THE APPLICATION AND BENEFITS OF EDI IN MANUFACTURING FIRMS
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).
One common managerial approach to the evaluation of an investment project is to assess its impact on firm performance in terms of financial criteria. In recent years, IT investments such as EDI assessed through the application of this approach have reported contradictory results on the business value of IT (Mukhopadhyay, Kekre, & Kalathur, 1995). The majority of studies in this area report little or no impact of IT on firm performance.
The productivity impact of ED...