Everything You Ever Wanted To Know About Electronic Data Interchange

.. but the DOD will institute a system-wide electronic funds transfer payment system by January 1, 1999. By that time every contractor that wants to get paid must enter it’s register (Campbell, 29). Resistance to The Adoption of EDI The resistance behavior of some firms towards the adoption of EDI is still very evident today. Recently EDI has received much attention in the transportation and logistics literature, particularly in the area of shipper-carrier relationships. EDI is often considered an indicator of mutual cooperation between a carrier and a shipper, as well between a customer and a supplier in a supply chain.

As people began viewing EDI as the glue that holds partnerships together, the decision to adopt (or not adopt) became a decision to be made by multiple firms rather than a single-firm decision. The use of EDI for transportation-related transactions by a shipper, for example, requires the use of EDI by its carriers. Similarly, if a retailer wants to use EDI for achieving higher operational efficiency, the use of EDI by its suppliers is a must. In other words, a successful implementation of EDI strategy (strategic use of EDI for achieving higher cost efficiency and improved customer service) greatly depends on whether a firm can persuade its trading partners to adopt the EDI system. Given these situations, firms pursuing the EDI strategy began feeling the need to learn effective ways of persuading their trading partners to adopt the EDI system (Suzuki, 36).

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In an attempt to provide insights on how to persuade non-adopters to adopt EDI, numerous researchers conducted studies to determine the factors that influence the decision to adopt or not. Those studies are invaluable tools that firms can use to attempt to persuade their trading partners to adopt EDI. The studies, however, did not study why firms choose not to adopt EDI. Adoption and resistance behavior may seem to be opposite sides of the same coin but in fact there could be numerous reasons not to adopt EDI. For instance a firms business environment may not require the adoption of EDI, that doesn’t mean that firm is resisting EDI it just means it doesn’t need it. On the other hand if a firm has adopted EDI but only uses it for certain limited purposes, like the issue of bills of lading, despite repeated requests by its trading partners to increase usage that firm, although it has adopted EDI, still shows strong resistance.

In the studies there arose three main factors that contributed to a firms resistance to EDI. These factors were as follows: uncertainty, EDI standardization, and perceived EDI benefit. Each factor will be discussed in the following paragraphs. Uncertainty The concept of uncertainty has been defined as the inability of a firm to forecast accurately the technical requirements of the EDI system in the relatively near future (Suzuki, 37). When there is a high level of unpredictability firms tend not to form long lasting agreements with other firms, such as those found in an EDI partnership, because they wish to retain the flexibility to terminate relationships whenever necessary.

EDI increases the strength of the partner relationship therefore a firm is less likely to accept EDI sharing with its trading partners when that firm perceives a high degree of uncertainty in EDI technology. EDI Standardization EDI standardization refers to the distribution level of an industry wide EDI format. When Company exclusive (many different) EDI formats are more common in an industry, the EDI standardization in this industry is considered low. However, if the industry wide (standardized or similar) EDI formats are more common, the EDI standardization is high. The lack of EDI standardization is considered to be a major barrier towards the adoption of EDI.

Firms with limited EDI knowledge can become confused with all of the different formats for EDI and be dissuaded from adopting EDI for their firm. Basically in industries where firms adopt their own EDI format other firms are less likely to accept EDI agreements because linking with these firms would require that firm to adopt more document formats. Perceived EDI Benefit EDI benefits have been discussed deeply in this paper, in literature, and just about every article or study about EDI. The lower the perceived benefit a firm has towards EDI the less likely that firm is to adopt the technology. If a firm believes that EDI has no benefit for that firm it may not and probably will not adopt EDI technology despite the pleadings of its trading partners or it may adopt the system but be reluctant to use it (Suzuki, 39).

The most obvious benefits of EDI are speed and accuracy of data transmission but can and often do include improved customer service quality. A successful implementation of EDI strategy greatly depends on whether a firm can persuade its supply-chain partners to adopt the EDI system. Convincing other parties to use the EDI system, however, may not be an easy task, because partners often show strong resistance to EDI usage. The study of resistance to the adoption of EDI indicated that firms tend to show stronger resistance to EDI when firms perceive a high level of uncertainty, low distribution rate of industry wide EDI formats and standards, and little benefits of using EDI for reducing processing time (Suzuki, 40). Therefore in order to successfully implement EDI across the entire supply-chain a firm must clarify the details of the agreement, adequately demonstrate the reliability and benefits of EDI, and insure a set global format that can be used anywhere. Conclusion While EDI may not be for everyone any other form of Electronic Commerce cannot match its benefits and popularity across all industries. EDI’s cost savings are the stuff of accounting legends.

For example, RJR Nabisco estimates that the cost for processing a paper-based purchase order is almost $70, whereas the same transaction performed through EDI costs less than $1. Further, EDI’s single entry of transactions minimizes repetitive data entry and reduces keystroke errors. The almost instantaneous nature of an EDI transaction shortens the time between creating a purchase order and sending an invoice to seconds. Until recently, there were few alternatives to EDI that offered the speed, standardization, and acceptance in the global business community. Now, Internet-based EDI solutions, such as those found at Hewlett Packard (See figure below), promise to trim the cost and mass of EDI and add new life to an antiquated system (Millman, 83). In the past, EDI adoption was a slow process because EDI exchanges were based on an exclusive company to company system.

Now EDI on the Web will greatly accelerate exchanging business documents all over the Globe. As the prices of EDI plummet, interest continues to soar, which will bring about lower prices and offer more flexibility for companies conducting Internet commerce. Bibliography Works Cited 1) Campbell, A.J. Embracing Electronic Data Interchange Now Will Keep Your Company in Step With The Competition Business America, June 1998 p28(2). 2) Millman, Howard.

A Brief History of EDI InfoWorld, April 6, 1998 p83(1). 3) Millman Howard. Easy EDI for Everyone InfoWorld, August 17, 1998 p38(1). 4) Suzuki, Yoshinori and Lisa Williams. Analysis of EDI Resistance Behavior Transportation Journal, Summer 1998 p36(9).

5) Turban, Efraim and Ephraim McLean and James Wetherbe. Information Technology for Management John Wiley & Sons Inc. 1999 p 241-247. Computers Essays.