Magazine article CMA - the Management Accounting Magazine

Electronic Data Interchange - a Management Primer

Magazine article CMA - the Management Accounting Magazine

Electronic Data Interchange - a Management Primer

Article excerpt

EDI is finally getting popular in Canada. Canadian businesses are positioning themselves to take advantage of this technology. Currently, there are over 5,000 Canadian businesses that have already adopted EDI as a means of doing business. In addition, there are several EDI projects initiated in the federal, provincial, and municipal governments. It is, however, becoming abundantly clear that very few companies know how to use EDI as a strategic tool. Most of these companies have a narrow focus and are only looking at the interfaces between the buyer and supplier as an EDI opportunity. Evidently, these companies are missing the opportunity to maximize the benefits associated with this technology.

This technology has existed for decades but only recently has started to receive the attention it deserves. Finally, senior management has realized that EDI is capable of saving time and resources by lifting an immense paper burden off of the shoulders of managers and other workers. Business managers started feeling comfortable with this prospect partly due to the fact that the technology is not in the control of IT specialists. The potential benefits may also have something to do with the change in attitude of business managers:

* competitive advantage

* reduction in costs

* speeding up information flow

* streamlining business processes

* achieving a higher level of automation

* on-line business

* economies of scale

* just-in-time (JIT) capabilities

* electronic marketing.

Additional reasons for adopting EDI include:

* No business can continue to survive in the growing excesses of a paper environment. For every dollar spent on a paper document, we spend $20 to $80 to process, copy, distribute, store, and destroy documents.

* Recent cuts in budgets and staffing have left managers with no choice but to meet the challenge of managing their activities more efficiently. EDI technology offers them an opportunity to re-engineer their environments for productivity.

* In spite of technological innovations that promise to improve productivity, white-collar productivity in North America has been declining every year. It is happening simply because organizations are automating chaos.

* It is no secret that exemplary organizations searching for excellence are making more effective use of information technology. These organizations are convinced that EDI offers great potential for proficiency and profitability improvements, and they are capitalizing on every opportunity to take advantage of this technology.

It is imperative to ensure that the company is ready for EDI. A fertile business environment for EDI is characterized by:

* a large volume of recurring transactions

* the need for timely transaction processing

* transactions associated with large amounts of paperwork

* the need for careful data tracking and reporting

* a highly cost-competitive market environment

* a centralized or distributed data processing with standardized applications. …

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