Is the computer to computer exchange of business data from the retailer to the vendor and vendor to retailer?

I.A.2. Electronic Data Interchange (EDI)

In EDI, the electronic equivalents of common business documents, such as request for quotes, purchase orders, and invoices, are transmitted electronically between the EDI-capable companies. These electronic documents are given standardized electronic formats and numbers (referred to as ANSI X12 standard), so everyone involved can correctly interpret the information that is sent to them. Value-added networks (VANs), provided by companies similar to long-distance phone companies or clearinghouses, provide connectivity between EDI-capable companies.

Since EDI runs over proprietary networks, it is typically well regarded in terms of reliability, security and performance. However, EDI deployment and ongoing VAN subscription premiums have proven too onerous for most companies and EDI is being less widely used today.

V.B.2 Prospect of Internet EDI

Companies who currently possess traditional EDI respond positively to Internet EDI. A recent survey by Forester Research on 50 Fortune 1000 companies showed that nearly half of them plan to use EDI over the Internet. Frequently, companies combine the traditional EDI with the Internet by having their Internet-based orders transmitted to a VAN or a service provider that translates the data into an EDI format and sends it to their host computers. The Internet simply serves as an alternative transport mechanism to a more expensive lease line. The combination of the Web, XML (eXtensible Markup Language), and Java makes EDI worthwhile even for small, infrequent transactions. Whereas EDI is not interactive, the Web and Java were designed specifically for interactivity as well as ease of use.

VIII. EDI and its Problems

Presently, electronic data interchange (EDI) is primarily used to facilitate coordination and communication among supply chain partners—e.g., Wal-Mart and its major vendors, as discussed earlier. Thus, EDI addresses information flows that apply principally to the interorganizational dimension of supply chain coordination.

EDI is the direct computer-to-computer exchange between two business partners (e.g., a manufacturer of finished goods and a supplier of raw materials) of standard business documents such as purchase orders and invoices. Others define EDI as the transmission of standard business documents in a standard format between industrial trading partners from computer application to computer application. EDI messages can be transmitted directly between two business partners or through a third-party value-added network.

EDI can help businesses save time and money by reducing transaction processing and data entry costs while gaining faster access to information. Studies suggest that EDI reduces the human element in communication while improving both speed and accuracy of data flow. EDI can also help lower inventory costs by reducing the time raw materials spend in inventory. Reductions in both leadtimes and inventory levels, using EDI, have been reported.

Unfortunately, EDI is not living up to its promise for a number of reasons. First, the participating companies must agree on the format of a standard, which is not as easy for them to do since many of them are using different standards. The American National Standards Institute (ANSI) developed the X.12 data interchange protocol as a flexible standard, but different industries have developed different versions of this standard.

Second, software is too expensive and too proprietary. Specialized software must be developed by participating businesses to convert incoming and outgoing messages in a common format that is understandable to other businesses, but only large businesses can afford to do that. This makes EDI less affordable to smaller organizations. Traditional EDI works better between two large organizations with a high volume of transactions.

Third, the transaction fees are too high. Again, only large organizations can afford EDI. For instance, EDI has been used to support the automotive and retail industries.

Fourth, EDI optimizes various links in the supply chain without holistically tackling the problem of end-to-end efficiency. This is mainly because the efficiency in some parts of the overall links is improved due to e-commerce technologies and these technologies may not be available to some supply chain partners, especially smaller businesses.

Fifth, while timely and accurate information exchange facilitates closer manufacturer and supplier relationships, and such closer relationships can improve leadtime performance, some studies have shown EDI to appear to have little effect on either relationships or leadtime performance.

The bottom line is this: EDI will remain in SCM, at least for the time being, since it has the advantage of higher data security than the Internet and it can carry large transaction volumes. In spite of concerns about security over the Internet, a growing number of experts agree that the economics of the Internet versus EDI appear overwhelming. Some argue that EDI simply does not have the flexibility to survive and will die a very slow death. EDI is inflexible and limited in the sense that it is a one-to-one technology that can only handle large transaction volumes.

VII. EDI Adoption

Firms considering the adoption of EDI need to conduct a feasibility study, similar in many cases to the adoption of other types of information technologies (IT). However, the business case for EDI is more complicated than for IT innovations that fall strictly within the boundaries of an organization, because two or more organizations are involved in an EDI implementation. Because of the interorganizational nature of the EDI decision, the factors influencing adoption comprise three categories, perceived benefits, external pressure due in part to business partner influence, and organizational readiness.

Perceived benefits refer to the anticipated advantages that EDI can provide the organization. As explained earlier, benefits are both direct and indirect in nature. Direct benefits include operational cost savings and other internal efficiencies arising from, for example, reduced paperwork, reduced data re-entry, and reduced error rates. Likewise, indirect benefits are opportunities that emerge from the use of EDI, such as improved customer service and the potential for process reengineering.

External pressure is multifaceted, encapsulating the influences arising from a number of sources within the competitive environment surrounding an organization. These sources include: competitive pressure, relating to the ability of EDI to maintain or increase competitiveness within the industry; industry pressure, relating to the efforts of industry associations or lobby groups to promulgate EDI standards and encourage adoption, and trading partner influences.

The latter factor captures the potential power of a trading partner to “encourage” EDI adoption, and the strength of the partner's exercised power. Imagine a major supplier or purchaser of a firm's goods or services. Potential power increases with size of the trading partner and its criticalness to the firm. Exercised power ranges from subtle persuasion to decrees requiring EDI adoption as a necessary condition for conducting any further business with the partner.

Organizational readiness is the set of factors necessary to enable the firm to adopt EDI. These include sufficient IT sophistication and financial resources. IT sophistication captures not only the level of technological expertise within the organization, but also assesses the level of management understanding of and support for using IT to achieve organizational objectives. Financial resources is a straightforward measure of an organization's capital available for use toward IT investment.

In the context of IOS, however, readiness is not solely an organization-level concept. Adoption of an IOS requires readiness on the part of, at a minimum, two trading partners. Thus readiness considers a firm that may be motivated to adopt EDI, i.e., having high perceived benefits, and be ready to adopt, i.e., having available financial resources and IT know-how, but is unable to do so due to trading partners that are not ready or able to adopt EDI. For example, the firm may find that its trading partners do not have the resources necessary to adopt EDI, or that the firm anticipates difficulty acquiring the “critical mass” of EDIenabled trading partners to make its adoption worthwhile. Smaller trading partners, even if financially and technologically able to adopt EDI, may not find it worthwhile to do so on a cost/benefit basis due to their limited volume of transactions (i.e., the lower cost of EDI transactions is not able to offset the largely fixed costs of EDI adoption). Thus, even large, solvent, and technologically sophisticated organizations can have difficulty in expanding their networks of EDI-enabled trading partners.

▹ EDI Standards

▹ UN-EDIFACT

To cater to the requirements of global rather than U.S. domestic trade, the United Nations developed a combination of the X12 and European standards endorsed by the International Standards Organization (ISO) that came to be known as the United Nations Electronic Data Interchange For Administration, Commerce and Transport (EDIFACT) group.

In reality both were guidelines that reflected the needs of complete vertical business groups, such as transportation. Individual organizations had to create implementation guides for their own use of these guidelines, which led to fragmented EDI networks.

2.1.7 Electronic Commerce

Electronic Data Interchange (EDI) is the computer-to-computer exchange of standard business documents such as purchase orders, invoices, and bills of lading, among organisations. Transmitting these documents electronically, or on-line, saves time and money by cutting down on paperwork and data entry (Laudon, 1995). Figure 15 illustrates an EDI system that transmits a purchase order (P.O.) from the buyer to the seller.

EDI can produce strategic benefits in that it can help firms increase market share by ‘locking in’ their customers - making it easier for customers or distributors to order from them rather than competitors. EDI can reduce transaction processing costs, cut inventory costs by reducing the amount of time components are in inventory–it can help get them in the pipeline faster–and EDI can reduce errors associated with manual data entry, and re-entry.

Electronic mail, or E-mail, is the computer-to-computer exchange of messages that eliminate telephone tag, costly long-distance telephone charges, and long delays associated with traditional mail service, sometimes called “snail mail,” and for good reason. It is possible for someone at that is “on-line” to send notes, letters, and attachments in the form of documents (that can retain their original formats), pictures, videos (if not too large), audio recordings, etc. to one or more recipients. By providing faster and more efficient communication between different functional areas of a firm, and among firms, E-mail can speed up many business processes, including production.

Almost faster than they can be evaluated, new information technologies appear that offer promise in improving an organization's competitiveness. Although possible advantages may appear obvious, implementation is another thing. Agile competitors must be up to the challenge of prospering in a rapidly changing environment where every day brings new opportunities and new challenges. The challenge is to know what is available, determine if it has value for the firm, discover how to use it, acquire it, and apply it in a way that produces some advantage for the firm.

2.2.3. EDI – Electronic Data Interchange

The acronym EDI, Electronic Data Interchange, is usually related with the use of general electronic transfer of business data from one independent computer system to another, using a standard data format as defined by the ANSI X12 [25] standard (mainly in the USA) or by the UN/EDIFACT (United Nations/Electronic Data Interchange for Administration, Commerce and Transport) [26] standards.

STEP and EDI are viewed as complementary standards, one addressing product data the other business data, and already there were some projects launched aiming to interconnect and harmonise them, willing do it without any modification on any of these standards [27].

Electronic Data Interchange (EDI)

According to the HHS, EDI “Is the electronic transfer of information, such as electronic media health claims, in a standard format between trading partners. EDI allows entities within the health care system to exchange medical, billing, and other information and to process transactions in a manner, which is fast and cost effective. With EDI there is a substantial reduction in handling and processing time compared to paper, and the risk of lost paper documents is eliminated. EDI can eliminate the inefficiencies of handling paper documents, which will significantly reduce administrative burden; lower operating costs, and improves overall data quality.” Under HIPAA, the following standard transactions must use EDI:

Claims and encounter information

Payment and remittance advice

Claims status

Eligibility

Enrollment and disenrollment

Referrals and authorizations

Coordination of benefits

Premium payment

Additionally, under HIPAA, the following specific code sets for diagnoses and procedures must also be used:

Healthcare Common Procedure Coding System (HCPCS) (Ancillary Services/Procedures)

CPT-4 (Physicians’ Procedures)

CDT (Dental Terminology)

ICD-9 (Diagnosis and Hospital Inpatient Procedures)

ICD-10 (As of October 1, 2014)

National Drug Codes (NDC)

3.5. Comparison of IT

The information technologies mentioned above include EDI, GroupWare, the Internet and Intranets. EDI involves the direct routing of information from one computer to another without interpretation or transcription by people, and to achieve this the information must be structured according to predefined formats and rules, which a computer can use directly. Although EDI has been shown to facilitate accurate, frequent, and timely exchange of information to coordinate material movements between trading partners, and suppliers receiving JIT schedule information achieved better shipping performance, the problem with EDI is the lack of a globally recognized standard format for data storage and transfer. Because of this, organizations must agree upon the translation software and data format on a project by project basis. Consequently EDI may not be a good choice for supporting quick response in agile manufacturing.

GroupWare applications can help coordinate work through: (1) making available to project members a common body of information, (2) tracking work flows so that project members can collaborate from a distance, and (3) provision of a platform for communication and interactive discussion. However, it can be expensive and it cannot be used to gain access to remote computers that are not GroupWare servers. Although GroupWare provides more flexibility than EDI, it is still not flexible enough to enable firms to quickly form a partnership to react to a market opportunity. One solution to the inflexibility problems of EDI and to a lesser extent GroupWare is using the Internet. Several technologies have been integrated successfully into the Internet and these include the WWW, Telnet, FTP, Email, and Videoconferencing. Specifically the Internet provides a mechanism for global access to both external data and customers. The Web would allow collaborators in remote sites to share their ideas and all aspects of a common manufacturing project.

An Intranet is essentially any site based on Internet technology but placed on private servers and designed not to allow unauthorized users. Hence it merges the advantages of the Internet (global access) with those of LANs (security). It appears that Intranets, utilizing the WWW and any Net browser, can be used to support the communication required for agile manufacturing, viz. external access and inter-organizational coordination.

2 Blockchain relevant to the transportation system

The goods and services when moved from its origin to its destination, takes a product, a carrier, and a middle-man who might be irrelevant and disappear. So, blockchain provides a relevant feature to the transportation system without any involvement of a third-party.

Blockchain technology was developed out of a branch of mathematics called cryptography that produces a complex hash value, which is difficult to calculate for an adversary. It is a replicated, secure, and immutable ledger in which to modify the data in one block is impossible without modifying the data of the entire chain. In this way, it is difficult to perform malicious and falsifying activities on the blockchain and it can potentially be applied in the transportation system. The traditional transportation system and future with blockchain-based transportation systems are described as follows.

2.1 Traditional/current transportation system

The traditional transportation system used electronic data interchange and application program interface to provide and record the transportation data [4]. This data can be altered, changed, or manipulated by a third-party authenticator, which can have critical consequences on the global transportation system. The pictorial representation of traditional transportation system is as shown in Fig. 1.

Fig. 1. Traditional transportation system.

2.2 Future transportation system with blockchain

With the help of blockchain technology, there is no involvement of third-party authenticator. So, there is no single point of failure in the system. This technology is used for data authentication where the whole network can contribute and validate data, which makes the system tamper-proof and transparent.

Fig. 2 shows if blockchain is implemented and shared by all entities then, it eliminates redundancy by having a single source of truth. In this context, a new platform called blockchain in transport alliance (BiTA) is working for applying blockchain technology to solve the problems of an the transportation system. This platform has been used for creating a decentralized framework to activate the development of blockchain applications for logistics management, asset tracking, transaction processing, and more.

Fig. 2. Future transportation system with blockchain.