EDI: Alive and well after all these years

Don’t believe reports you might hear about the death of electronic data interchange. Not only is EDI alive more than 20 years after its birth, it’s also thriving at companies that use it to exchange purchase orders, invoices and other information with trading partners.

Retailers such as Wal-Mart Stores Inc., J.C. Penney Co., Supervalu Inc. and Hallmark Cards Inc. delivered that message loud and clear to a packed session at the recent UConnect Conference in Anaheim, Calif., sponsored by Uniform Code Council Inc.

And the majority of over 20 respondents to a Computerworld(U.S.) poll this week echoed those sentiments. Most said they’re either adding new trading partners or increasing the number of EDI transactions they do.

They also noted that they expect that trend to continue, even though some are exploring XML-based alternatives.

“A few years ago, everyone was making claims that EDI was on its deathbed and XML was the greatest thing since sliced bread,” said Jay Herman, EDI coordinator at Knouse Foods Cooperative Inc. in Peach Glen, Pa. “Internet EDI and competition have brought the cost of transactions down, and EDI volume continues to increase.”

One of the most influential companies driving new technology trends is Wal-Mart. But during a panel discussion at the conference, Teresa Breshears, a senior business analyst at the Bentonville, Ark.-based retailer, said it has no plans to move away from standard EDI transactions.

“If there’s a need, we will come up and do XML,” she said. “But right now, I don’t see us migrating away.”

The far bigger trend in EDI for the past 18 months has been sending EDI transactions over the Internet using the Applicability Statement 2 protocol, which describes how to send data securely and ensure that messages are received.

Wal-Mart in September 2002 asked its suppliers to shift from value-added networks (VAN) to AS2. But few companies drive change to the degree that Wal-Mart does. Several users said they have moved to AS2 with only one or a handful of trading partners, although they expect more to follow.

Henry Figura, IT officer at Recochem Inc., said management had to be convinced that it needed to invest in AS2 software from Inovis Inc. to comply with just one customer. Now the Montreal-based producer and distributor of chemical products hopes more customers follow suit with AS2, since the company has cut its VAN costs by 20 per cent for its 800 transactions per month with Wal-Mart.

Piggly Wiggly Carolina Co. has cut costs by 70 per cent since going from a VAN to AS2 with 200 of its 600 trading partners, according to Kathy Davis, a lead systems analyst at the Charleston-based grocer.

But some companies are having trouble cost-justifying such a move. Thomas Moriarty, manager of EDI support at J.C. Penney, said the Plano, Tex.-based retailer analyzed a potential move to AS2, including the cost of software and security, but decided it wouldn’t provide a good cost benefit. He said 98 per cent of the company’s EDI transactions with its 3,000 trading partners go through VANs.

For some suppliers the justification has been tough too. Lorraine Kaleda, an EDI analyst at New York-based L’Oreal USA Inc., said, “To use AS2 would be too costly at this time, because there are only two trading partners we have that are capable of doing this technology.”

Upgrading to new versions of documents or adding document types tend to be more common changes for many EDI users. Cynthia Wilson, EDI co-ordinator at Dallas-based Morningstar Foods, said the number of transaction sets has soared in pricing, payments and logistics areas.

“There seems to be a constant flow of requests from internal business owners as well as customers to increase the amount and type of electronic information exchanged using EDI,” Wilson said. “Everyone wants automated, seamless interfacing of data.”

Ken Vollmer, an analyst at Cambridge, Mass.-based Forrester Research Inc., estimated that EDI represents 80 per cent to 90 per cent of the total business-to-business traffic, and the number of EDI transactions is growing three per cent to five per cent every year.

At J.C. Penney, the growth rate has been much higher, as more internal business units adopt EDI. Moriarty said there were 5.5 million EDI documents communicated to trading partners in May of this year compared with 4.7 million in May 2003 — a 17 per cent increase.

Some companies are seeing increases in EDI trading partners. Brian Akabane, a consultant in IT business development at Kansas City, Mo.-based Hallmark, said the company has added 10 retailers and about 30 suppliers to its EDI trading partner base of over 290 during the past three years.

“I don’t really see it going away at all anytime soon,” Akabane said. He added that Hallmark has four trading partners on AS2, expects to add four more this year and predicts that the number will double each year thereafter.

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