Abstract Most electronic data interchange (EDI) users start electronic trade with a simple experimental system.

This initial step includes just one or two message types with one or two trading partners. From this initial step many users develop their EDI systems y expanding to additional trading partners and including more trade cycle messages. !roposes a six"stage maturity model representing these stages in EDI developments. In the literature# EDI is exampled as an I$%IT application that can e used to gain competitive advantage. There are examples o& early EDI systems (and EDI"li'e systems) that gave organi(ations such advantage. $ince those early days EDI has developed rapidly# normally on a trade sector asis# ut there have een no similar examples o& dramatic# competitive advantage. )ithin many trade sectors# EDI means *Everyone is doing it+ and the real attle is to avoid competitive disadvantage. ,rgues that the achievement o& EDI maturity gives new scope &or innovative# competitive advantage systems that ma'e imaginative use o& a company-s EDI in&rastructure. Discusses new systems which illustrate this new competitive edge Introduction The in&ormation systems (I$) literature gives numerous examples o& the use o& I$ and in&ormation technology (IT) y organi(ations to gain a competitive edge. , num er o& these systems are EDI systems or involve electronic trade as an essential component. This paper reviews some o& these systems and the evolving pattern o& EDI systems and EDI trading. , model o& EDI system maturity is proposed. The paper identi&ies some recent# innovative systems that are made possi le y a mature in&rastructure o& electronic trade. These systems are re"engineering esta lished usiness practices and patterns o& service to give a new generation o& competitive edge systems IT and the competitive edge )ith increased competition# in oth domestic and international mar'ets# companies are having to &ight to hold or increase their share o& the mar'et in which they operate. .ompanies can di&&erentiate themselves &rom their competitors on the asis o&/ 0 price1 0 nature o& the product1 0 2uality o& service. Excellence in one or more o& these aspects can give a company a competitive edge. The e&&ective and innovative use o& IT is# it is argued# one o& the most e&&ective devices &or gaining a competitive edge/ IT o&&ers major new usiness and management opportunities. It has the potential to e a strategic weapon in at least &our di&&erent ways/ 3. To gain competitive advantage. 4. To improve productivity and per&ormance.

5. To ena le new ways o& managing and organising. 6. To develop new usiness. !ursuit o& competitive advantage implies the use o& IT externally to distur # enhance or limit the competitive &orces at wor' in the &irms sector . The use o& IT &or competitive advantage can e assessed in conjunction with !orter-s value chain analysis. The value chain model divides the operations o& the company into activities which are physically and technologically distinct. !rimary activities in a value chain might e as shown in Figure 3. These primary activities operate in conjunction and interaction with support activities such as the &irm-s in&rastructure# human resource management and technology development. ,ll activities in the value chain are connected y *lin'ages+. 7in'ages re2uire coordination and# to achieve this# there has to e the exchange o& product and control in&ormation. The lin'ages exist etween the activitieswithin a &irm and in the collective and complex value chains which exist etween customers and suppliers within an industry.)ithin the value chain model IT can e used to support the tas' or the administration o& any activity 8 it is in this area that management attention and IT investment has o&ten een &ocused. ,s important to e&&iciency is the e&&ective operation o& the lin'ages and here also IT has an important part to play. In particular# EDI is a relevant technology to the economic# timely and relia le operation o& lin'ages 8 especially interorgani(ational lin'ages. !re"dating !orter-s value chain analysis is !orter-s model o& competitive &orces95:. This model identi&ies the &ive &orces as/ (3) rivalry etween competitors1 (4) argaining power o& suppliers1 (5) argaining power o& uyers1 (6) threat o& new entrants1 (;) threat o& su stitutes. !orter identi&ies three generic strategies o& de&ence against competitive &orces and o& potential competitive advantage. The three strategies are product di&&erentiation# mar'et segmentation and lowest cost 8 IT can e an important instrument in each o& these. IT can# &or example# e used to limit the threat o& new entrants y increasing the economies o& scale or raising the cost o& entry. E2ually# IT can e used to jump over an entry arrier or provide a su stitute service 8 direct an'ing as opposed to traditional ranch an'ing could e an example see &or instance <elassi and 7oe ec'e-s case study. IT and electronic trading can e important in relationships with customers and suppliers. EDI should help to limit costs o& servicing these trading lin's# ut it can also di&&erentiate the product y speed and e&&iciency o& service. The investment in EDI lin's implies a switching cost# i& a change o& supplier is contemplated. The loc'"in o& customers can e increased y using IT to provide value added services such as

such as stoc' control and accountancy# see &or example the case study o& 7eroyMerlin and the description ( elow) o& the ,merican =ospital $upply system. Interorganizational systems ,s indicated a ove# the use o& EDI can e an important component o& the competitive use o& I$%IT. The category o& I$%IT systems that lin' organi(ations# o& which EDI is the principle *technology+# has ecome 'nown as the interorgani(ational system (I>$). The use o& the I>$ &or competitive advantage is much 2uoted in the literature# &or example. Many o& the est 'nown examples o& competitive advantageous in&ormation systems are those that lin' a company to its suppliers# distri utors or customers. $uch systems# called *interorganisational systems+. !ro a ly# the two most 2uoted cases o& I>$ are ?nited ,irlines- ,pollo reservation system and ,=$-s ,$,! ordering system1 see &or example Earl# <ohnston and @italeand Aenjamin et al. (Aenjamin et al. example the ,merican ,irlines $a re# as opposed to the ,pollo system1 Earl examples oth). The ,$,! is relevant to the study o& EDI and competitive advantage. Earl summari(es the case as &ollows/ ,merican =ospital $upply# the ?$ medical supply company# provided on"line order entry terminals &or purchasing executives in hospitals. ,=$ carried a very road product range and hospital uyers could use the terminals to en2uire on stoc' availa ility# price and delivery and then to order. $o attracted were purchasing executives y the system# that ac2uisition o& an ,=$ terminal was very accepta le and orders were increasingly placed with ,=$. >rdering and distri ution costs were reduced &or oth ,=$ and their customers. In a mar'et o& over 6BB rivals and C#BBB major customers# ,=$ achieved 3C per cent per annum growth in mar'et share in the late 3DCBs and early 3DEBs. The system changed the traditional relationship etween customer and supplier. The competitive advantage o& the early implementation o& the ,$,! system was in cost savings and 2uality o& service. Maloneet al. descri e the evolution o& su se2uent versions as &ollows/ to customise the system to a particular hospitals needs These features include purchase history files, computation of economic order quantities and basic order file templates. This is an example o& value added &eatures &or customer loc'"in (descri ed as *procedural asset speci&icity+ in the source paper). Fote that ,$,! was# initially# not truly an EDI system (the electronic lin'ing o& distinct usiness system) ut the provision o& remote online terminal access to the supplier-s usiness system. 7ater versions o& the system# as descri ed y Maloneet al.# provided &or EDI/ >rders are prepared y the customer-s internal computer system and transmitted electronically to ,=$# and order con&irmations are returned to the customer-s computer and used to updatethe hospital-s &iles. EDI development

EDI development is typi&ied y large customer organi(ations re2uiring their suppliers to trade using EDI. The two most o vious examples are/ (3) &ood retailers (in the ?G 8 Tesco# < $ains ury# etc.)1 and (4) vehicle assem lers (Ford# Heneral Motors# etc.). The power o& the customer# in these cases# has led to the development o& a trading networ' typi&ied as a *hu and spo'e+ arrangement. The large customer is the *hu + and is the organi(ation that initiated the networ'# set (local) standards and derived most ene&it. The ene&its have een in terms o& the e&&iciency gains &rom using electronic documents and stoc' cost savings &rom shorter order cycles times and just"in"time supply. The suppliers are the *spo'es+ and have had to &it in with their customers- electronic trading re2uirements 8 not in&re2uently with di&&ering re2uirements &rom a num er o& customers (e.g. a &ood manu&acturer that supplies several or all the major &ood retailers). These suppliers have not seen the same ene&its &rom EDI. Their processing volumes are lower and their position is complicated y the di&&ering re2uirements o& their various customers. ,dditionally the application o& just"in"time supply is as li'ely to push stoc' holding ac' down the supply chain as to give any overall stoc' (and cost) reduction. Fote# =ood et al. provide a num er o& interesting case studies on the implementation o& EDI at suppliers to the major &ood retailers 8 the picture given in this paper is ac'ed up y the current author-s own research in the do"ityoursel& (DII) retailing supply chain. The development o& EDI pictured a ove is mirrored in other mar'et segments where EDI is eing implemented. The general picture seems to e &or EDI to e developed y all major players in a mar'et segment# roughly in parallel. EDI development in &ood retailing and automotive assem ly is &airly universal in developed countries (although it has not started at the same time or proceeded at the same pace in each country (&ood retailing) or company (automotive assem ly). EDI in other mar'et segments can e on a national asis# &or instance/ EDI is used extensively in the retail home improvement%do"it"yoursel& sector in the ?G ut not in France1 the Danish pharmaceutical supply industry has well"developed EDI systems and is# in this respect# ahead o& this sector in the ?G. It may e that the intention o& these EDI developments has to een to achieve competitive advantage ut the *copy cat+ nature o& EDI development has o&ten prevented any real advantage eing gained. ,rgua ly the e&&ect o& the *game+ has een only to create competitive disadvantage &or those who did not 'eep up. !ossi le exceptions to the a sence o& competitive advantage in recent developments o& EDI systems are/ 0 EDI systems that have een introduced y suppliers (as opposed to eing imposed y customers 8 note ,=$ was a supplier initiative). ,n example is that o& ports such as Jotterdam# $ingapore and =ali&ax (.anada) that have introduced EDI &or &reight handling and clearance and claim to have gained competitive advantage as a result. 0 EDI systems that have een introduced into &ragmented mar'ets. <elassi and 7oe ec'e# example this in the case study o& a small French DII chain that has started using EDI. The French DII mar'et is served y traditional shops and a &ew small DII chains (the opposite to the setup in Aritain where the mar'et is dominated y a small num er o& multiples# all advanced

users o& EDI). The introduction o& EDI into such a mar'et has the potential to change the competitive position o& those who use it and# together with other &actors# 35 EDI maturity and the competitive edge Dave )hiteley 7ogistics In&ormation Management @olume D K Fum er 6 K 3DDL K 3383C ring a out a rapid restructuring o& the mar'et. The general position on EDI and the competitive edge is summed up y Aenjamin et al. thus/ Implicit in the early writings on EDI has een the assumption that these systems hold great potential &or strategic advantage. >ne o& our conclusions# however# is that EDI applications# rather than eing a competitive weapon# are increasingly a necessary way o& doing usines. =owever# could it e that# as EDI systems develop and mature# there will e new possi ilities &or competitive advantageM Evolution of EDI systems EDI systems are evolving as they ecome widespread and the users o& the systems ecome more used to the technology. In a recent paper# and as a part o& a twodimensional model# $axena and )agenaar suggest three stages in *EDI usage and maturity+ . The paper used these three stages to examine EDI policy and EDI development at the level o& the country# industry sector and organi(ation. The stages are summari(ed as/ (3) Discovery stage/ where a country# an industry"sector# or an organi(ation ecomes aware o& EDI and egins planning and educating its people. (4) >perational use stage/ which involves gaining the a ility to exchange documents electronically with the majority o& trading partners y an organi(ation within an industry sector or a country. (5) $trategic use stage/ which uilds on the expertise gained in earlier stages to exploit innovative applications ena led y EDI# and may lead to new usiness relationships# new organi(ational &orms# and%or new sector%community structures. There are# however# a num er o& more detailed stages that can e discerned. )ithin the operational use stage o& the a ove model# most organi(ations start EDI in a limited way with selected trading partners 8 an introductory stage. From that stage# EDI usage is expanded to more and more trading partners and EDI message processing is integrated into core usiness systems 8 the integration stage. Integration o& EDI into usiness systems points logically to the next step which is the completion o& the electronic trade cycle 8 only when all this is completed &or most customers and all &re2uently used document types is the development o& (conventional) electronic trade complete 8 the operational stage. The operational# or even the integrated# use o& EDI leads to the strategic usage stage. ,t this stage EDI is the normal way o& doing usiness and is a way o& enhancing and reengineering the way that usiness is done. Aeyond these activities# and eyond the reengineering o& the usiness processes there is the innovative use o& EDI. This is where EDI moves &rom the way that usiness is done to e a way o& doing new usiness 8 this is the innovative stage.

These stages can e used to construct a six stage EDI maturity model. The stages o& the model and some o& the opportunities and implications o& each stage are now descri ed in a little more detail. Discovery stage Discovery can e y an organi(ation choosing to adopt EDI to gain competitive advantage or to solve an administrative pro lem. $ometimes it arises &rom the reali(ation that competitors are adopting EDI and that eing le&t ehind will result in competitive disadvantage.For most organi(ations discovery has come in the &orm o& a *re2uest+ &rom a signi&icant customer organi(ation that is converting its trade transactions to EDI 8 such *re2uests+ are not necessarily negotia le. Introductory stage >rgani(ations setting out on the EDI path generally start with a pilot scheme. Initiators o& EDI trading networ's will choose one or two trading partners with which to pilot a single message (transaction) type. EDI maturity and the competitive edge Dave )hiteley 7ogistics In&ormation Management @olume D K Fum er 6 K 3DDL K 3383C .>rgani(ations which are &orced into EDItrading y an insistent partner start electronic trading in a similar way. This stage re2uires investment 8 there are direct costs in computer hardware and so&tware ut at least as signi&icant will e the time commitment in esta lishing the parameters o& the electronic trading relationship. This stage# on its own# does not result in any cost saving or e&&iciency gain. Integration stage =aving &ound out a out EDI and having gained some practical experience the system can e developed &urther. @ery pro a ly the introductory system was a &ree standing system with transactions eing transcri ed &rom the EDI system to the main usiness system (or vice versa depending on the selected message type). There is little ene&it in an EDI system i&# &or example# orders have to e printed out and typed ac' into the order processing system. The next stage# there&ore# is to inter&ace the EDI so&tware with the usiness application so that EDI messages can e trans&erred electronically and automatically etween the two systems. The wor' involved in this stage is very varia le ut is o&ten expensive. To esta lish the EDI service# EDI so&tware can e ought *o&& the shel& +. Integrating the EDI so&tware and the usiness system will o&ten re2uire writing an in"house inter&ace system. The EDI so&tware will provide inter&ace &ile &ormatting &acilities ut is not li'ely to e a le to match the validation and integrity chec's that a usiness system would normally apply. Integration is an essential stage &or the large user o& EDI. Many small organi(ations# o&ten &orced into EDI y a large trading partner# never achieve integration/ .onsultants at $ema estimate that EB per cent o& their EDI customers are still printing out the in&ormation they receive y EDI and re"'eying it. Operational stage Integration reali(es the EDI ene&its o& saving time and avoiding transcription errors. Jeal usiness ene&its only come when a signi&icant num er o& trading partners and%or commonly used trade transactions are converted to EDI. Jeaching a *critical mass+ in the volume o&

electronic trading gives cost savings 8 the sta&& dealing with manual transactions can e redeployed. Di&&erent organi(ations have placed di&&ering emphasis on the completion o& the operation stage. Jetailers have een 'een to convert all their suppliers to EDI orders ut there has een less emphasis on electronic invoicing and payment# &or example A=$. The vehicle assem lers# however# tend to e more advanced in implementing other message types (see &or example the Jover case study). Strategic stage There are savings to e made y simply replacing paper documents y their electronic e2uivalent. The real opportunities come &rom ma'ing changes to esta lished usiness practice. These opportunities only arise when signi&icant progress is made in the operational stage 8 the implementation o& these changes is the strategic stage. !ossi le areas o& change and examples o& where such changes have ta'en place are/ 0 The se2uence o& trade documents can e revised. Document matching is a considera le pro lem in order processing/ the customers have to match deliveries to the orders and invoices to the deliveries1 the suppliers have to match payments to invoices 8 each process made more complex y disparate document types# part deliveries and incorrectly recorded codes EDI ma'es the process easier 8 at the very least codes should e correct and in the proper place. EDI also gives the opportunity to re"engineer the trade document cycle1 Ford# &or instance# sel&" invoice &or delivered components# thus omitting one stage o& the matching process (&or themselves i& not their suppliers). 0 EDI can give dramatic time savings. The time etween &ormulating a replenishment demand to the order eing processed y the supplier can e as short as is re2uired 8 &or all orders# not just rushed orders. This has &acilitated the reduction or elimination o& stoc' holding ( y the customer organi(ation at least) and is a part o& the development o& just"in"time (<IT) manu&acture and 2uic' response supply. Examples o& this a ound. Jover-s use o& just"in"time is documented in Aa'er. Jetailers have also used EDI &or 2uic' response supply# eliminating stoc' holding in the stores or their own warehouses. The esta lishment o& electronic trading relations can involve considera le discussion and co"operation (although it can also e a case o& *EDI or die+ 8 here is what we do 8 now you &it in). EDI# in some trade sectors# is part o& a pattern o& closer co"operation etween customers and suppliers and involves cooperation in design# production and a longterm trading relationship. This can e rein&orced y the electronic interchange o& production plans or electronic point o& sale (E!>$) data 8 A=$ lin' !>$ data and EDIorders1 they say o& their supplier * y 'nowing the sales o& his product# he can e more pro"active in his dealings with A=$+. Innovative stage The esta lishment o& an operational EDI in&rastructure and the change o& operational procedures that it &acilitates also gives the possi ility o& changing the nature o& the product or the provision o& new services. These developments are termed the innovation stage in the

model and it is contended that they open up new possi ilities &or competitive advantage. Examples intended to illustrate these possi ilities are given in the concluding section elow. Conclusions mature EDI and the competitive edge Timely investment in imaginative IT systems has the potential to create a competitive advantage. EDI systems could reasona ly e expected to share this potential. =owever# the time ta'en to plan# agree and implement such systems# coupled with their pu lic (cooperative) nature will# in most circumstances# preclude any dramatic or sustaina le competitive advantage1 competitors will see what is going on and 2uic'ly set up parallel developments o& their own. That said# the reengineering o& the supply chain and the development o& a mature EDI in&rastructure alters the way usiness is done. The new electronic in&rastructure can e used &or the creation o& a new product or the delivery o& new services. Examples o& such developments are only justemerging as the early users o& EDI achieve maturity in their systems. >ne example o& such a development is Jover cars which# &or the ?G mar'et at least# has stopped producing cars &or stoc' and only produces a car when it has the dealer-s order. EDI and the associated changes in supply and production have reduced the time &rom production planning to delivery o& a car &rom seven wee's to two. Jover dealers have een e2uipped with computer systems where the customers can speci&y their own car (well at least the options they want) and two wee's later there it is with its sun roo&# alloy wheels and gleaming pin' paintwor'. >ther moves to product customeri(ation also rely on a mature EDI in&rastructure. For example Jaleigh will uild their top o& the range mountain icycles to a customer speci&ication. 7evi <eans# i& you are &emale and live in the ?$,# will produce a &actory made"tomeasure pair o& jeans. The measurements are ta'en in the store and su mitted electronically to the centre. ,dditional moves to exploit a mature EDI in&rastructure in an innovative way should e expected. , sector where the lin'ing o& E!o$ and EDI is set to change the mar'et is that o& the * est seller+ oo' trade. Timely mar'et intelligence can allow reprints o& success&ul loc' usters to e rushed out e&ore the stoc' disappears and the pu lic interest is lost. The point is illustrated y a 2uote &rom a speech y Eddi Aell# chairperson o& =arper .ollins# to the AI. $ymposium )ith E!o$ and EDI wor'ing together on our ehal&# we could have had the reprint out three wee's earlier1 no oo'shop need ever have een out o& stoc' 8 and we could pro a ly have dou led our sales during this early *hot+ period. ,nd &or the oo' that does not ma'e it# the same mar'et in&ormation could dramatically reduce that hal& o& all printed oo's which are remaindered or pulped