EDI: An unfulfilled promise
The Internet may prove to be the panacea for EDI technology
By Doug Harper -- Industrial Distribution, 6/1/1998
To most distributors, the pairing of electronic data interchange and industrial distribution has always looked like a marriage made in heaven.Because processing paper purchase orders and invoices costs distributors an inordinate amount of time and money, it has always been assumed that EDI's paperless transactions would provide the perfect solution.
And when distributors found many of their customers adopting just-in-time inventory practices mandating even more frequent deliveries of smaller quantities of goods, EDI's future seemed all but assured.
Implementation of the technology took another leap forward when major industry segments including the "Big Three" automakers began requiring that distributors servicing their industry adopt EDI as a condition of doing business with them.
So bright seemed EDI's future, in fact, that as early as 1984 the National Industrial Distributors Assn. and the Southern Industrial Distributors Assn. (the predecessors of I.D.A.) together with ASMMA took an unprecedented step. The three organizations formally endorsed Redinet, a commercial EDI venture created by Control Data Corp. and AT&T.
But a funny thing happened on the way to industrial distribution's "electronic revolution." EDI lost its virility and stalled.
According to the 51st Annual Survey of Distributor Operations conducted by this magazine last year, more than half of distributors (52 percent) still were not using EDI. Even more ominous was the fact that the percentage of 1997 EDI users represented growth of only one percent over the 51 percent using EDI in the 48th Annual Survey conducted in 1994.
ID's figures are supported by another study that says while 90 percent of all "Fortune 500" companies currently use EDI, only a paltry six percent of the remaining 10 million companies in the U.S. use the technology. And of those, it must be assumed that a substantial number are only using EDI because it is mandated by their Fortune 500 trading partners.
In fact, it is becoming increasingly apparent that for most distributors, the use or avoidance of EDI represents an almost perfect case-study example of "push-through" technology. When the customer requires EDI as a condition of obtaining or keeping his business, the distributor complies. But on their own initiative, many distributors apparently don't feel a compelling need to adopt it.
Aside from the necessity of training employees in the intricacies of this new and relatively complex discipline, the reason most often cited by distributors for ignoring EDI is the expense of using one of the value-added networks that have been formed to carry EDI. But the Internet may prove to be the salvation of EDI.
Today, EDI is becoming a significant part of the on-line mix of transactions taking place over the Internet that have been grouped together under the general heading of electronic commerce.
While, from its very inception the "Net" appeared to be the ideal medium for carrying EDI, concerns about the security of data precluded its extensive use. But in the last few years, a new generation of software has been developed that assures the integrity of EDI data on the Net.
Programs now exist that provide both encryption and verification through digital authentication. In addition to coding the transmission itself, these products are designed to verify the identity of both sender and recipient and confirm the fact that the data has not been tampered with or altered. They offer the promise that even the most determined hacker will not be able to compromise your company's security.
Thanks to the Net, many experts now believe that the eventual use of EDI by as many as 75-80 percent of all American companies is not out of the question. And according to the EDI Group, Ltd., -- an Oak Park, Ill. consulting firm -- the worldwide EDI market may reach more than $3.2 billion by the year 2001, more than a 300 percent increase over 1995.
But you don't need to encrypt your comments and/or suggestions to send them to dharper@interport.net.
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