The competitive advantages of EDI
Wednesday, June 13, 2012, 8:00 AM
This section serves the purpose of reexamining the anticipated benefits that associate with the adoption of EDI. There are two main classifications from which the competitive classifications of the EDI emanate from. They are the bargaining power and the comparative advantage. For instance, comparative pros are the efficiencies from bettered inter-organizational and internal service capabilities and cost structures. There is a variety of sources which aids improve the internal efficiency. Among them is the forced standardization of internal data when several functions like sales and operations require access to EDI processed transactions; faster data capture; and lower costs of inventory JIT delivery. Better service to customers and from suppliers lead to improvement of the inter-organizational efficiency.
Access by customers to the status of orders, one-stop shopping and the availability of inventories are key factors towards the improvement of services. There is need for ability of the seller to extend its geographical reach at low costs. More so, it should have a quick access to markets reaction to new products and the promotions.
On the other hand, it is the perspective of the sponsoring firm which determines the increase of the bargaining power. If new computers are to be housed then there is a high chance of cost increase as one shift from one supplier to another. EDI makes the product easier and less expensive to select, use, handle, and order. Consequently, it gives a sponsoring firm a high chance to increase its bargaining power. A seller who adopts EDI has an upper hand to other sellers since it provides immediate feedback on the products and also enhances the general image of products. EDI lowers both shopping and searching costs incurred by buyers. In addition, it may be used by sellers when suggesting other alternatives when inventories are not available or when indicating to price breaks related to volumes. However, all these advantages are fleeting given the increased perception that EDI is a competitive necessity.
Studies have been carried out and some benefits of EDI adoption have been discovered. These two are the most outstanding: A market share effect. This means that firms which sponsor EDI realize an increase of their shares of business from suppliers. Anticipated efficiency and service advantage is the second one. It implies that the adoption of EDI is directly proportional to the expected service benefits and efficiency. When EDI is adopted, in most cases, the cycles times are cut into halves. EDI associates are comprehended by managers as experiencing lowered order lead time, higher service levels, and fewer out-of-stock situations; efficient deal organizations, promotions, price changes, and product availability; better accuracy in ordering, shipping, and receiving; and a reduction in costs of labor. Also, motor carrier industry managers have a perception that associates of EDI enjoy Office efficiency and accuracy, reduced transaction time and less paper work. In terms of the correct mix and quantity, the experience of a buyer with EDI and the level to which EDI is integrated with other systems correlate well with inbound quality of shipment. When it comes to public warehouses, it is true that those linked with EDI are more flexible compared to their non-linked counterparts at a number of activities like handling service requests, product recalls, and returned goods. They offer a wide range of services which include consolidation, distribution consulting, repackaging and breaking bulk among others. Basically, the more the perceived gain of EDI in relation to cycle time reduction, the greater the diffusion of EDI when it comes to the percentage of a firms trading partners connected to EDI. Likewise, the higher the proportion of transactions processed by EDI technology, the greater the perceived value in general.
Replacing manual with electronic communication like rekeying costs is the cardinal source of EDI direct benefit. Adoption of EDI from paperwork may lead to a drop of costs of processing, storage and sending from as high as 50dollars to as low as less then 5dollars.However,in the past many small to medium sized businesses have been barred from participating in the EDI due to the high costs of subscription to the Value added networks (VAN) and the inability to raise the significant computing power to meet the standards of VAN .The fact is that while EDI has tried to lower the costs, it has not relented in offering the best services. In general, EDI should associate with improved financial performance; that is according to the indications of the total cost savings.
The answer to the research question as to whether EDI have less or more inventories on balance isnt clear. This is because of the following two reasons: the vulnerability of the associate seller increases when instantaneous access to product availability is provided to customers. Secondly, Suppliers can no longer use the slack built into slower modes of communication to fill orders.
This post serves to enlighten business dealers weigh the importance or benefits of subscribing to EDI in comparison with being a non-EDI linked. Essentially, it is true that EDI has a wide range of advantages since it makes several transactions not only efficient but also cheap. For instance, a dealer using EDI makes profits so many times the amount made by one using papers under similar circumstances.