E-Commerce ©David Whiteley/McGraw-Hill, 2000 1 Chapter 10: EDI and business.
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e c o m m e r c e electronic commerce strategy technologies and applications E-Commerce ©David Whiteley/McGraw-Hill, 2000 1 Chapter 10: EDI and business
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Transcript of E-Commerce ©David Whiteley/McGraw-Hill, 2000 1 Chapter 10: EDI and business.
e c o m m e r c e
electronic commerce
strategy
technologies and
applications
E-Commerce ©David Whiteley/McGraw-Hill, 2000 1
Chapter 10: EDI and business
e c o m m e r c e
electronic commerce
strategy
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applications
E-Commerce ©David Whiteley/McGraw-Hill, 2000 2
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.
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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.
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EDI trading patternsHubs and Spokes
Hub
Spoke order
invoice
Spoke order
invoice
order invoice
Spoke
order invoice
Spoke
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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.
Save on
Food
Sava Store
Super Food
Freshest Fruit
Mighty Meat
Nuts Now
Very Veg
Best
Bread
Nan’ Ham
Top Pop
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EDI trading patternsExtended supply network
Save on Food
Sava Store
Super Food
Freshest Fruit
Mighty Meat
Nuts Now
Very Veg
Best Bread
Nan’ Ham
Top Pop
Fred’s Flour
Ready Raisin
Pete’s Pears
Avril’s Apples
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EDI trading patternsWholesaler network
Henry’s Office Supply
Wholesale
Kent Council
Benny Bank
Instant
Insurance Sue Shop
Andy Agent
Pete’s Paper
Pam’s Pencils
Penny’s
Pens
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EDI trading patternsOpen 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.
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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 …
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EDI transactions
EDI trade exchanges
Customer
order
delivery note
invoice
payment
EDI Supplier
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EDI transactionsOrder 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’.
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EDI transactionsDelivery 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.
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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.
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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.
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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
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EDI adoption and EDI maturity
Business System Evolution
Business
Applications
Integrated Business Systems
Inter-organisational Systems
Internet enabled Systems
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EDI adoption and EDI maturity
EDI Maturity
Discovery
Introductory
Integration
Operational
Strategic
Innovative
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EDI adoption and EDI maturity
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.
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EDI adoption and EDI maturity
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.
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EDI adoption and EDI maturity
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.
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EDI adoption and EDI maturity
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.
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EDI adoption and EDI maturity
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.
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EDI adoption and EDI maturity
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.
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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.
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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.
Internet e-Commerce
EDI
Manufacturer / Retailer
Materials Supplier Product
Supplier
Customer
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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.
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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.
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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.
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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?
