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EDI 101 \ What is causing the growth?

One of the main reasons for the explosive growth of the EDI service market is that the business environment finally contains all the pieces to make EDI possible. Clearly, standards are a major factor. By 1986, there were over 150 standardized transaction types. Standard transaction development has a cascading affect. The Purchase Order begat the Invoice. The Invoice begat the Shipping Notification. This Shipping Receipt leads to the desire to make electronic payments, which spawns another batch of electronic transactions.

The spread of computers and available software has been a factor in EDI growth. The acceptance of the Personal Computer has been a stimulus to EDI. It is possible to develop an EDI solution based on a Personal Computer with less than $1,000 hardware investment.

Another factor is what you could call the “Domino Effect” within industries, where large companies in the center of an industry coerce their suppliers’ partners to adopt EDI. Soon, the second tier suppliers require EDI links to the third tier suppliers. The automobile industry is an example of the Domino Effect.

There are two approaches to getting supplier compliance; incentive and force. Some companies have offered incentives for electronic linkups.

The retail industry relied on force with deadlines and ultimatums. If you supplied production material to a retail store, lack of EDI support meant loss of business.

What could inhibite EDI implementation?

There are several factors:

  • Lack of ease of use and accessible EDI software.
  • Difficulty in understanding the various options for implementation of EDI.
  • Advertisement misinformation.
  • Inability to understand the importance of EDI as a strategic tool for acquiring new business opportunities.

EDI is overcoming these obstacles to acceptance because it addresses a basic business goal within every company; the goal of reducing administrative overhead and opening new trading opportunities.

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