THE APPLICATION OF EDI TECHNOLOGY IN SMALL AND MEDIUM ENTERPRISES

Transcription

1 Internatinal scientific Cnference - SMEPP 2011 (Small and Medium Enterprises - Pssibilities and Perspectives), University f Nvi Pazar. THE APPLICATION OF EDI TECHNOLOGY IN SMALL AND MEDIUM ENTERPRISES Esad Međedvić University f Nvi Pazar, Departman f cmputer sciences Nvi Pazar, Serbia, esad@dr.cm Muzafer Saračević University f Nvi Pazar, Departman f cmputer sciences Nvi Pazar, Serbia, muzafers@gmail.cm Sead Mašvić, University f Belgrade, Faculty f Organizatinal Sciences Nvi Pazar, Serbia, sekinp@gmail.cm Enver Bičevac, University f Nvi Pazar, Departman f cmputer sciences Nvi Pazar, Serbia, e.bisevac@uninp.edu.rs Abstract: In this wrk we cnsider the key factrs and mre recent theretical appraches related t the limitatins and usefulness f electrnic dates interchange and electrnic distributins in small and medium enterprises. Primarily refers t technlgy that includes prcessing and exchange business infrmatin between businesses in the natinal and glbal envirnment thrugh infrmatin technlgy and exchange f business and administrative messages between cmputers tw r mre business partners with the use f agreed standards t structure the transactin r dates. Key wrds: EDI, e-cmmerce, electrnic data interchange, e-distributin. 1.INTRODUCTION The intrductin f e-business in small and medium enterprises is a challenge, primarily citing investment in infrmatin and cmmunicatins equipment, then the lack f technical and managerial knwledge and the pssibility f implementing a netwrk system which is based n infrmatin technlgy. EDI technlgy used mainly by large cmpanies and institutins because f high implementatin csts. Fr the applicatin f electrnic data interchange that are listed in this wrk are lwer csts, better custmer service, relatins with ther cuntries and marketing.

2 The rapid develpment f the telecmmunicatin infrastructure in recent years has prvided brad netwrk cverage with high quality and fast transmissin. This factr has facilitated the develpment f inter-rganizatinal systems (IOS). Electrnic data interchange, r EDI fr shrt, is ne type f IOS that enjys the abve benefits. EDI is a system that transmits electrnic infrmatin via telecmmunicatin links in a structured frmat. By establishing links between different parties, EDI prvides a speedy, accurate and efficient means t exchange infrmatin. Many benefits such as increasing accuracy, imprving prductivity, and reducing transmissin time can be btained frm the adptin f EDI. The majr bjective f this study is t investigate and determine what factrs wuld influence EDI adptin decisins in SMEs. As mentined abve, EDI adptin in SMEs is nt as ppular as it is in large rganizatins. Despite the abundance f the attractive benefits f adpting EDI, SMEs are still reluctant t use the system. SMEs cntribute the grss dmestic prduct (GDP) and emplyment rates and thus play an imprtant rle in the ecnmy. The verall lack f EDI capability f SMEs is a serius issue and may very well have a negative impact n the ecnmy f a cuntry. Mrever, wing t the netwrking nature f the technlgy, the mre rganizatins that adpt EDI, the higher the benefits are t all adpters. The fact that few SMEs are jining the EDI cmmunity significantly affects the benefits f EDI-capable rganizatins inside the netwrk. Clearly, recgnizing the factrs that influence EDI adptin will be useful in suggesting strategies t vercme the cnstraints that inhibit adptin. This line f inquiry benefits bth researchers and practitiners. Researchers will benefit frm the study's theretical insights and explre further EDI adptin and diffusin patterns. Practitiners wh learn why rganizatins adpt EDI and what the related factrs are that influence the adptin prcess will make better strategic decisins cncerning the adptin f EDI. 2. ELECTRONIC DATA INTERCHANGE EDI is the exchange f structured business data between separate cmputer cmpanies, carried ut withut manual interventin, electrnically, by means f standardized messages that replace traditinal paper dcuments. EDI is the exchange f business r administrative messages (rders, invices, ntificatins, billing, and inventry), the cmputer tw r mre business partners using agreed standard t structure the transactin r data. EDI is ften defined as the exchange f frmatted business transactins in a standard frmat, frm cmputer t cmputer between business partners. Business partner usually have different cmputer systems and business applicatins, EDI envirnment standard data frmats and prtcls t send and receive business dcuments. The data is frmatted with each end t allw fr integratin int the established system. Like ther mdels f electrnic cmmunicatin, such as fax and , EDI allw infrmatin is sent ver a public r private cmmunicatin lines.

3 EDI is ne f ways fr crssing the "paperless sciety". Submissin f business dcuments is dne in secnds instead f several days, and reduces the pssibility that such dcuments are lst r be crrupted. Unlike ther types f electrnic cmmunicatin, EDI allws the cmputer t prcess the infrmatin received, thus eliminating the task f rewriting and the pssible errrs when retyping. EDI system takes infrmatin frm incming surce thrugh a netwrk address f the seller, and sends them directly t the applicatin t further prcess the data. This ability t frward infrmatin directly t applicatins makes EDI a pwerful tl fr business. EDI is defined as the prcess f cmmunicatin (cmputer t cmputer) business infrmatin in standard frmats. Electrnic cmmerce is a brad term includes EDI, but als includes interpersnal cmmunicatin (human t human), Transfer Mney, and the sharing f cmmn databases with added activities and assist in the efficient cnduct f business. T understand the true meaning f EDI is best t cnsider what EDI is and what is nt [1]. Using EDI in their daily peratins cmpany creates: faster delivery f dcuments withut lsing r damaging significant savings in time needed fr dcument prcessing by eliminating the need fr re-typing dcuments Increase prductivity and efficiency Significantly reducing the cst f prcessing paper dcumentatin, reduce f errrs in data prcessing Imprved transprtatin management, distributin, inventry... significantly reduce prcurement csts and the like. 2.1 EDI system develpment phases The appearance f EDI technlgy has caused a series f stages that have gradually develped EDI systemand and eliminate a number f shrt cmings and drive innvatin.

4 Discvery: mre prblems, a small advantage Intrductin: pilt applicatins starting with a dcument, and 1-2 business partner Integratin: the frmatin f interfaces between the EDI applicatins and IS Actin: the achievement f a sufficient number f transactins, with mre business partners using a number f dcuments Strategic changes: updating the dcument f a jb and savings in time Innvatin: persnalizatin slutins and new services 2.2 Structure and functinality EDI structure cnsists f five cmpnents (aspects), which frm a whle: Technical cmpnents: cmmunicatins, hardware, sftware Ecnmic aspects: csts and benefits f EDI, the impact f the transactin, the impact n the structure market Strategic aspects: the ptential benefits Organizatinal aspects: intrductin f internal prcesses under the influence f EDI Scial and plitical aspects: selectin f EDI partners, re-distributin f pwer within the framewrk EDI netwrk cntrl technlgy EDI is cmpsed f fur levels as fllws: Semantic level, the standards, the level f transprt and physical level. SEMANTIC LEVEL APPLICATIONS LEVEL STANDARDS ANSI ASC X12, EDIFACT LEVEL OF TRANSPORT Pint-t-pint,X.435, ,WWW,FTP,Telnet,HTTP PHYSICAL LEVEL Dial-up line,internet

5 2.3 Semantic level f EDI system BUSINESS PROCESSES SERVICES TEHNOLOGY Level f business prcesses, the scenari between buyer and seller including: Marketing: the available and accessible infrmatin Cntracting: negtiating price, delivery and payment The transprt thrugh a third party, subject t apprpriate cnditins and d cuments Administratin: Taxes and Custms Declaratin Payment: The transfer f mney frm the buyer t the seller directly thrug h the bank r directly Level services Security: authenticatin, cnfidentiality, integrity and the exclusin f nnrecgnitin legal infrmatin and advice: in internatinal business Establishing a market: in many areas, auctins, infrmatin retrieval infrmatin abut the cmpany: the ecnmic pwer and the rganizatin f EDI Integratin: the link between EDI translatrs and related data frmats Level technlgy security: cryptgraphy, digital signatures and smart cards legal infrmatin and advice: agree n the exchange, electrnic cntracts, review f legal cntent frmatin f the market: catalgs fr auctins, data discvery, electrnic negtiatin Cmpany infrmatin database with data n cmpanies EDI Integratin EDI translatrs, standards, Light-EDI 2.4 Level Standards General EDI prcesses f transactins can be seen thrugh the fllwing examples. Exchange business data between the tw firms. The cmpany bradcasts custmer business transactins frm their internal business system as a subsystem f trade. Transactins are translated int standard frmat (ANSI X.12) s that the supplier

6 can understand. Translatin sftware is usually separated frm the business system. The transactin is sent t the supplier thrughut this allws the cntrlled exchange f electrnic dcuments. The cmpany's vehicle receive transactin and translates it int a frmat fr printing r frmat that is acceptable fr its independent perating system, such as a system fr prcessing rders. As the cmpany buyer, the seller cmpany usually sends back an electrnic cnfirmatin f firm custmer that the transactin has been cmpleted and that in the prper frmat [1]. The fllwing example shws, hw EDI can be used t achieve interactive electrnic market. Buyer transmitted t the system and all registered sellers public demands fr sme cmmdity prices, the sellers take ver the system demand f gds in accrdance with their interests. Sellers respnd by sending the dcument t the prices buyers and infrm them electrnically. The decisin may be sent t each ne, fr example, directly with custmers. Custmer can review all the replies received using making sme kind f sftware, deciding t ffer the mst cnvenient fr AND / OR criterin set, and sends an rder selected merchant. The buyer may als transmit infrmatin t the seller gt rder. Buyer after receipt f the gds may issue a dcument fr the payment f dealer rders, and send mney t the merchant using electrnic funds Transfer (Electrnic Funds Transferring - EFT) [1]. As mre firms are using EDI t exchange business dcuments there is a need f standardizatin f fields that are exchanged. If the cmpany wuld cmply with the standards will accelerate the prcess f implementing EDI and reduce the cmplexity f the enterprise. Each business partner may be n its peratins utside their wn business applicatin t translate the standard frmat and agreed with ther business partners. In his speech, when the transactin is received, the business partner checks in a standard frmat and apprpriate sftware can be translated int the frmat required fr internal business applicatins. There are tw public standard frmats fr EDI transactins, ANSI ASC X.12 and UN /EDIFACT. Mst EDI transactins are exchanged in this frmat (with the appearance f web, there are ther frmats that are used). 2.5 UN/EDIFACT Internatinal standards laid dwn in the EDI ccur under the auspices f the United Natins (UN). The internatinal standard is called UN/EDIFACT (Electrnic Data Interchange fr Administratin Cmmerce and Transprt) - EDI fr Administratin, Cmmerce and Transprt. The mst widely accepted EDI standards in develped cuntries; legislatin was adpted as the fficial natinal standard EDI. Applicatin f standard UN/EDIFACT in several areas: Trade, Transprtatin, Finance, Custms and Insurance, Statistics, Cnstructin, Health, Turism, Scial and Public Administratin, Public Order. Disadvantages UN / EDIFACT are Analgy with TTY: nly text files. Prvides nly the frmat f exchange between different applicatins (and nt the cmplete slutin).

7 2.6 TEDIS prgram in Small and Medium Enterprise Because f realizatin f this idea 1987 th was launched TEDIS (Trade Electrnic Data Interchange System) prgram at the initiative f the Eurpean Cmmunity. TEDIS is a system that supprts the electrnic exchange f business infrmatin, allws aviding the use f paper dcuments and prvides a system that wrks glbally. Rle TEDIS system is fast and efficient internal and internatinal trade. This applies t traffic in a brader sense when taking int accunt the timely supply f prductin by suppliers. Further develpment f this system is mving tward an interactive exchange f infrmatin between infrmatin systems f business partners Phase f TEDIS prgram In develping the prgram TEDIS there were tw phases: In the first phase, that cntinued since fr was perfrmed t identify cmmunicatins needs and requirements f the existing netwrks in terms f cnnectivity, interactive wrk and integratin. Examined the pssibility f telecmmunicatins netwrks t supprt the develpment f such systems. The secnd phase began in and lasted until The main bjective f this phase was t make the integratin f infrmatin systems. It was als very imprtant t study the effects f using the electrnic exchange f data n gvernance in public and private cmpanies. Anther task was t initiate cmpliance with standards (EDI) in small firms as well as Eurpean prducers f sftware and hardware. Security, the pssibility f using TEDIS prgrams and applicability: One f the imprtant issues is the security f data sent in this way. TEDIS system is n it paid special attentin. When any infrmatin sent, it autmatically encrypts TEDIS and disables read data r making any changes. Als n the data and assigns a digital signature that nly the user knws. Any cmpany can use the system easily. Nt require expensive cmputer systems, r sme special sftware, but it is sufficient that the cmpany wns a cmputer and a cnnectin t the Internet. The prgram TEDIS there has been a huge increase in the implementatin f electrnic data exchange in Eurpe fr the past few years. It will play a rle in increasing the cmpetitiveness f Eurpean firms in the cntext f the internal market. Trend imprve efficiency in administratin is already evident [3].

8 3. STUDIES OF EDI ADOPTION IN SMEs Few EDI adptin studies in the SMEs cntext have been cnducted. A ntable ne is Iacvu et al. (1995), which prpsed a theretical mdel cnsisting f three cntextual factrs: 1) perceived benefits f EDI, 2) rganizatinal readiness, and 3) external pressures, which determine EDI adptin in SMEs. Perceived benefit refers t Rgers' (1983) characteristics f innvatin. Organizatin readiness refers t "availability f the needed rganizatinal resurces fr adptin". External pressure refers t influences frm the rganizatinal envirnment[2]. Seven rganizatins, which were selected frm a list f suppliers t the British Clumbia gvernment, were investigated by using case studies. The findings indicated that the external pressure frm EDI initiatrs had the strngest explanatry pwer t influence EDI adptin in SMEs, fllwed by perceived benefits. Als, nn-adpters had lwer levels f awareness f EDI benefits and fcused n direct benefits rather than n indirect benefits frm adptin. The relatinship between rganizatinal readiness and adptin was nt strng but the cst f the investment and the lack f technical knwledge were imprtant in the adptin decisin. Iacvu et al.'s study prvides preliminary empirical findings n the adptin f EDI in SMEs. The insights btained als help t frmulate hyptheses and prvide theretical backgrund fr further cnfirmatry investigatin. Hwever, the small sample size and the lack f reliability and cnstruct validity

9 tests restricts the validity f the verall findings, suggesting that a large-scale study might be needed t ensure greater reliability [4]. Raymnd and Bergern (1996) surveyed 39 SMEs t examine EDI adptin frm anther perspective. They prpsed a mdel f success factrs f EDI in SMEs. Six factrs, namely, rganizatinal supprt, the implementatin prcess, the cntrl prcess, internal and external integratin and impsitin levels were used t study hw they affect the advantages t be btained frm using EDI. The results suggest that mre benefits frm adpting EDI are btained if mre rganizatinal supprts such as training fr emplyees are prvided. This implies that lack f resurces is an imprtant inhibitr fr SMEs t realize the ptential benefits f adpting EDI. Als, the impsitin level was fund t have an adverse effect n btaining EDI benefits in SMEs. The findings f Raymnd and Bergern's study were als cmpared with thse btained in anther study in which the same research mdel was applied t large rganizatins. The cmparisn indicated that factrs affecting EDI advantages might be different between large rganizatins and SMEs in terms f strengths and directins. One significant difference is the degree f influence f the rganizatinal cntext n bth large rganizatins and SMEs. The rganizatinal cntext, which includes rganizatinal supprt, the implementatin prcess and the cntrl prcess, plays a significant rle in successful use f EDI in SMEs [2]. EDI traditinally has been used by large rganizatins that can affrd t spend huge amunt f mney n cnverters as well as maintaining private pint-t-pint netwrks fr security and reliability reasns. This was an unthinkable prpsitin fr the small and medium sized enterprises. The advent f Internet has brightened the pssibility f ding nline transactins by these small and medium enterprises, but with the cmprmise n security. Ensuring the flw f EDI data transfer ver the Internet in a secure manner is the bjective f EDIINT [5]. 3.1 Benefits f EDIINT EDIINT slutin helps t level the playing field fr SMEs by prviding a slutin that allws these cmpanies t d business with larger rganizatins and, at the same time, enjy the cst savings, speed and ther benefits f e-cmmerce. EDI ver the Internet (EDIINT) is a wrking grup f the Internet Engineering Task Frce (IETF) that is chartered with creating specificatins fr transprting EDI r XML dcuments ver the Internet in a secure (digitally signed and encrypted), highly reliable manner [3]. EDIINT EDI ver the Internet ffers the pprtunity fr large, medium and small enterprises t cnnect and exchange business dcuments ver a secure public netwrk and significantly reduce cmmunicatin csts.

10 The fllwing are sme f the benefits Secure: Addresses the issues f privacy, integrity, authenticatin and nnrepudiatin fr B2B e-cmmerce ver the pen Internet. Increased Reliability due t the usage f secure prtcls, guaranteed delivery, and encryptin decryptin techniques Lw-cst as cmpared t the VAN based transactins Highly accessible as cnnectivity t Internet is n mre a luxury Supprts high bandwidth cmmunicatins Technically mature as the specificatins are being cntinually refined based n the feedback frm industry usage CONCLUSION We cnclude that the benefits f using EDI in small and medium sized businesses primarily delivery f business dcuments is dne in secnds instead f several days, and reduces the pssibility that the dcuments are lst r damaged. Fr unlike ther types f electrnic cmmunicatin EDI enables the cmputer t prcess the infrmatin received, thus eliminating the task f rewriting and the pssible errrs when retyping. EDI is mst frequently used in electrnic cmmerce and digital ecnmy. The main applicatin f EDI applicatins in carrying ut functins such as buying and selling gds and services, but EDI can als is used fr a wide range f business applicatins. REFERENCES [1] Kantr, Michael; James H. Burrws (1996). Electrnic Data Interchange (EDI). Natinal Institute f Standards and Technlgy. [2] C. L. Iacvu, I. Benbasat, and A. Dexter(1985). Electrnic data interchange and small rganizatins: adptin and impact f technlgy, MIS Quarterly, vl. 19, n. 4, pp [3] Parker,C.M. (1997). Educating Small and Medium Enterprises abut Electrnic Data Interchange: Explring the Effectiveness f a Business Stimulatin Apprach. Department f Infrmatin Systems. [4] Seyal, A. H. & Rahim, M.M. (2006). A Preliminary Investigatin f Electrnic Data Interchange Adptin in Bruneian Small Business Organisatins. The Electrnic Jurnal f Infrmatin Systems in Develping Cuntries, 24 (4), [5] Thng, J., C. Yap, (1996). Infrmatin technlgy adptin by small business: An empirical study, In Diffusin and adptin f infrmatin technlgy, ed.k. Kautz and J. Pries, pp Lndn: Chapman & Hall.