EDI 101 \ Examples

The following are some examples of EDI usage.

Auto Loans

A major part of the automobile manufacturers business is the financing of the sale of its vehicles. Auto companies finance over 1/3 of all cars purchased in the U.S. General Motors Acceptance Corporation is one of the largest financial institutions in the world. To be more responsive to their customers, auto companies have implemented electronic links to credit bureaus such as TRW.

The normal process for the auto company is to request a credit history from the credit bureau via an EDI connection. The auto company’s computer system electronically receives and analyzes the credit report. Each report is scored and then credit approval is provided without human involvement.

There is now movement to allow the dealers direct transaction input. This moves the personnel cost of data entry from the auto company to the dealer. This is also an advantage to the dealer as it allows them to better respond to their customers. It is possible to get back, instantaneous response to credit authorizations. Credit authorizations are often returned while the customer is still on the sales floor. The real payoff, in this example, is the extra competitive advantage the dealer has when he can offer immediate credit.

Wal-Mart

An EDI link between Wal-Mart and one of its suppliers, Seminole Manufacturing Co. cut the delivery time of Seminole slacks by 50%. This resulted in a 31% sales increase of these slacks in the first 9 months after the link was established.

General Motors

General Motors has integrated EDI Electronic funds transfer at 30% of its assembly plants. Shipping receipts are sent electronically from the GM plant to an Electronic Data System (EDS is subsidiary of GM) computer center where they are matched against electronic invoices and purchase orders. Suppliers group the shipping receipts, and one payment is made. This single payment may represent dozens of different shipments to different plants. These payments are also performed electronically via Electronic Funds Transfers.

JC Penney

Sales of Stafford suits jumped 59% after JC Penney linked up with their supplier Lanier Clothes. EDI allowed Penney to quickly replenish stock fast enough to meet demand while cutting their overall inventory of suits by 20%.

Rockwell

Rockwell, a major automotive supplier received design change notifications directly from the automakers via EDI.
Rockwell has been able to react faster to their customer’s constant design changes while reducing their inventory of finished goods. Parts now bypass their warehouse and go directly from their production lines to their shipping docks.

Textile Industry

The Textile industry is beginning to fight back against Asian competition with EDI. While the US textile industry is hard pressed to compete on a cost basis, EDI is helping them provide superior service. Service is making it easier and faster to do business with a US supplier.

US Customs

US Customs accepts electronic customs documentation, in advance of goods shipments. This reduces port delay and provides a competitive advantage for those ports of entry that support EDI.

Market Outlook

The Yankee Group, a Boston based market research group, estimates that 4/5 of all business transactions will be electronic by 2010. The EDI survey, published by Input, found that 70% of Fortune 1000 sized businesses; universities, and Public companies are currently using EDI. An additional 20% are planning EDI implementations.

Input also forecasts that the EDI service market will grow to $28.2 billion by 2010. That’s an annual 25% per year growth rate from the 2000 market size of $3 billion.