Electronic Data Interchange Analysis

Electronic Data Interchange (EDI) is a critical part of large business operations, yet it remains a mystery to those outside its immediate users. EDI came about in the late 1960s and early 1970s as transportation organizations sought a way to communicate more effectively with vendors and customers. Eventually, standards were developed which made it possible for companies to send common business documents--purchase orders and invoices, primarily--from one company to another using computer systems. The advent of the Internet has changed EDI as companies have begun to take advantage of additional capabilities that the Internet offers. In addition, small and medium sized companies have access to the Internet where they typically did not participate in EDI. It is unlikely that EDI will be supplanted by the Internet, and far more likely that EDI companies will integrate the Internet into the services that they offer.

Electronic Data Interchange (EDI) is one of the few technologies that has survived largely intact from the 1970s to the present. EDI has gone largely unnoticed by the retail consumer, but it is an integral part of American--and international--business at the largest companies. EDI makes it possible for companies to communicate directly with each other's computer systems and send documents such as purchase orders and invoices from one company to another without human interaction. The result is less paperwork, fewer errors, and decrea

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of errors, but also increases the speed and efficiency with which transactions are processed. By setting up reorder quantities, reorder points and similar triggers based on seasonal demand and other parameters determined by the company's purchasing manager, a company can greatly automate the purchasing process so that very little human interaction is necessary. This has the advantage of reducing the number of people needed to perform the data entry aspects of the purchasing function, and allows buyers to focus on obtaining the best pricing and delivery terms. When multiple companies in a supply chain take similar steps, it is possible to greatly increase the speed and efficiency with which goods move through the supply chain while decreasing the number of individuals associated with the process ("EDI Offers," 2002). Historically, EDI users have been large companies and their immediate customers and suppliers. These are the organizations that have the most to gain from eliminating paperwork and taking advantage of streamlined operations and JIT processes. Smaller organizations had difficulty justifying the costs (including the transaction costs) associated with EDI, and thus tended to continue to use manual processes of one k

Category: Science - E