EDI... A free lunch for small/medium business?

by Sigrid Marmann, President of Datatech EDI Systems
ACCPAC Agenda, June 1995, Volume 1 Issue 1
Electronic Data Interchange, better known as EDI, is changing the way we business is done.

What, then, is EDI?

EDI is the transmission of business documents from one computer to another in a standardized format by eliminating paper and multiple re-entry of data.

Instead of mailing a business document such as a purchase order, invoice, or check, an electronic message is created and sent from a sender's computer to a receiver's computer via a modem. Each business document has its own individualized set of messages so that the receiving computer knows just what is being received; i.e., an order or an invoice.

The initial movement of businesses to EDI begain in the 70s. It was started primarily by the retail/grocery industry, auto makers, and the garment industry. The goal in mind was to quantify transactions, control costs, lower inventory levels, and improve service through error reduction and faster response time. Since 1983, there has been progress on all fronts of EDI, including the adoption by many companies of ANSI X12 standards.

EDI offers opportunities for control and protection that go far beyond paper systems. Papers can be stolen or lost and audit trails can provide a false sense of security. Through password authentication and encryption, electronic systems can offer far greater protection than paper systems.

But is small/medium business ready for EDI? They had better be. They They may be forced to it by bigger trading partners.

When evaluating EDI, small and medium sized businesses often pose the questions, "What's in it for me? Do I get a free lunch? What are the benefits? Can I afford new software and equipment? When is the payback? Am I forced into EDI by a trade partner? Will EDI improve my relationships with them?"

Because smaller businesses usually do not have the resources of their bigger counterparts, their decisions to use EDI or not are not always based on practical considerations. Once the decision is made to move to EDI, a business then must face the realization that moving to EDI is not a free lunch. Moving to EDI involves the more tangible investment in software, hardware, manpower, procedures, and approaches. It also involves the intangible effects of change such as fear, education, job security, and uncertainty.

All current business procedures need to be looked at and maybe re-invented into better solutions for the company. Some of the things to look at are business procedures, filing systems, approval mechanisms, and communications within the company and from outside.

Two major ingredients go into an EDI project: EDI Management Issues and EDI Implementation Issues.

EDI Management Issues

Organizations resist change. Ideally, change needs to start right at the top with the blessings of the president. Once obtained, EDI will be supported throughout the entire organization.

Project success depends on the relationship between decision making and implementation skills. EDI means re-engineering the way you do business. Technical people need to know more about the business procedures, and users need to become more informed about technology. Business in general has to be able to recognize the opportunities EDI offers and no longer focus on the way it was done or if it ain't broke, don't fix it, but take a new look at the entire business.

For EDI to be successfully implemented, all people need to understand it and feel comfortable with it in order to support it. You may want to tell them why the company is going to EDI, i.e. the long term benefits. To dispel fear, talk honestly; let them know that change is about to happen and how it affects them individually. Show them how they will fit into the new scheme. You may want to let them know up front that the conversion is not going to be easy and that it may be very frustrating.

EDI Implementation Issues

The advantage small/medium sized companies have over their bigger trading partners who implemented EDI at an earlier stage is that they can leverage off their experiences. Key issues in selecting EDI include:
  1. Know how and techniques to move to EDI
  2. Integration issues with existing in-house software
  3. Cost and implementation of new software and/or hardware
  4. Incentives to overcome the grief of conversion
  5. Educational issues
  6. Security and access controls
  7. Strong internal controls
  8. EDI administration

EDI is the future. The future is now. Be ready.

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