Chapter 10: EDI and business E-Commerce ©David Whiteley/McGraw-Hill, 2000

Organisations that use EDI Bhs UK and European multiple apparel retailer. Bhs deals with about 400 suppliers using EDI. Lucas Rist Manufacture the wiring loom for car maker. Confirmed EDI orders for delivery to track side within 10 hours. TeleOrdering The EDI system for the UK book trade System supplied to bookshops on CD-ROM. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI trading patterns Hubs and Spokes The Hub: the major manufacturer or retailer Spokes: suppliers to the hub. EDI can be a condition of trade: ‘Therefore, when it [the Hub] says, “thou shall trade electronically”, the suppliers have little option but to reply “anything you say, Sir”.’ EDI or DIE Arrangement can become problematic for a supplier serving several hubs – each with differing requirements. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI trading patterns Hubs and Spokes E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI trading patterns Overlapping user communities Major retail chains with EDI links to most suppliers; Suppliers with links to several of the major retail chains. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI trading patterns Extended supply network E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI trading patterns Wholesaler network E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI trading patterns Open User Community Networks: Trading partners use differing VADS (possibly in different countries). EDI Standards: Trading partners using differing EDI standards. Hubs defining subsets or dialects of EDI standards. Product Coding: Inconsistent/non-standard use of coding and/or units. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI transactions EDI Trade Exchanges The main execution and settlement exchanges of the trade cycle are: The Customer sends an Order to the Supplier. The Supplier sends the goods and a Delivery Note. The Supplier follows up the delivery note with an Invoice. The Customer makes payment against the Invoice and sends a Payment Advice. See next slide for diagram … E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI transactions EDI trade exchanges E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI transactions Order The order (purchase order) is a contract for one specific consignment of goods. It specifies: What is wanted (product code) In what quantity (quantity and unit of issue) Where it is to be delivered (delivery address code) Who will pay (invoice address code) etc. Also needed – the amendment orders Another form of order - the ‘call-off order’. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI transactions Delivery Note Goods arriving at a customer’s door should have documentation to indicate who they are from and why they have been sent. It normally specifies: The product and quantity It should specify The order it fulfils The delivery note can be sent by EDI. This saves: Typing in the delivery note details Matching it to the corresponding order The problem with the EDI delivery note is that it does not prove that the package and the goods actually arrived. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI transactions Invoice When goods or services have been delivered, the supplier issues an invoice. This says: What has been supplied For which order(s) Total cost (which we would now like paying) Invoices need checking against the original orders and deliveries – EDI automates this process.  E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI transactions Payment and Payment Advice With EDI, both payment and payment advice can be electronic: Payment can be sent to the bank either using an EDI payment message or EFT system (BACS in the UK) The payment advice can be sent to the supplier and is readily matched to the invoice(s) for which it is the payment.  Electronic Funds Transfer (EFT) Bank Clearing System (BACS) E-Commerce ©David Whiteley/McGraw-Hill, 2000

Alternative EDI trade cycles Order Message: Delegated Ordering Responsibility of maintaining stocks is given over to the supplier Self Invoicing (self billing) The customer pays for goods received without an invoice being sent. Invoice Only Ordering is informal but invoicing is EDI E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI adoption and EDI maturity Business System Evolution E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI adoption and EDI maturity E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI adoption and EDI maturity Discovery Stage An organisation choosing to adopt EDI to: Gain competitive advantage Solve an administrative problem Copy competitors who are adopting EDI An organisation having to adopt EDI because a significant customer insists. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI adoption and EDI maturity Introductory Stage Organisations setting out on the EDI path: Start with a pilot scheme. This stage: requires investment. Does not result in any cost saving or efficiency gain.  E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI adoption and EDI maturity Integration Stage Interface the EDI software with the business application: Messages can be transferred electronically and automatically between the two systems. This stage: Often expensive (writing interface system). System starts to achieve benefits. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI adoption and EDI maturity Operational Stage A significant number of trading partners and/or commonly used trade transactions are converted to EDI – a ‘critical mass’. The volume of electronic trading gives cost savings – the staff dealing with manual transactions can be redeployed. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI adoption and EDI maturity Strategic Stage The opportunity to make changes to established business practice. For example: Revising the sequence of trade documents. Just-in-time (JIT) manufacture Quick response supply. E-Commerce ©David Whiteley/McGraw-Hill, 2000

EDI adoption and EDI maturity Innovative Stage The possibility of changing the nature of the product or the provision of new services. Example are: Producing cars to order (as opposed to producing for stock). Bicycles built to a customer specification. A factory made-to-measure pair of jeans. EPOS and EDI in the ‘best seller’ book trade. Electronic point of sale system E-Commerce ©David Whiteley/McGraw-Hill, 2000

IOS and industry sector organisation (Inter-organisational System) EDI has, for many sectors, becoming ‘the normal way that business in done’. The closer co-operation between customer and suppliers of which IOS is a part is also having a subtle effect on the market. It is argued that it is no longer just a manufacturer or a retailer that is competing for the customer but it is these companies in conjunction with their supply chains. E-Commerce ©David Whiteley/McGraw-Hill, 2000

IOS, EDI and Internet e-Commerce EDI and Internet e-Commerce complement each other: Internet e-Commerce provides for searching for products and for once-off purchases. EDI is an application to application interface for repeated and standardised transactions. E-Commerce ©David Whiteley/McGraw-Hill, 2000

Chapter 9 – Exercise 1 For each stage of the business trade cycle, see Figure 10.5, list the stage specific advantages (and any disadvantages) of using EDI. E-Commerce ©David Whiteley/McGraw-Hill, 2000

Chapter 9 – Exercise 2 What problems might be encountered by a small food processing company, which supplies several supermarkets, when required by its customers to implement EDI. E-Commerce ©David Whiteley/McGraw-Hill, 2000

Chapter 9 – Exercise 3 EDI is typically applied to trade exchanges, orders, invoices, etc. but it can also be used for non trade purposes. In the UK, students apply for university places through the UCAS clearing centre (and other countries have similar schemes). The procedure is that students submit their applications to UCAS and the clearing centre passes the application onto the preferred universities. Each university then accepts, rejects or makes an offer and the decision is passed back to the student via the UCAS clearing centre. Suggest how EDI (and other ICT technologies) might be used to update such a scheme. E-Commerce ©David Whiteley/McGraw-Hill, 2000

Chapter 9 – Exercise 4 Section 10.4.2 shows three instances where a mature EDI supply chain (JIT supply coupled with sharing of market information suppliers) can facilitate a change in the nature of the product or service – can you suggest any further real examples or possibilities that could be developed? E-Commerce ©David Whiteley/McGraw-Hill, 2000