the internal data structure into a standard EDI transaction with  
     the required fields supplied by the data dictionary.  This  
     transaction is then transported to the supplier whose EDI  
     software converts (using the same data dictionary) the standard  
     transaction into the format acceptable to their order processing  
     system. 
 
 
     The TDCC and other vendors provide EDI software for mainframes,  
     mini and personal computers. The TDCC leases mainframe software  
     written in ANSI COBOL and is shipped on 9 track tape.  TDCC  
     provides the COBOL source code because few mainframe COBOL  
     systems are exactly alike.  The user many need to make some  
     changes to the software to match their particular system. 
 
 
     The TDCC software is "table-driven."  This means that all  
     translations between internal and standard data formats are  
     defined in easily modifiable tables.  You do not have to modify  
     COBOL programs for translation. A portion of the EDI software,  
     called the Set Generator, converts internal format data records  
     into standard transactions.  These internal format records are  
     produced by some internal system such as a Purchase Order System.  
     The Set Generator reads these input records and performs the  
     translation according to the parameter tables and the information  
     in the data dictionary.   
 
 
     When the transactions are received by the destination EDI  
     software, the receiver's data dictionary and parameter tables are  
     used by the  Set Interpreter to convert the standard format  
     transaction into the desired internal format. 
 
 
Transport Alternatives 
 _________ ____________ 
 
     EDI specification do not require any particular type of  
     transport.  There are 4 general methods  to choose from: 
 
 
     Tape/Diskette Transport 
      _____________ _________ 
 
          Transactions could be batched and recorded on formatted  
          magnetic tape or diskette. The tape or diskette could be   
          sent by  the US mail, Express mail, or by a courier service.  
          This approach might be  the most cost effective depending on  
          the application, but it is also the lease responsive.  
           
          <Figure ?.1>  
 
 
     Point-to-point Communications lines 
      ______________ ______________ _____ 
 
          Point-to-point communications lines could be established  
          between the trading partners using standard communications  
          protocols.  This connection could either be a leased or a  
          dial-up line.  A leased line is purchased on a monthly basis  
          and is always available for transmission.   
 
 
          A dial-up line is established just like a normal telephone  
          call.  When the sending party has something to transmit, the  
          call is made and the data is transmitted. When dialup links  
          are used, senders typically batch up their transaction and  
          at certain points  make the connection and send the entire  
          batch. 
 
 
          The dial up approach is cheaper when the amount of data is  
          low and sporadic.  An expensive leased line can be more cost  
          effective if the amount of transactions is high, and fairly  
 
          constant throughout the day.  Also, faster line speed can be  
          achieved with a leased line and there is not dial delay or  
          need to batch transactions.  With a leased line the  
          transaction can be transmitted as soon as it is created.   
          For some applications, it immediate transmission and reply  
          may be appropriate. 
           
          <figure ?.2> 
 
 
     Value-added Networks 
      ___________ ________ 
 
          Point-to-point links often present a scheduling problem to  
          trading partners.  Often, it is not convenient for the  
          receiver to receive transactions when the sender chooses to  
          send them.  The solution to this problem  is a value-added  
          network that provides a store-and-forward mailbox service.   
          Compuserve, Telenet and Tymenet are examples of value added  
          networks. 
 
 
          The sender connects with the value-added network and sends  
          it's EDI transactions to the recipient's mailbox where they  
          are stored.  The sender then disconnects from the service.   
          At some point that is convenient, the recipient can connect  
          to the network and receive those transactions from their  
          mailbox.  With this approach, both sending and receiving  
          parties must use the same EDI standard transactions. 
           
          <figure ?.3> 
 
           
 
 
     Third Party Services 
      _____ _____ ________ 
 
          Another approach is to use a third party EDI service.  Third  
          party service providers use a network with individual  
          mailboxes in the same manner as the value-added networks.   
          Third party  vendors  also include translation amongst their  
          services.  This approach is attractive when cross industry  
          transactions are required or, when one trading partner has  
          converted to X12 while trading partners have not. 
 
 
          Third party EDI service providers include: 
 
 
               Control Data's Redinet 
 
 
               General Electric Information Services 
 
 
               IBM Information Network 
 
 
               McDonnell Douglas Applied Communications 
 
 
               Sterling Software's Ordernet 
                
               <figure ?.4> 
 
 
          Most Third Party Service vendors provide software tied to  
          their service.  In an interesting move, IBM announced it's  
          expEDIte Family of EDI products in April, 1989.  The  
          expEDIte Family includes: 
 
 
               The IBM expEDIte DataInterchange Series 
 
 
               The IBM expEDIte Communication Series 
 
 
          The expEDIte DataInterchange Series is a set of translators  
          that run across a wide range of IBM's product line.  
          DataInterchange runs on a Personal Computer running OS/2,  
          the System/3x and AS/400 mid-range systems and the  
          System/370 line of mainframes from the 9370 to the 3090. 
 
 
          DataInterchange converts internal documents in to standard  
          format. DataInterchange supports either the ANSI X12 or the  
          international EDIFACT standards.  The translators run either  
          in interactive or batch mode, and can be called from user  
          written programs.  
 
 
          The expEDIte Communication Series is a set of communication  
          products designed to connect with the IBM Information  
          network. What make this announcement interesting is the  
          unbundling of the translator from the communications  
          software.  This allows you to choose the IBM translator  
          without being tied into the IBM Information Network for  
          communication services.  You can then choose the appropriate  
          transport media for your business, while using an off-the- 
          shelf EDI translator. 
 
 
Benefits 
 ________ 
 
     EDI is a productivity-enhancing tool that replaces less efficient  
     and error-prone human processes involved with inter-company  
     communication. EDI provides benefits to both the buyer and the  
     seller as outlined below. 
 
 
     Buyer Benefits 
      _____ ________ 
 
          Lower Inventory Levels 
 
 
          Quick Order Acknowledgments: If a supplier can not provide  
          the product desired, the buyer can quickly seek an alternate  
 
          supplier. 
 
 
          Efficient Invoice Processing: Time spent matching invoices  
          to purchase orders and  re-keying invoices into an Accounts  
          Payable System  is reduced. 
 
 
     Supplier Benefits 
      ________ ________ 
 
          Elimination of problems and delays caused by order entry  
          errors: Manual order entry can result in errors in as many  
          as 50% of all documents.  Errors in order entry mean missed  
          ship dates, shipment of wrong items or quantity and lower  
          customer satisfaction. 
 
 
          Personnel Reductions: There are estimates that as much as  
          70% of all computer output becomes computer input.  With  
          EDI, the supplier is relieved  of processes of re-keying  
          orders and verification of orders. 
 
 
          Inventory Reductions: While EDI is often used in Just-in- 
          time inventory approaches that place the burden of inventory  
          on the supplier, it is possible for the supplier to achieve  
          reduced inventory levels also.  Production schedules can be  
          tuned more closely to customer demand to reduce finished  
          goods inventory. 
 
 
          Improved Cash Flow: Time taken out of the invoicing/payment  
          cycle improves the cash flow of the supplier. 
 
 
          Improved Customer Service 
 
 
          Improved Sales Tracking 
 
 
     Cost Savings 
      ____ _______ 
 
          A common benefit to both buyer and supplier is cost savings.  
          Input, a California based market research firm recently  
          published survey of Fortune 1000 size business, universities  
          and public companies entitled The North American EDI  
          Service.   One of the results of the survey was a comparison  
          of the cost of manually prepared documents  to EDI  
          documents.  The survey showed that a manually  prepared and  
          transferred  document costs  about $49 while the EDI  
          document cost about $4.70.   
 
 
          That 10 fold savings per document is impressive and when you  
          think about the millions of such documents generated in some  
          companies, you can see why there is pressure to implement  
          EDI. 
 
 
Examples 
 ________ 
 
     Following are some examples of EDI usage. 
 
 
     Auto Loans 
      ____ _____ 
 
          A major part of the automobile manufacturers business is the  
          financing of the sale of it's vehicles. Auto companies  
          finance over 1/3 of all cars purchased in the U.S.  General  
          Motors Acceptance Corporation is one of the largest  
          financial institutions in the world. To be more responsive  
          to their customers, auto companies have implemented  
          electronic links to credit bureaus such as TRW.   
 
 
          The normal process if for the auto company to request a  
          credit history from the credit bureau via an EDI connection.  
           The auto company's computer system electronically receive  
          and analyze the credit report. Each report is scored and  
          then credit approval is provided without human involvement. 
 
 
          There is now movement into allowing the dealers direct  
          transaction input.  This moves the personnel cost of data  
          entry from the auto company to the dealer.  This is also an  
          advantage to the dealer as it allows them to better respond  
          to their customers. It is possible to get back quicker, if  
          not instantaneous, response to credit  authorizations.  
          Credit authorizations are often returned  while the customer  
          is still on the sales floor.  The real payoff in this  
          example is the extra competitive advantage the dealer that  
          offers immediate credit has. 
 
 
     General Motors 
      _______ ______ 
 
          General Motors has integrated EDI and Electronic funds  
          transfers at 30% of it's assembly plants. Electronic  
          shipping receipts are sent electronically from the GM plant  
          to an Electronic Data Systems (EDS is a subsidiary of GM)  
          computer center where they are matched against electronic  
          invoices and purchase orders. Shipping receipts are grouped  
          by supplier and one payment is made.  This single payment  
          may represent dozens of different shipments to different  
          plants.  These payments are also performed electronically  
          via Electronic Funds Transfers. 
 
 
     JC Penny 
      __ _____ 
 
          Sales of Stafford suits jumped 59% after JC Penny linked up  
          with their supplier Lanier Clothes. EDI allowed Penny to  
 
          quickly replenish stock  fast enough to meet demand while  
          cutting their overall inventory of suits by 20%. 
 
 
     Rockwell 
      ________ 
 
          Rockwell, a major automotive supplier received design change  
          notifications directly from the automakers via EDI.   
          Rockwell has been able to react faster to their customer  
          constant design changes while reducing their inventory of  
          finished goods. Parts now bypass their warehouse and go  
          directly from their production lines to their shipping  
          docks. 
 
 
     Textile Industry 
      _______ ________ 
 
          The textile industry is beginning to fight back against  
          Asian competition with EDI.  While the US textile industry  
          is hard pressed to compete on a cost basis, EDI is helping  
          them provide superior service. Service is making it easier  
          and faster to do business with a US supplier. 
 
 
     US Customs 
      __ _______ 
 
          US Customs accepts electronic customs documentation, in  
          advance of goods shipments.  The reduces port delay and  
          provides a competitive advantage for those ports of entry  
          that support EDI. 
 
 
     Wal-mart 
      ________ 
 
          An EDI link between Wal-mart and one of it's suppliers,  
          Seminole Manufacturing Co. cut the delivery time of Seminole  
          slacks  by 50%.  This resulted in a 31% sales increase of  
          these slacks in the first 9 months after the link was  
          established. 
 
 
Market Outlook 
 ______ _______ 
 
     The Yankee Group, a Boston based market research group, estimates  
     that 1/3 of all business transactions will be electronic by 1995.  
     The EDI survey, published by Input,  found that 34% of Fortune  
     1000 sized business, universities and public companies are  
     currently using EDI.  An additional 20% are planning EDI  
     implementations. 
 
 
     Input also forecasts that EDI service market will grow to  $1.9  
     Billion by 1993.  That's an annual 56% per year growth rate from  
     the 1988 market size of $208 million. 
      
     <figure ?.5> 
 
      
 
 
     While EDI has been around for a while, it is still in it's  
     infancy as far as market potential.  This has been recognized by  
     companies such as AT&T, Telenet, ADP, Compuserve, Martian- 
     Meritetta and Western union who have all  jumped into the  EDI  
     service provider  arena in the last 2 years. 
 
 
     What is causing the growth? 
      ____ __ _______ ___ _______ 
 
          One of the main reasons for the explosive growth of the EDI  
          service market is that the business environment finally  
          contains all the pieces to make EDI possible.  Clearly,  
          standards are a major factor. By 1986, there were over 150  
          standardized transaction types.  Standard transaction  
          development has a cascading affect.  The Purchase Order  
          begat the Invoice.  The Invoice begat the Shipping  
          Notification.  This Shipping Receipt leads to the desire  to  
          make electronic payments which spawns another batch of  
          electronic transactions. 
 
 
          The spread of computers and available software has been a  
          factor in EDI growth. The acceptance of the Personal  
          Computer has been a stimuli to EDI. It is possible to  
          develop an EDI solution based on a Personal Computer with  
          less than a $1,000 hardware investment.  
 
 
          Another factor is what you could call the "Domino Effect"  
          within industries.  The domino effect is where  large  
          companies in the center of an industry coerce their trading  
          partners to adopt EDI. Soon, the second tier suppliers  
          require EDI links to the third tier suppliers.  The  
          automobile industry is an example of the Domino Effect. 
 
 
          There are two approaches to getting supplier compliance;  
          Incentive and Force.  Some companies have offered incentives  
          for electronic linkups. Conrail, for example, offers  
          discounts to their electronic trading partners.  
 
 
          The automobile industry relied on force with deadlines  and  
          ultimatums.  If you supplied production material to an  
          automobile plant, lack of EDI support meant loss of  
          business.  Even within the automobile industry, there were  
          come levels of incentive provided.  One automaker choose to  
          sell a PC based EDI interface to the suppliers, while  
          another gave it away.  Which approach do you think garnered  
          the most support? 
 
 
 
     What is inhibiting growth?  
      ____ __ __________ _______  
 
          Input's current market forecast is for 56% annual growth of  
          the EDI market.  This 1989 forecast has been reduced from  
          their previous predictions of 88% annual growth. There are  
          several factors that are inhibiting EDI Growth: 
 
 
               Lack of upper-management awareness 
 
 
               Companies too busy fighting today's fires 
 
 
               The "not invented here" syndrome 
 
 
               Application development backlog in MIS departments 
 
 
               Turf battles 
 
 
               Perceived lack of standards 
 
 
               Electronic payments reduce payee's "float." 
 
 
               Fear of improper authorization and duplicate electronic  
               and paper transaction. 
 
 
               Fear of outside links to the production environment. 
 
 
          One of the solutions to the fear of linking outsiders to the  
          production environment  is being address today with the use  
          of Personal and Mini Computers as EDI front-ends.  The  
          outside world is connected to the PC, or Mini and not the  
          production system. 
 
 
          EDI will eventually overcome these inhibitors to acceptance  
          because it addresses a basic business goal within every  
          company.  The goal or reducing administrative overhead. 
 
 
How to Proceed 
 ___ __ _______ 
 
     Form a taskforce with broad company representation.  EDI  
     implementation is not simply a Systems Department exercise, but  
     affects the entire company. Select people across departmental  
     boundaries to reduce resistance and turf battles. 
 
 
     Set your taskforce's goal of determining when, not if, to  
     implement EDI. By setting the goal of when to implement EDI, you  
     are acknowledging that almost every company will use EDI at some  
     point in the future.  The key emphasis should be when does it  
     make business sense for your company.  
 
 
     Now clearly, if you have a large customer that is coercing you  
     into electronic trading, you can certainly make a business case  
     for doing it now. The threat of loss of your biggest customer can  
     make the rest of the issues moot.  But, even if no one in your  
     industry uses EDI, the taskforce should  examine the  
     possibilities of strategic use of technology to take a  
     competitive advantage. 
 
 
     Educate taskforce members on EDI, and the internal operation of  
     the business.  Make sure everyone understands that the business  
     is a system and EDI is simply another business tool that may or  
     may not be appropriate at this time. 
 
 
     Consider if it is appropriate to team up with other similar  
     companies in your industry to share in the development.  This  
     might sound like a contradiction to what was written earlier  
     about competitive advantage, but there are times when it is   
     helpful to the entire industry to work this issue together.  The  
     cooperation in the development of the Airline Industry's   
     reservation systems is an example of how cooperation in a very  
     competitive industry has benefited all. Even while working on an  
     industry wide EDI project, you can still maintain a competitive  
     advantage by building a company reputation of being a pioneer, or  
     industry leader. 
 
 
     Carefully evaluate trade and industry standards.  The old adage  
     of not reinventing the wheel applies. Stick with the ANSI X12  
     standards as much as possible. 
 
 
     Constantly monitor the X12 standard for changes. EDI is not a one  
     time project, but an evolving process. 
 
 
     Determine what form of transport, or third part services are  
     appropriate and select software and service vendors accordingly.  
     Service providers are often good sources of information and  
     support that you can leverage to your advantage. 
 
 
     Determine the overall commitment to EDI within the organization.  
     EDI can be implemented as a stand-alone  process where a PC  
     simply receives electronic orders and prints them on paper.  The  
     rest of the process is business as usual.   
 
 
     EDI could also be implemented by integrating it within the  
     overall business operation.  The second approach can totally  
     change the way you do business today, but only you (or your  
     taskforce) can determine what level of integration is appropriate  
     for your business.  If the integrated approach is desired, do not  
     underestimate  the innate human factors that cause resistance to  
     change. 
 
 
     If the taskforce determines that it is appropriate to implement  
     EDI, make sure their report includes  plans for a pilot phase and  
     for post-pilot expansion.  A pilot phase is where a select group  
     of functions, and/or customers are implemented to shake down the  
     process and determine if the approach is viable. 
 
 
     If the determination of the taskforce  is that the timing is not  
     appropriate for EDI, make sure that their findings include a list  
     of conditions that must be met before EDI would be viable for the  
     organization.  This list of considerations can be re-evaluated  
     periodically and could serve as a road map for future EDI  
     projects. 
 
 
Futures 
 _______ 
 
     EDI is still in it's infancy and you can expect tremendous growth  
     in the future. By the end of the decade of the '90s you can  
     expect to see Electronic Document Interchange affecting almost  
     every business in the U.S. 
 
 
     The amount of standard transaction will steadily increase.   
     Electronic order, shipments and payments will be common. 
 
 
     There will be increased product code standardization.  The UPC  
     code used by grocery store scanners will steadily support more  
     and more products. 
 
 
     Further expansion will occur in multi-industry standards because  
     few companies really operate in just one industry. The grocery  
     stores, for example, sell many non-food items. 
 
 
     As competition between third party service providers increases,  
     these service providers will become more aggressive in providing  
     and marketing their services. 
 
 
     There will be increased international EDI activity.  It has been  
     estimated that between 5% and 7% of the value of goods traded  
     internationally can be saved by EDI.  Even though the U.S. has  
     been involved in EDI since the 60's, some experts believe that  
     Europe is only 18 to 24 months behind. 
 
 
     There already exists several international EDI standards  
     organizations such as the Organization of Data Exchange by  
     Teletransmission in Europe (ODETTE).  ODETTE was founded in 1984  
     and represents 9 countries.  
 
 
     Also, the United Nations' Economic Commissions for Europe,  
     Working Party on Facilitation of International Trade Procedures,  
     meets in Geneva semiannually to coordinate EDI standards for  
     world trade. Over 40 major trading nations and 12 world trade  
     organizations send representatives to this conference.  The U.S.  
     delegation is headed by a representative from the Department of  
     Transportation.  
 
 
     In addition, a joint team of European and U.S. Standards bodies  
     know as the Joint Electronic Data Interchange (JEDI) project, has  
     made significant strides in the convergence of the various EDI  
     formats. This has led to a new standard known as EDIFACT, or EDI  
     For Administration, Commerce and Transport.  EDIFACT is creating  
     excitement in Europe and has been accepted by the International  
     Standards Organization as the ISO 9735 standard. 
 
 
     A trend currently underway that will continue is the bundling of  
     function.  Expect to see third party  service providers bundle  
     EDI services along with Electronic Mail, Electronic funds  
     transfers, online databases, videotext and online news services.  
 
 
     The electronic mail standard X.400 will play a major role in the  
     bundling of features. The X.400 protocol will become the standard  
     transport vehicle for EDI transactions as it already has become  
     for text based electronic mail. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
