Electronic Data Interchange

Electronic data interchange involves a communications standard that supports interorganizational electronic exchange of common business documents and information. It is a cooperative effort between a buyer and seller to become more efficient by streamlining communication processes. When used by buyers and suppliers, EDI can help eliminate some steps involved in traditional communication flows, which reduces time and cost.

Although actual volumes through EDI have increased through the 1990s, actual EDI volume does not match the expected volume that was projected by companies. In 1993, for example, purchasing professionals estimated that 60 percent of the supply base, 70 percent of total purchase dollars, and 65 percent of total purchasing transactions would flow through EDI systems. Actual 1997 volume was 28 percent of suppliers, 38 percent of total purchase dollars, and 32 percent of total purchasing transactions flowing through EDI systems. Part of this shortfall is due to the introduction of auto fax technology. For many organizations, especially smaller organizations, auto fax is a quicker and less expensive method of communicating with suppliers. Auto fax systems automatically fax requirements to suppliers once those requirements are known by the buyer. The Internet also captures electronic volume that formerly would have passed through third-party EDI providers. The IT chapter discusses this important topic in greater detail.