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EDI in Manufacturing 

 

PART IV. 

 

Many obstacles must be overcome to implement EDI within any company. Some of the obstacles can be external and others can be internal. Described below are three obstacles presenting road­blocks to implementing EDI for competitive advantage.

• Executive-Level Commitment — This is the most difficult obstacle to overcome when implementing EDI. Unless EDI is viewed as a business issue and addressed as part of your overall business strategy, it will not receive the attention or resources required to help your company achieve a competitive advan­tage in the marketplace. The key to selling EDI at the executive level is not based on the technology, but as a project directed at solving a business problem such as improved customer service.

• Level of Automation — This can be a problem if the sophistication of your customers and suppliers is not at the level needed for you to move toward an EC environment. Many companies have incurred "hidden costs" to increase the EDI capabilities of their trading partners. These costs can include conducting training to educate suppliers, identifying turnkey solutions that suppliers can purchase or funding a portion of the investment. The key to overcoming this obstacle is to identify the type of help suppliers need and working with them to resolve the issues.

• Compatibility of Technology — This is generally not an issue if the services of a value-added network (VAN) are utilized since they can handle almost any hardware and communica­tions interface required. It also eliminates other issues related to the timing of transmissions, security and control reporting. However, this obstacle will become more important as com­panies move to event-driven EDI versus the current batch-ori­ented processes. The key is to evaluate the value of maintaining in-house expertise versus utilizing a third-party service to support these trading partner linkages.

Benefits

In summary, there are many benefits to be obtained through the strategic use of EDI. The most important is the opportunity to earn greater profits and increase market share. However, many companies only document the reduced costs associated with eliminating the processing of paper-based documents. Significant benefits can be obtained from the competitive use of the inter-enterprise information. As indicated previously, reducing time to replenishment for existing products and time to market for new products are becoming critical issues for many companies. If companies are able to apply IBS technologies such as EDI to not only reduce cycle times and eliminate non-value-added activities, but share sales, marketing and engineering data the result will be a true competitive advantage.

The benefits obtained from using EDI are also directly propor­tional to the measurements used to evaluate its success. Tradition­ally, the success of EDI has been measured by number of trading partners and transaction sets that have been implemented. These measurements tended to promote the idea of EDI as simply a technical issue. Recently, some companies have changed to measuring the success of EDI based on more operational measures such as inventory levels, delivery time and open account receivable days. This has helped to increase the awareness of the business benefits available from the use of EDI. However, to realize the true strategic benefits of EDI, companies must develop new measures of EDI success such as the velocity at which products move through the distribution channels and the increase in cash flow or working capital. This will help to create the awareness of EDI as an offensive weapon to win the business war.

Assessing Your Potential

The assessment of EDI's potential for competitive advantage may be driven by many factors. If you are being required to implement EDI with your customers or suppliers, an assessment of your potential may help to establish a future direction. If you are already using EDI, an assessment may help evaluate your efforts with the long-term potential for EDI. Regardless of your situation, the benefit of assessing your EDI potential is the opportunity to examine, from a business perspective, the use of EDI as an enabler of process innovation and increased competitive advantage.

The approach to assessing your EDI potential must be one that allows people to step back from their day-to-day activities and begin to formulate a new way of doing business. This is not the time to follow your standard systems development approach. What is required is a process that generates a climate of open, creative and innovative thinking that results in not just incremental changes of 10-20 percent, but order-of-magnitude changes of 100-200 percent. The assessment, if executed properly, should significantly change a company's thinking about the potential for EDI and result in initiatives to realize this potential.

The first step to assessing your EDI potential involves compiling the information required to formulate an accurate vision. It should involve an examination of the your current business strategies and direction. This examination should focus on understanding the drivers of the business (e.g., time, cost, quality), market opportunities and the demands of your customers. It should be an executive-level effort focused on analyzing your key business processes at a strategic level. The result should be not only a consensus on your key business goals and objectives, but identification of the business processes offering the greatest opportunity for developing tighter linkages with your customers and suppliers.

The second step involves conducting a series of sessions to develop a vision of how your business processes should be done differently using EDI. In Process Innovation: Reengineering Work through Information Technology, Davenport describes a visioning process that provides this focus consisting of five steps:

1. Develop an initial vision statement describing the overall process and how it will work.

2. Develop a list of key process characteristics such as flow, output, performance, organization and technology to describe how well it will need to work.

3. Identify performance measures and objectives such as cost, quality, cycle time and speed to describe what must go right for the process to be successful.

4. Identify critical success factors such as people and technology that could cause the process not to be successful.

5. Determine potential barriers to implementation such as resources, organizational culture, technology and market factors that could prevent a successful effort. The result should be a realistic vision of the EDI potential in your organization from a business perspective. It will also provide a high-level understanding of the challenges that must be addressed before EDI can be used for competitive advantage.

Conclusion

This paper has attempted to create an awareness of the competitive advantages available from the use of EDI. It has stressed the need to view EDI as part of a business strategy and not simply a technical issue. It has emphasized the need for companies to understand their business environment in order to take full advantage of EDI's potential. Finally, it has summarized the obstacles, benefits and an approach to utilizing EDI for competitive advantage. The challenge is to take this new perspective and make EDI your company's gateway to competitive advantage.


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