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Electronic Data Interchange (EDI) is defined as "the movement of business documents electronically between or within firms in a structured, machine-retrievable, data format that permits data to be transferred, without rekeying, from a business application in one location to one in another location." This means that paper documents are eliminated from business transactions, allowing transactions to take place faster and with more accuracy than ever before possible. The transaction time is decreased by eliminating the delay in mailing a document and eliminating the need to rekey the information into the receiver's computer system. Greater accuracy is achieved through the information having to be keyed into computer format only once at the originator's end instead of also being keyed in at the receiver's end. As a result, EDI can create opportunities for many corporations if implemented properly. For example, Navistar International has cut its truck inventory from a 33-day supply to six-day supply. Levi Strauss uses EDI in providing several services to its retail customers, including pre-ticketing of items with Uniform Product Code tickets, stock and management reports showing sales and profitability by item and period, electronic purchase orders and packing slips. Consequently, the retailers have been able to replenish their stocks in three days instead of the previous 14. The U.S. Air Force is expected to save $135 million annually due to the reduction in technical documentation as a result of the application of EDI for exchange of technical product documentation with defense contractors.
Industry characteristics determine how quickly EDI will be adopted by an industry and how power is distributed among suppliers and buyers. The distribution of power will affect the development of industry standards, which will in turn affect the development of EDI. Thus, industries with powerful individual corporations who have adopted EDI as a competitive advantage will attempt to restrict the development of industry standards as long as possible. This restriction will be overcome when the customers in these industries gain enough power to force standards to spread.
EDI allows a company to provide greater speed and accuracy than was provided by a paper/manual system. In today's global business environment, both of these characteristics are important for a company to be competitive. The growing emphasis on total quality management and the...