information is directly dependent on the level of adherence to the standard (Quinn, 1991, p. 45). Data is transmitted over voice or data lines using a value-added network (VAN) resulting in more accurate transmission at lower costs than traditional methods of business communications. Data is translated from format to format, and provides message storage and retrieval functions. EDI is positioned to become the standard for exchanging business documents because it improves the cost structure of three business fundamentals: order entry, transaction, and payment.
The primary purpose of EDI is to provide a communications standard that promotes the interchange of common business information. The first use of EDI was in the purchasing and order areas, eliminating the use of traditional purchase order documents in order to achieve quicker response time. The first company to integrate EDI in their business procedures was American Hospital Supply Corporation (AHSC) in the early 1960s, which established a purchase/ordering system that linked their customers directly to them. This system was later refined and eventually led to the development of Analytic Systems Automated Purchasing (ASAP). This allowed hospitals to key their own orders directly into AHSC's system, which reduced the hospital's lead time and inventory costs. AHSC gained a competitive edge because the competition did not immediately develop their own systems.
EDI allows a company to provide greater speed and accuracy to their suppliers and customers than is possible in a manual system, or even in a traditional information system that combines manual with automated processing. In today's international business environment, this enhanced speed and accuracy are important for a company to maintain its competitive advantage in the market. The growing emphasis on total quality management (TQM) and the increased emphasis on customer service is likely to enhance the growth ...