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1 CIT 245 By Mohammed A. Saleh. Organizations that use EDI  It has potential applications where the administration processes are computerized.  Extensive.

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Presentation on theme: "1 CIT 245 By Mohammed A. Saleh. Organizations that use EDI  It has potential applications where the administration processes are computerized.  Extensive."— Presentation transcript:

1 1 CIT 245 By Mohammed A. Saleh

2 Organizations that use EDI  It has potential applications where the administration processes are computerized.  Extensive users of EDI: 1. Bhs - UK and European multiple retailer dealing with fashion goods. - Deals with about 400 suppliers on a regular basis and all orders are sent by EDI. - It uses JIT supply 2

3 - Uses EDI to confirm supply delivery and communicate bar code information (delivery and packaging) - Use of EDI is the back-end to an integrated merchandising, sales and replenishment system. 2. Lucas Rist - Car manufacturer using EDI as a facilitator of JIT manufacturing system. - Responsible for electrical works on Rover cars. 3

4 - Rover sends L R a 10-day plan and later a provisional order, both by EDI. - L R notifies Rover of when the parts will be dispatched. - Rover adjusts it production schedule according. - One missing part by Rover causes the production line to stop. 3. TeleOrdering - Book trade EDI system 4

5 3. TeleOrdering - Book trade EDI system - Bookshops view a monthly catalogue; Book in Print, to look up any book in print but not in stock. - If a customer (bookshop) wants a book, the book ordering system will format an EDI order - Makes it easy for publishers to market and quickly sell their books 5

6 1. Hubs and Spokes - EDI has been adopted by large retail organizations. - They then form extensive e-trading networks with their supplier. - This EDI flow forms the hub and spoke pattern, where the major organization is the hub and suppliers are the spokes. - Orders sent from the hub to the spokes, who then transmit EDI invoices after the goods have been delivered. 6

7 Figure 1: Hub and Spoke Trading Patterns 7 Hub Spoke order invoice

8 - Initially implemented with minimal suppliers then with time the system is extended - In this pattern EDI is made a condition of trade Bray (92): “…..If the Hub says ‘ thou shall trade electronically, the supplier have little option …” Tesco: “EDI or DIE - Leads to closer user communities - The hub chooses the VADS and EDI standards. 8

9 - Works well if a supplier serves a single hub, but less satisfactory if the supplier trades with multiple hubs. - With multiple hubs the supplier will join at least two VADS and follow a different EDI standard. - It’s a complex pattern: Spokes intertwined and hubs are spokes of other hubs. Different EDI standards used. VADS interconnectivity is a ‘nightmare..!’ 9

10 2. Overlapping User Communities - A spider web to the spoke organization Figure 2: Overlapping Supply Networks 10 Super Food Sava Food Save on Food Fresh Fruit Mighty Meat Nuts Now Very Veg Best Bread

11 - It shows conflicting requirements by the demanding customers. - EDI development seems to result in network expansion and complexity. 3. Differing patterns of EDI - More patterns developed - They vary in the range of trading links established and type of messaging used. - Retailing is a sector involving massive e- trading and a pattern has been developed: - 11

12  Major retail chains with EDI links  Suppliers with links to several of the major retail chains. - Spread of EDI to second tier supplier. - Suppliers acting at different layers increase the network complexity. - Shown on Figure 3: 12

13 Figure 3: Extended Supply Networks 13 Super Food Sava Food Save on Food Fresh Fruit Mighty Meat Nuts Now Very Veg Best Bread Fred’s Flour Avril’s Apple Pete’s Pears Ready Ralsin

14 - An alternative is the wholesaler pattern Figure 4: Wholesaler Networks 14 Henry’s Office Supply Wholesale Kent council Pete’s Paper Pam’s Pencils Pam’s Pencils Penny Pens Penny Pens Benny Bank Instant Insure Andy Agent Sue Shop

15 4. Co-operative User Communities - A good example is the TeleOrdering network, all publishers and book retailers, large and small can take part in the network. - This is setting up a co-operative community 2. Open User Communities - cater for an established trading relationship with EDI evolution - Principle barriers to EDI evolution of open EDI trade: 15

16  Networks Using more than one VADS in e-trading, due to cross sector boundaries. Defining the membership of a VADS is a problem.  EDI Standards Standards have been developed on a national basis or industry basis. For open trade a universal standard is required. EDIFACT is trying to encompass the needs for all.  16

17  Product Coding Product codes and quantity they imply. The need to use an acceptable coding system, keeping in mind different sectors exist. E.g. ANA code for food or an ISBN code for a book 17

18 EDI Trade Exchanges  Main use of EDI is for the execution and settlement exchanges of the trade cycle.  Exchanges take place within an agreed trade relationship and in the context of a formal contract.  Basic pattern: Customer sends an order Supplier send goods + delivery note Supplier follows up delivery note with an invoice Customer makes payment against the invoice 18

19 Figure 5: EDI Trade Document Exchanges 19 Customer Supplier order del. note invoice payment EDI

20  Order - A contract for one specific consignment of goods - Specifies what is wanted, quantity, where to be delivered and who will pay. - Order allows amendment by customer. - Form of order widely used in commercial transactions is the ‘call-of-order’. - Call-of-orders will be large quantities and for an extended period the pros is in using EDI. 20

21  Delivery note - A documentation stating where goods are from and why they have been sent. - Entered into the computer system and matched with the original order - Helps to identify any discrepancies.  Invoice - Once goods have been delivered an invoice is issued - Issued at the end of each order or at end month. 21

22 - EDI invoicing ensures reliability and accuracy of the invoice. - No issues of lost invoices in the post.  Payment - Payment sent to the bank by using an EDI payment message - Makes the whole process fast and swift. 22

23 Business System Evolution  Development of computers; mainframes, micro to mini led to the growth of organizations.  Merging computers and telecomm has resulted into networking (LANs, MANs, WANs)  Networks have been used to integrate organization's business processes like customer file and interfaces to accounting systems. 23

24  The integration of systems has been a factor for improving customer services and customer care.  However the integration systems stopped at the companies back and front doors.  Inside the company the order processing system formulated the replenishment demand, updated the stock file and made a posting to the accounting system but the order was printed on paper. 24

25  These difficulties and inefficiencies is the Inter-organizational System (IOS).  The prime technology of IOS is EDI.  The development of EDI and IOS has changed the inter-organization business practices in much the same way as the evolution of IT and IS has radically changed intra-organizational procedures.  These developments of BIS can be represented as three stages: 25

26 26 Business Applications Business Applications Internet enabled Systems Internet enabled Systems Inter-organizational Systems Inter-organizational Systems Integrated Business Systems Integrated Business Systems

27  Represented a six stage maturity model: 27 Discovery Introductory Integration Operational Strategic Innovative

28  Opportunities and implications of each stage are:  Discovery - An organization choosing to adopt EDI to gain competitive advantage or solve and admin problem - Arises from the realization from competitors.  Introductory - Organizations start with a pilot scheme - Initiators of EDI networks choose one or two trading partners with which to pilot a message. 28

29 - Requires investment; direct costs include H/W and S/W - Does not result in any cost saving or efficiency gain.  Integration - Further system development after gaining practical experience. - Interfacing the EDI software with business application so the EDI messages can be transferred electronically and automatically between the two systems. 29

30 - To establish the EDI service the EDI software can be bought off-the-shelf. - It is often an expensive stage.  Operational - Integration realizes the EDI benefits of saving time and avoiding errors. - Real benefits come with significant number of trading partners. - The conversion of the major part of the trade cycle, both in volume of trading partners and in numbers of message types is the known as the operational stage. 30

31 - This stage speeds up transactions because of converting the trade cycle to operate electronically.  Strategic - Saving are made by replacing paper documents by their electronic equivalent - Real opportunities come from making changes to established business practice. - Significant progress made in the operational stage brings out these opportunities. 31

32 - The implementations of these changes however has to be strategic. - Possible areas of change: i. Document matching - considerable problem in order processing - Customers match deliveries to orders and invoices and suppliers payments to invoices. - Complexity is brought about by disparate doc types, part deliveries and incorrect codes - The use of EDI makes the process easier. 32

33 ii. Time between formulating a replenishment demand to the order being processed by the supplier takes a long time. - EDI give dramatic time-saving - Eliminated stock holding - Development of JIT and quick response supply. 33

34  Innovative - Establishing an operational EDI infrastructure gives the possibility of changing the nature of the product and provision of new services. - Open up new possibilities of competitive advantage. - an example, Rover Cars have stopped producing cars for stock and only produce when they have a dealer’s order. - EDI has reduced the supply and production time. 34

35 Pick an organization that has implemented EDI. Try to identify the EDI maturity stages that, that organization has undergone. Briefly explain each stage. Requirements  Word-processed – Times New Roman, 12  Should not exceed 2 pages  Hand-in date 14 th May, 2009 (after the lecture) 35

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