EDI: Not dead yet
By Amy Zuckerman and Rosalind McLymont -- Purchasing, 9/16/1999
With all the huff and puff about electronic commerce these days, many purchasing professionals might be wondering what happened to electronic data interchange (EDI), the 1,000-pound gorilla of the 1970s that revolutionized transmission of commercial data.There's much talk in the field of replacing EDI with Internet transmissions or dumping the somewhat cumbersome process altogether. This talk has led to some speculation that EDI is a dead-in-the-water technology. Interviews with a number of purchasing managers from major companies and producers of e-commerce technology say EDI is alive and well and still quite useful. They find it reduces inventory management costs, order management costs, physical distribution costs and transportation costs.
And many companies have no other choice than to work with EDI, especially those that supply automotive manufacturers. Major auto producers such as General Motors require suppliers to transmit messages in EDI code. As Bob Ryan points out, companies that resist EDI may find themselves locked out of business. Ryan is chief executive officer of Pittsburgh-based DXI, a manufacturer of international trade software.
For these reasons, EDI remains a very viable method of communicating such documents as purchasing orders, invoices, shipping documents, and notifications. "It's part of a bigger (e-commerce) picture now. It's so commonly used that it's not even in the jargon of e-commerce," says Dan Jankowski, a GM spokesman.
EDI's ongoing role
In fact, some purchasing executives go as far as to say that EDI always will play a major role in the supply chain and in e-commerce.
"I think EDI is always going to be a necessary part of the industry, especially material releasing and the delivery side," says Jeffrey Wincel, VP, corporate procurement and materials at Donnelly Corp., a supplier to automotive manufacturers. "Many of our customers have specific requirements (for EDI use)...Some require us to view their EDI data four or five times a day. It has to be part of the operations."
"EDI is not dead," agrees John Paterson, vice president of global production procurement and reengineering at IBM in Somers, N.Y. "There are thousands of companies invested in EDI, and while the Web is another medium for transacting (data), it is unlikely that too many companies will throw their investment in EDI overboard."
At IBM he says they use "EDI extensively with our suppliers to place purchase orders/replenishment/shipment notification/change notification and invoices. EDI helps with speed of communication and simplification/automation of administrative processes."
On the plus side, Paterson says EDI provides a "clearly defined and accepted set of (messaging) standards for which today there is no Web equivalent. On the negative side, it has a limited scope when looked at from the standpoint of the total procurement process/supplier collaboration." Specifically, he finds EDI limited to back-end transaction activities such as purchase orders and invoicing.
These sorts of limitations, not to mention that EDI requires a cumbersome coding process, have not dampened the enthusiasm General Motors officials exhibit for the process. GM managers say they believe EDI's role will increase, not diminish. Given GM's size and clout with suppliers, this support pretty much assures EDI's future. In fact, there are many in the e-commerce field that credit GM with keeping the technology front and center.
"EDI is not only an integral part of e-commerce, but it also will become even more important," according to Melanie McCarthy, EDI manager with General Motors' Information and Systems Services group. She says GM is so committed to EDI that it's adopting the European-based edifact (administration, commerce, and transport) EDI communication standard, which will allow GM to extend EDI outreach to global trading partners.
"The purpose of EDI is to reduce the amount of keypunching so we can use our people for more value-added tasks and get into the data," she adds. "At GM we believe in EDI. In our production-purchasing world, which is where we use it most heavily, we are over 99% EDI-compliant in the productive scheduling process. We use EDI most heavily in materials scheduling area, which is the production control element of the worldwide purchasing arena."
Some companies like appliance-maker Maytag already are heavily invested in EDI technology but are only now contemplating extending its use in purchasing. According to Dawn McCauley, manager of enterprise applications for Maytag, the company is trying to find out if EDI "makes sense (for purchasing)" or they should "just forget it and move on to something else."
Because answers aren't conclusive, she says a decision hasn't been made. "I went to a couple of conferences this year specifically seeking out this question: Is EDI dead? One of the sessions was called 'Is EDI A Dead Man Walking?' The key takeaway from that session was everyone's opinions were based around the product they were using. So it wasn't that helpful to me."
Internet extends EDI use
Paterson of IBM says EDI has its pluses and minuses, but finds that coupling EDI messaging sets with Internet transmission can go a long way to making up for the rigidity built into EDI technology. For this reason, IBM is working on extending the reach of EDI by sending these sorts of transactions over the Internet, especially to companies that are not EDI-enabled.
What Paterson describes is part of a larger trend to "hybridize" EDI and Internet use. Widespread surveying indicates that adopting some hybrid system that combines EDI messaging sets with Internet transmission is the way most companies are going.
"There's EDI and then there's EDI," explains Ryan, meaning that companies don't need to have EDI equipment and direct computer link to communicate with major EDI-equipped corporations. Many buy into translation software that allows them to communicate with an EDI-equipped company like GM.
And McCarthy points out that like IBM, GM is working with its smaller suppliers to make them EDI enabled. While not requiring them to invest in EDI technology, GM is helping them implant the so-called "E-Form messaging format," that allows for translation of EDI messaging while using the Internet as a transmission tool.
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