A Case Analysis on Hong Kongs Tradelink: An EDI Vision

Submitted by: Mark Carlo Pabustan Keith Padillo

Submitted to: Ms. Marichu Vicente

I.

Problems A. Macro 1. The delay of the request for proposal for the provision of hardware, software, and services required to implement the CETS. 2. How can Hong Kong surpass the EDI System of Singapore? B. Micro 1. How could they implement the EDI projects 2. How can Hong Kong Tradelink implement the EDI projects in their country with its political environment?

II.

Causes 1. Lack of government support. The government was hesitant to support the project saying that such a system would be of benefit mainly to business, and therefore business should pay to build it. A survey of trading companies done by the council provided another argument for government sponsorship, noting that most trade business people said they would feel uneasy if competitively sensitive trade data were stored by any organization other than the government. Again, the government argued that it was not in the business of providing information processing services that could well be done by other VANS. Furthermore, they added that they will break their image if they intervene in the trading system since the government had long been adopting a very pro-business, noninterventionist policy.

2. Lack of standards. There was no certain standard that could be used by the whole of Hong Kong EDI users that time that could fit in to their trading industry as there are so many traders in country. EDI was not EDI without an agreed standard for formatting the data being exchanged. Without a standard, the receiving computer would be unable to understand and act on information being sent to it by its trading partner.

3. Technology is too expensive. The EDI approach involved more time, skill, expense to set up, and was focused on providing EDI services to large sophisticated organizations which were already highly automated. And because the 82% or 90,000 were considered small importer and exporter with only 38% computerization rate, it became a hindrance to apply the EDI. III. Systems Affected 1. Structural- the trading structure before the introduction of the EDI is complicated due to the heavy documents that will be traded to the different service providers. It will be now easier to trade and exchange because the system is simple as sending the documents by using the EDI 2. Psychological- since transactions will be done through computers; it would be beneficial or different now for the trading industry. It would be more convenient and faster for the traders to exchange information. 3. Technical- transactions will be computerized instead of person to person approach. The industry will be using computers, hardware, and software for them to successfully apply the EDI system. EDI would make all the transactions of documents easier and it would lessen errors and delays of info exchange. 4. Managerial- there will be lesser management and work for human resource because there will be lesser manpower. The focus will turn more on to the computerized transactions and the direction of the right way of implementing EDI system. 5. Goals- EDI will automate existing paper flows between organizations in much the same way as paper flows within organizations have been automated. EDI can also represent the opportunity to rethink and restructure the relationships between organizations. While the benefits are significant, so too are the pitfalls that can derail EDI initiatives, or their business impacts.

IV.

Alternatives 1. Hotline proposed system 2. Coopers & Lybrand Consultancy (C&L) Proposal 3. The Tradelinks Counter Proposal 4. The Shared Project for EDI (SPEDI) 5. Community Electronic Trading Service (CETS- SPEDI Recommendation)

V.

Discussion of Alternatives 1. Hotline proposed system Advantages:

In 1984, trade related Edi service for Hong Kong was first discussed by the trade Facilitation Council (TFC), a non-profit organization consisting o traders, trade service providers and Government departments and agencies. The TFC underwrote a project called Hotline, which proposed that a centralized data base of all trade information be created to streamline the exchange of such data. Disadvantages:

This proposal though was still too new a concept to warrant backing. Plus it has no similar implementations elsewhere. existed

2. Coopers & Lybrand Consultancy (C&L) Proposal Advantages:

The C&L reported that the provision of EDI services in the territory be left to market forces with Tradelink entering the market as one of the participants. It was also recommended that the government should enforce and regulate the interconnection of all service providers. Disadvantages

On its negative side, the proposal was only focused on providing EDI services to large sophisticated organizations which were already highly automated, the real internal rate of return to the shareholders was not sufficient, unworkable government mandate and control over the interconnection of networks and providers, and lastly, no one would benefit of the proposal because small traders (the backbone of the economy) would be left without any solutions and the large users would need to retain expensive unjustifiable dual systems. 3. The Tradelinks Counter Proposal Advantages: and

Tradelink presented a counter proposal wherein they recommended that in a public sector-private sector partnership with government it be granted an exclusive franchise as the sole EDI provider for government trade documents. They would undertake to provide a solution for Hong Kongs small traders as well as help in the development of a Chinese language Edi standard. Plus EDI services be left open to market forces. Disadvantages:

The disapproval on this proposal is that the arrangement seemed counter-intuitive to Hong Kongs entrepreneurial spirit and non-interventionist government.

4. The Shared Project for EDI (SPEDI) Advantage:

The objective of the SPEDI was to develop a business plan and technical specification for a community EDI service for Hong Kong trading community and providing specific information.

Disadvantages:

A potential provider of an EDI service was required to make a significant upfront investment in hardware and software, with a large proportion of this amount usually required before a service was even operational, there was also a concern about the length of time required to build up enough users and transactions to make a service profitable, lastly, it was difficult to make business projections with any accuracy.

5. Community

Electronic

Trading

Service

(CETS-

SPEDI

Recommendation) Advantages:

CETS have three critical components, first is the community gateway- this would serve as an electronic post office, collecting and delivering EDI messages among all trading establishments in the community including an exclusive link to the government, second is the Shared EDI Facilities- it would add value ton top of the base routing functions of the Community Gateway, providing a range of services to facilitate the management of electronic trading. And the third one is the Community Access Service (CAS), CAS provided Fax-in and Walk-in access for the large segment of the trading community which was unable or unwilling to justify pure EDI. Disadvantage

This project is too expensive to implement because it is worth $100 million.

VI.

Recommendations We recommend the fifth alternative which is Community Electronic Trading Service (CETS- SPEDI Recommendation) the CETS because of its advantages. It has three critical

components, first is the community gateway- this would serve as an electronic post office, collecting and delivering EDI messages among all trading establishments in the community including an exclusive link to the government, second is the Shared EDI Facilities- it would add value ton top of the base routing functions of the Community Gateway, providing a range of services to facilitate the management of electronic trading. And the third one is the Community Access Service (CAS), CAS provided Fax-in and Walk-in access for the large segment of the trading community which was unable or unwilling to justify pure EDI. The only setback on this alternative is that it was expensive. The CETS is the perfect choice to be implemented since it was really customized for the Hong Kong trade industry and can really be used especially for the country.