EDI Application & Benefits

A major information technology (IT) innovation that is beginning to affect the way in which manufacturing businesses are operated is electronic data interchange, or EDI (Borthwick & Roth, 1993). EDI lowers substantially the cost and time associated with the transfer of information between different functional elements within and organization, as well as between an organization and outside suppliers and customers. Data communication networks are essential to the success of the application of EDI technology. Some managerial decisions related to the use of EDI also will involve the practice of outsourcing. One problem that may be encountered in the application of EDI technology are laws in some jurisdictions that do not consider non paper documents to be legally binding (Fitzgerald, 1992).

Some researchers have claimed that inter-organizational IT systems using EDI create "vertical information integration" between trading partners along the value chain (Bakos & Treacy, 1986, p. 107). By improving the accuracy and timeliness of information exchanged over manual methods, EDI is believed to significantly change how organizations conduct business with their suppliers and customers. Although the effect of EDI on business is undeniable, no rigorous studies have yet quantified the financial benefits accruing to firms from improved information exchanges due to EDI (Mukhopadhyay, Kekre, & Kalathur, 1995).

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oration was implemented in 1984 with the introduction of the Supplier Delivery Schedule transaction system that provides the precise shipping quantities to suppliers electronically (Mukhopadhyay, Kekre, & Kalathur, 1995). The impetus for the program came from management directives to implement JIT (Just-in-Time) practices in assembly centers using EDI. In 1990, "the ANSI X12 standard was mandated by Chrysler and adopted almost universally by assembly plant suppliers" (Mukhopadhyay, Kekre, & Kalathur, 1995, p. 139). As part of the corporate goal to reduce the cost per vehicle by 30 percent, the procurement, manufacturing, and logistics areas at Chrysler Corporation were directed to coordinate and improve the efficacy of the materials management process (Mukhopadhyay, Kekre, & Kalathur, 1995). At that time, suppliers neither had current information about Chrysler's requirements, nor did the assembly plants know the exact content and status of shipments. "To cope with the uncertainty, large safety buffers had to be maintained at assembly centers. When shortages occurred, emergency deliveries resulted to avert costly line stoppages. Finally, with 70 percent of components and subassemblies out-sourced, Chrysler took a bold initi
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Approximate Word count = 2035
Approximate Pages = 8 (250 words per page)

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