Current Status of Electronic Data Interchange in the U.S.
1-SUMMARY-Conducted by:
Richard P. Vlosky, Ph.D., FIWSc.2 Director and Professor
June 9, 2014 INTRODUCTION
Electronic data interchange (EDI) is an inter-organizational system that involves “the movement of business documents electronically between or within firms in a structured, machine-retrievable, data format that permits data to be transferred, without re-keying, from a business application in one location to a business application in another location”. The wide adoption of electronic data interchange (EDI) has been argued to be important for the success of the technology. While industry literature discusses EDI as a technology that can provide strategic and operational advantages for its adopters, the adoption rate has often not been as high as predicted in various studies. For over two decades, electronic data interchange (EDI) has been one of the primary enabling technologies for conducting business-to-business (B2B) transactions.
Today, corporations are more dependent upon their business partners than ever. In today’s global and often fragmented marketplace, Business-to-Business (B2B) capabilities are very important for a company’s successful collaboration with its business partners. Such
capabilities significantly improve the business efficiency and quality of the information exchanged, resulting in lower costs and higher profitability. 3
Early B2B solutions were usually implemented and maintained by in-house IT teams. However, the expansion of business networks—both physically and technologically—and the increasing complexity of managing these types of solutions, led a growing number of companies to outsource a portion of their B2B operations to external managed services
1Funding support for this study was provided by NewEDI, 5755 North Point Parkway, Suite 28, Alpharetta, GA 30022;
Phone: 404-839-0949; NewEDI.com; [email protected];
2 Director and Crosby Land & Resources Endowed Professor of Forest Sector Business Development; Louisiana Forest
Products Development Center; Louisiana State University Agricultural Center; Baton Rouge, LA 70803; [email protected]; Phone: (225) 578-4527
3 Barchi Gillai And Tao Yu. 2013. Business Value and Adoption Trends. By, Foreword by GXS, Inc. Stanford Global Supply
providers to streamline their supply chain operations and improve overall business
performance. Over the years, B2B managed services providers have achieved new levels of maturity, providing greater value and expanding the range of services they offer. These developments raised confidence among IT end users that managed services providers can successfully implement and manage their B2B projects, resulting in more companies using their services to simplify and enhance their B2B operations. 4
As the wide adoption of EDI could increase the economic welfare of an industry or a network of companies in a supply chain, as a whole, efforts have been made to understand more about the technology and to identify factors affecting the adoption decision.
OBJECTIVES
1. Identify current uses of Electronic Data Interchange (EDI) and reasons for adoption.
2. Determine strengths and weaknesses of current EDI providers/Value-Added Networks (VAN).
3. Establish demographic profiles of respondent companies. METHODOLOGY
1. A sample was drawn from client industry sectors within the NAICS 44-45: Retail Trade and NAICS 31-33: Manufacturing. Expanded to Wholesale Trade, hospitals and other related industries.
2. A web-based questionnaire methodology using SurveyMonkey® was used with one mailing to recipients.
General Results
This study yielded 780 useable responses of which 60% are using EDI. Of the remaining 384 respondents, 9% have an immediate need for an EDI solution, 6% have been requested by an exchange partner to implement EDI, and 18% are considering implementing an EDI solution.
Respondents are represented by over two dozen sectors led by manufacturing (10.3% of respondents), Education (8.7%), Health Care (5.9%), Distribution (5.3%), and Retail (4.6%).
EDI-user respondent company size was measured by 2013 sales revenue. Fifty percent of EDI user respondents had 2013 revenues between $10 million and $249 million. Larger respondent companies with 2013 sales of $250 million or more comprised 42% of respondents and companies with less that $10 million in sales
Value-added Network Providers
Of the respondents that use EDI, 25% use Internet EDI only (AS2 or EDIINT) and do not plan to use VANs in the future, 29% use one or more VANs and 37% use both VANs and Internet EDI. The remaining 9% of respondents uses Internet EDI only, but considers supplementing it by using an EDI VAN in the future.
The average estimated number of EDI trading partners by company size was as follows:
Company Sales in 2013 Average Number of EDI Trading Partners/Company
Less than $10 million 97
$10 million-$49 million 53
$50 million-$99 million 38
$100 million-$249 million 22
$250 million-$499 million 14
$500 million or more 57
Cost for EDI Implementation and Annual Spend
The average cost incurred by respondent companies to initially implement EDI was $40,000; the average annual spend for EDI in 2013 was $41,000.
VAN Selection Criteria
Ten key VAN selection criteria were ranked on a 5-point scale by level of importance: 1=very unimportant; 2=somewhat unimportant; 3=neither unimportant nor important; 4=somewhat important; 5=very important. The criteria were ranked by overall average response (for all respondents).
The highest ranked criterion was “Customer Support and Responsiveness” (mean=4.3) followed by “Overall Vendor Reputation” (mean=4.0).
The next two criteria were tied, at 3.9: “Ease of Migration” and “Overall Prices”.
The fifth and sixth most important criteria were tied at 3.6: “Ease of procurement/ sales cycle” and “One stop shop for all EDI related needs”.
The bottom two VAN selection criteria were “No Contract Required” and “VAN Company Size”.
VAN Strengths and Weaknesses
Results from a 2009 study identified the top five VAN strengths and top five VAN weaknesses as perceived by those study respondents. In this study, respondents rated VANs relative to these 2009 study strengths and weaknesses on 5-point scales anchored on 1=very low strength/5=very high strength and 1=very low weakness to 5=very high
weakness.
Most Significant VAN Strengths (Ranked) 1. System Reliability & Consistency
2. Responsive – Knowledgeable Support
3. Cost Competitive
4. Ease of Use
5. Always Up & Running-No Downtime
Most Significant VAN Weaknesses (Ranked) 1. Cost is too high for services provided
2. Lack of Detailed Reporting/Documentation
3. User Interface is difficult to navigate
4. Inadequate support and training
5. Network problems
Overall VAN Satisfaction and Confidence
Two questions were asked that focused on a) respondent satisfaction with VANs and b) confidence in VAN proficiency. A 5-point scale was used from 1=strongly disagree; 3=neither disagree nor agree; 5=strongly agree.
The overall mean for “My company has confidence in the proficiency of the people representing our VAN” was 3.9 for all respondents/all VANs, indicating an overall somewhat satisfied position.
Specific to VAN satisfaction, the overall mean for “My company is generally satisfied with our current EDI VAN” was 4.0 for all respondents/all VANs, also indicating somewhat satisfied.
Overall VAN Satisfaction and Value
An important question posed to respondents identified their level of satisfaction with their VANs’ value proposition: “Generally, how satisfied are you with the overall value provided by the current EDI VAN provider(s)?” Using a 5-point scale of satisfaction:
Overall VAN Relationship Commitment
Two questions were asked that focused on customer relationships with VANs. A 5-point scale was used from 1=strongly disagree; 3=neither disagree nor agree; 5=strongly agree.
The overall mean for “My company is committed to long-term relationships with our current VAN” was 3.6 for all respondents/all VANs, indicating a point between neutral and somewhat agree.
Ease of Implementation by VAN
A single question was posed to discern ease of EDI implementation. A 3-point scale was used from 1=more difficult than expected; 2=pretty much as expected; 3=easier than expected. The overall mean was 1.9 for all respondents/all VANs, a score indicating a slight level of difficulty.
Pricing
As indicated earlier in the section on Van Selection Criteria, “Lower Overall Prices” was tied for 3rd highest ranked criterion.
An additional pricing question, also anchored on a 5-point scale of agreement, was “My company believes that our VAN has easy to understand pricing mechanisms”. The overall respondent/all VAN average was 3.5.
VAN Value and Switching Linkages
The question regarding value that VANs provide was specifically asked in the
following way “Our EDI VAN should provide better value to our company” to tease out any dissatisfaction that respondents may have. Also anchored on a 5-point scale of agreement, the overall all respondents/all VAN average was 3.4, indicating a point between neutral and somewhat agree.
Previous literature has found strong linkages between value provided to customers and their willingness to switch EDI VAN providers. The weaker the value proposition, the higher propensity (or desire) to switch. In addition, vendor satisfaction has a strong influence on switching behaviors.
We provided one statement linking value and switching, also anchored on a 5-point scale of agreement; “My company would be willing to switch to a different VAN if the value existed to do so”. The overall all respondents/all VAN average was 3.4, again indicating a point between neutral and somewhat agree.
Other Respondent VAN Switching Drivers
Even though there may be a desire to switch EDI VAN providers, other influences may make it difficult to switch. One influence is asset specificity where the investment in integrating one VAN’s infrastructure may make it difficult to redeploy assets with a different VAN.
Accordingly, we examined other non-value specific factors that influence switching
behavior, specifically time, effort and cost investments, structural mechanisms, and level of disruption to switch also anchored on a 5-point scale of agreement (3=neutral). Following are the overall all respondent/VAN averages.
My company could easily switch to another EDI VAN if we wanted to. Overall all
respondent/VAN average: (2.9).
The investment we have in developing EDI with our VAN(s) could easily be transferred
to alternative VAN(s). Overall all respondent/VAN average: (3.0).
It would be disruptive to my company to end the business relationship(s) with our current VAN(s). Overall all respondent/VAN average: (3.7).
Spend Clauses
On average, 33% of respondents have minimum spend clauses with their VAN(s). In
addition, 36% of respondents have minimum contract duration. On average, 15% said their clauses were too restrictive.
