Thursday, February 17, 2011

Electronic Data Interchange (EDI) as a Complement for Enterprise Resource Planning (ERP) and Supply Chain Management (SCM)

Although many of the technological advancements occurring within Supply Chain Management (SCM) are still considered by many to be in their infant stage(s) (Bendoly, Bachrach, Wang, & Zhang, 2006) discuss how Enterprise Resource Planning (ERP) advancements could lead to additional technological advancements in systems such as online ecommerce medians. As a result of this analysis, a new way could then help an organization secure additional vendors and system advancements in a process termed “e-procurement.” Describing e-procurement as a form of Electronic Data Interchange (EDI), Bendoly et al (2006) created a framework for those individuals that are involved in international purchasing decisions of their firms through online medians. Three benefits of EDI systems described were (1) the elimination of domestic market boundaries, (2) the introduction of new international suppliers, and (3) the ability to conduct transactions that are more efficient.

In order to substantiate the data proposed within past theories and concepts, Bendoly et al (2006) conducted a study by examining the different components of EDI systems, which they also found helped reduce material costs, while streamlining other organizational processes such as those found in ERP systems of many international supply chains. Bendoly et al (2006) examined 72 cases, which claimed e-procurement activities conducted online increased profit margins while decreasing overall costs. The results of this analysis combined with the previous literature showed a potential link between the benefits of implementing an ERP system and other emerging technological advancements. In addition, Bendoly et al (2006) showed that those organizations that utilized online e-procurement, EDI, or ERP systems and practices were the ones that could compete with like businesses regardless of the market or location.

The rapidly changing and evolving world of business technologies are giving way to additional technological advancements that are allowing many small businesses now to compete directly with their larger counterparts. Bendoly et al (2006) showed several of the evolving systems (ERP, EDI, and e-procurement) which are helping organizations compete on a global scale. Regardless of the system that an organization utilizes to build relationships and grow their business it is important to understand the tools available to them. As e-commerce becomes a normal part of any businesses long-term strategy, ERP, EDI, and e-procurement will become even more important to organizations. Since Small-to-Medium Enterprises (SMEs) are usually late adopters, of most technological advancements, it then becomes even more important for these organizational leaders to understand how these systems or others (i.e. those discussed in previous posts such as CRM, SCM, etc) operate. This is where I come in, in each post, I have been discussing not only the benefits of such technological systems, but some of the drawbacks leaders’ face, as they decide which system is right for their organization. EDI is yet another spoke in a complex wheel of technological advances that leaders need to be aware of. With the help of many scholarly pieces, over the days and weeks ahead I will continue to report my findings in search of the best systems adoption for not only SMEs but also Multi-National Corporations (MNCs), as I get ready to conduct real world research into some, if not all of these discussed systems. In the meantime, any comments, suggestions, or real world experiences you can offer please take the time to comment, as this is the best advice we can give leaders faced with a major purchase decision or implementation such as ERP, CRM, EDI, etc.

Of course make sure to keep smiling, as this truly breeds success, as we all look to achieve more!

Bendoly, E., Bachrach, D. G., Wang, H., & Zhang, S. (2006). ERP in the minds of supervisors. International Journal of Operations & Production Management, 26(5), 558.

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