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Chapter 10: EDI and business

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Organisations that use EDI

Bhs UK and European multiple apparel retailer. Bhs deals with about 400 suppliers using EDI. Lucas Rist Manufacture the wiring loom for car maker. Confirmed EDI orders for delivery to track side within 10 hours. TeleOrdering The EDI system for the UK book trade System supplied to bookshops on CD-ROM.
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EDI trading patterns

Hubs and Spokes The Hub: the major manufacturer or retailer Spokes: suppliers to the hub. EDI can be a condition of trade: Therefore, when it [the Hub] says, thou shall trade electronically, the suppliers have little option but to reply anything you say, Sir. EDI or DIE Arrangement can become problematic for a supplier serving several hubs each with differing requirements.
E-Commerce David Whiteley/McGraw-Hill, 2000

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E-Commerce David Whiteley/McGraw-Hill, 2000

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EDI trading patterns

Hubs and Spokes
Spoke

order

invoice

Spoke

order invoice

Hub

order invoice

Spoke

order

invoice

Spoke
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EDI trading patterns

Overlapping user communities
Super Food Save on Food Sava Store

Top Pop

Best Bread

Freshest Fruit

Nuts Now

Mighty Meat

Very Veg

Nan Ham

Major retail chains with EDI links to most suppliers; Suppliers with links to several of the major retail chains.
E-Commerce David Whiteley/McGraw-Hill, 2000

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EDI trading patterns

Extended supply network
Super Food Save on Food Sava Store

Top Pop

Best Bread

Freshest Fruit

Nuts Now

Mighty Meat

Very Veg

Nan Ham

Ready Raisin

Freds Flour

Avrils Apples

Petes Pears

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EDI trading patterns

Wholesaler network
Andy Agent Instant Insurance Kent Council Benny Bank Sue Shop

Henrys Office Supply Wholesale

Pennys Pens

Petes Paper

Pams Pencils

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EDI trading patterns

Open User Community Networks: Trading partners use differing VADS (possibly in different countries). EDI Standards: Trading partners using differing EDI standards. Hubs defining subsets or dialects of EDI standards. Product Coding: Inconsistent/non-standard use of coding and/or units.

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EDI transactions
EDI Trade Exchanges The main execution and settlement exchanges of the trade cycle are: The Customer sends an Order to the Supplier. The Supplier sends the goods and a Delivery Note. The Supplier follows up the delivery note with an Invoice. The Customer makes payment against the Invoice and sends a Payment Advice.

See next slide for diagram

E-Commerce David Whiteley/McGraw-Hill, 2000

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EDI transactions
EDI trade exchanges
Customer Supplier

EDI
order delivery note invoice payment

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EDI transactions
Order The order (purchase order) is a contract for one specific consignment of goods. It specifies: What is wanted (product code) In what quantity (quantity and unit of issue) Where it is to be delivered (delivery address code) Who will pay (invoice address code) etc. Also needed the amendment orders Another form of order - the call-off order.
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electronic commerce The delivery note can be sent by EDI. This saves: Typing in the delivery note details strategy Matching it to the corresponding order technologies and applications The problem with the EDI delivery note is that it does not

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EDI transactions
Delivery Note Goods arriving at a customers door should have documentation to indicate who they are from and why they have been sent. It normally specifies: The product and quantity

It should specify The order it fulfils

prove that the package and the goods actually arrived.

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EDI transactions
Invoice When goods or services have been delivered, the supplier issues an invoice. This says: What has been supplied For which order(s) Total cost (which we would now like paying) Invoices need checking against the original orders and deliveries EDI automates this process.

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EDI transactions
Payment and Payment Advice With EDI, both payment and payment advice can be electronic: Payment can be sent to the bank either using an EDI payment message or EFT system (BACS in the UK) The payment advice can be sent to the supplier and is readily matched to the invoice(s) for which it is the payment.

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Alternative EDI trade cycles

Order Message: Delegated Ordering Responsibility of maintaining stocks is given over to the supplier Self Invoicing (self billing) The customer pays for goods received without an invoice being sent. Invoice Only Ordering is informal but invoicing is EDI

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EDI adoption and EDI maturity

Business System Evolution
Business Applications Integrated Business Systems Inter-organisational Systems Internet enabled Systems
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EDI adoption and EDI maturity

EDI Maturity
Discovery Introductory Integration Operational Strategic Innovative
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EDI adoption and EDI maturity

EDI Maturity Discovery Stage An organisation choosing to adopt EDI to: Gain competitive advantage Solve an administrative problem Copy competitors who are adopting EDI

An organisation having to adopt EDI because a significant customer insists.

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EDI adoption and EDI maturity

EDI Maturity Introductory Stage Organisations setting out on the EDI path: Start with a pilot scheme. This stage: requires investment. Does not result in any cost saving or efficiency gain.

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EDI adoption and EDI maturity

EDI Maturity Integration Stage Interface the EDI software with the business application: Messages can be transferred electronically and automatically between the two systems. This stage: Often expensive (writing interface system). System starts to achieve benefits.
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EDI adoption and EDI maturity

EDI Maturity Operational Stage A significant number of trading partners and/or commonly used trade transactions are converted to EDI a critical mass. The volume of electronic trading gives cost savings the staff dealing with manual transactions can be redeployed.

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EDI adoption and EDI maturity

EDI Maturity Strategic Stage The opportunity to make changes to established business practice. For example: Revising the sequence of trade documents. Just-in-time (JIT) manufacture Quick response supply.

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EDI adoption and EDI maturity

EDI Maturity Innovative Stage The possibility of changing the nature of the product or the provision of new services. Example are: Producing cars to order (as opposed to producing for stock). Bicycles built to a customer specification. A factory made-to-measure pair of jeans. EPOS and EDI in the best seller book trade.
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IOS and industry sector organisation

(Inter-organisational System) EDI has, for many sectors, becoming the normal way that business in done. The closer co-operation between customer and suppliers of which IOS is a part is also having a subtle effect on the market. It is argued that it is no longer just a manufacturer or a retailer that is competing for the customer but it is these companies in conjunction with their supply chains.

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IOS, EDI and Internet e-Commerce

EDI and Internet e-Commerce complement each other: Internet e-Commerce provides for searching for products and for once-off purchases. EDI is an application to application interface for repeated and standardised transactions.
EDI

Internet e-Commerce

Materials Supplier

Product Supplier

Manufacturer / Retailer

Customer

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Chapter 9 Exercise 1

For each stage of the business trade cycle, see Figure 10.5, list the stage specific advantages (and any disadvantages) of using EDI.

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Chapter 9 Exercise 2

What problems might be encountered by a small food processing company, which supplies several supermarkets, when required by its customers to implement EDI.

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Chapter 9 Exercise 3
EDI is typically applied to trade exchanges, orders, invoices, etc. but it can also be used for non trade purposes. In the UK, students apply for university places through the UCAS clearing centre (and other countries have similar schemes). The procedure is that students submit their applications to UCAS and the clearing centre passes the application onto the preferred universities. Each university then accepts, rejects or makes an offer and the decision is passed back to the student via the UCAS clearing centre. Suggest how EDI (and other ICT technologies) might be used to update such a scheme.
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Chapter 9 Exercise 4

Section 10.4.2 shows three instances where a mature EDI supply chain (JIT supply coupled with sharing of market information suppliers) can facilitate a change in the nature of the product or service can you suggest any further real examples or possibilities that could be developed?

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