Electronic data interchange is coming: here's why.

Electronic Data Interchange Is Coming: Here's Why

Processors trying to deal with the challenges brought about by changing relationships with customers and suppliers, shorter product life cycles, and new competitive pressures are learning a new acronym that may soon become a household word. EDI is shorthand for computer-to-computer exchange of business information, in precise formats, without human intervention. And while it isn't new, only during the last five years or so has it begun to achieve widespread use in manufacturing.

EDI was originally implemented to speed up the processing of invoices, purchase orders, freight bills, and other documents between companies. EDI can reduce paper processing costs, because data are transmitted electronically rather than mailed; it can also eliminate data errors, because data needn't be manually reentered into a computer. But more importantly, EDI's structured nature is helping it become a core tool for computer-integrated manufacturing (CIM). It can provide a vital link between internal databases or production control systems and the outside world. It can enable production to respond immediately to the customer. Conceivably, a purchase order generated via EDI could automatically trigger the supplier's production control and accounts payable system. With this kind of capability, it also has a role to play in Just-in-Time (JIT) manufacturing.

In reality, the system rarely works at such a level today. EDI, while about 20 years old, is still quite immature as a technology. According to James Zamjahn, EDI policy coordinator for General Motors Corp. in Detroit, EDI is being treated as a machine readable fax by most users. "Where the real work needs to be done is to change the business systems, and then apply the EDI applications," he says.

EDI is sometimes confused with electronic mail. The chief distinction is that EDI messages are strictly formatted, machine-readable electronic transactions, while E-mail messages are simply free-form blocks of data or text. However, state-of-the-art E-mail systems are beginning to blur those differences.

Timothy Kogelschatz, sales manager for American Business Systems, Inc., Ann Arbor, Mich., an EDI software supplier with an installed base of over 1000 customers, says implementation levels vary by industry. Ninety percent of ABS's customers are in automotive. Kogelschatz says perhaps 20% of them link EDI to other business software applications. However, among ABS's retail customers, which include K-Mart and Sears, the level of integration jumps to 90%. Retailers often use EDI to transmit or receive large, complex orders that must be broken down among different departments. The most sophisticated retailers are even beginning to integrate bar-coding and other data-collection devices with EDI to update their suppliers on an almost real-time basis.

BIG COMPANIES LEAD

SUPPLIERS TO EDI

Larger manufacturers tend to be more sophisticated about EDI than smaller manufacturers. But even within large, multisite companies, the level of implementation often varies. As large companies decentralize operations, individual plants often make the decision whether to implement EDI. For example, Deere & Co.'s highly automated, JIT-oriented gardening products plant in Horizon, Wis., transacts 40-45% of all its business with suppliers via EDI. But at Deere's less automated Moline, Ill., harvester works, only about 20% of business travels electronically.

Such large customers--often called "hub companies" in EDI jargon--are usually more advanced than their suppliers when it comes to integrating EDI with core business applications. On the supplier end, transactions often start and end at a stand-alone personal computer or terminal, which prints out the customer's purchase order for use as a sort of "kanban" job ticket rather than automatically updating a production scheduling or MRP-II system. If such systems exist at the supplier, the data are usually rekeyed.

Sears and GM are typically hub companies. Sears uses at least nine different EDI transactions, and a number of others are planned, yet most of its suppliers use just one or two transactions, mostly on a stand-alone basis. It's similar at GM. Most of its suppliers tend to conduct their EDI business on a single personal computer that was bought for EDI because GM strongly suggested it.

Are stand-alone EDI systems worth it? Undoubtedly processors doing business with the Big Three automotive companies would say yes. Their livelihood might depend on it. But there's no reason why EDI can't become integrated with a company's internal systems. It doesn't require a visionary to imagine the production-scheduling components of MRP-II systems being activated by EDI transactions. In a first-class MRP-II shop, the data should already be there. In JIT shops, an incoming purchase order via EDI activates the order entry system, which then updates daily or weekly production and shipping schedules. When the order is to be shipped, an advance shipment notification to the customer can be automatically generated, which the EDI program in turn converts to a format the supplier can read.

STANDARDS: KEY ITEM

ON THE AGENDA

And that's where the thorny issue of EDI standards comes in. Standards set the format and content of specific transactions. Without them, many EDI trading partners would be speaking different computer languages. In fact, a large sub-industry has emerged to ensure that partners can communicate effectively.

The first EDI-like systems began to appear about 20 years ago in the trucking industry to clarify the status of goods in transit. A standard set by a professional organization within the industry, which later became the Electronic Data Interchange Association (EDIA), made it possible. Then in the 1970s, EDI spread to retail, pharmaceutical, and other industries. But each of these industries established systems using its own proprietary standards, and confusion became rife.

In the 1980s, manufacturers' love affair with JIT really caused EDI to take off, and with it has come a coordinated effort to establish standards across industries. In 1979, the Automotive Industries Action Group prevailed on Detroit's Big Three to harmonize their standards. The result became the basis for the American National Standard Institute's (ANSI) recently released X12 standard. Other industry groups have selected X12 as their basic standard and are adding industry-specific subsets to meet their member's requirements.

Experts say X12 is poised for virtually unanimous acceptance as the domestic EDI standard, although it looks as though Europe and other areas will develop their own standards. But while standards clearly are the wave of the future, the current situation is another matter. Take Sears, for example. About 80% of its EDI transactions are through pre-X12 systems. While Sears supports X12, it's not about to scrap its existing EDI system. But it also doesn't plan to develop the proprietary system any further. In automotive, changeovers from proprietary systems to X12 generally occur only in conjunction with larger business-system upgrades.

While standards are important in EDI, and will lead to more widespread use, they may not be as critical as they are for some manufacturing computer systems or for applications such as SPI's Communication Protocol. Different standards can coexist in EDI a bit more easily. EDI standards only care about how many characters are in your purchase-order number field, and so forth. Also, a large amount of translation software is available, and many of the leaders in third-party public networks, such as GE Information Services Co. (GEISCO), are offering services called value-added networks (VAN), that provide the same function. VANs make the messages sent between trading partners understandable to each other.

WHAT'S OUT THERE

EDI basically requires computers, translation software, and a network between the trading partners. The EDI services market is segmented into software and network service providers. Software providers generally provide translation software. Service providers supply network service for transmission of EDI messages and sometimes translation software as well. Vendors typically provide software and network services conforming to specific industry standards addressing three issues: 1) a structure for the message "envelope" that surrounds the data to be transmitted; 2) a structure for the message content; and 3) a vehicle to handle the links to external computers through communication protocol conversion.

A look at one service provided by GE gives an indication of what's available. With its [Design.sup.*.Express] System, companies can electronically process and transmit engineering/manufacturing information such as patterns, blueprints, and bills of material from their computer to computers at trading partners around the world. [Design.sup.*.Express] accepts document formats such as ASCII and binary files, screen images, IGES, CGM, GKS, GIF, SGML, and NAPLPS files. Generic CAD/CAM files, engineering/material specification and NC files are also accepted.

Processors looking for translation software should be cautious. The trick to translation software is choosing a vendor that keeps up with the latest versions of the standards, which are continuing to add new transaction types. American Business Systems' Kogelschatz recalls attending an EDI trade show in the early 1980s and seeing 50 to 60 companies offering translation software, a number that dwindled to about 15 a few years later. Keeping EDI translators up to date has proven more complex than many vendors expected. Besides staying current, they have to offer functions like the ability to track transactions or automatically route them to different departments. All translators aren't created equal.

EXPERIENCE IN THE FIELD

Who's using EDI in plastics? A lot of automotive molders have no choice but to use it. But apart from automotive, EDI is increasing in popularity. For example, The Tech Group, a Scottsdale, Ariz., custom injection molder, and one of its customers, Carlisle Memory Products of San Diego, are establishing an EDI network that's expected to have far-reaching implications for both companies. Both partners look at their EDI network as the basis for a strategic alliance. "It's a matter of developing a relationship that includes understanding one another's business so well that we can all be involved in shared problem-solving," says Al Branson, Carlisle's v.p. of product resources.

One use of the system will be for Carlisle's quality-assurance people to look at Tech Group's manufacturing records. Says Tech Group president Steve Uhlmann, "We known what they're trying to accomplish, and they'll know what our logistics are. We're opening up our production reporting and quality systems so they can access it and see the same data that our people are working with. We're in the process of setting up an EDI system where we can go inside their computers and vice-versa to check on inventory, the status of orders, and other information. By having more information we can act together as a cross-checking system."

IBM Corp's Information Systems Div., in Lexington, Ky., which molds parts of typewriters, keyboards, and printers, and its moldmaking partner Leap Technologies, Inc. of Otsego, Mich., are using an EDI network to reduce product introduction cycles. They transmit CAD/CAM drawings of mold designs and documentation of computer mold-filling analyses to predict optimum plastic flow, filling speed, and cooling parameters. This verifies that proper tool design and polymer recommendations have been made. Leap Technologies president Fred Borsini says the system gives engineers the capability to quickly transmit essential engineering geometry to worldwide locations, if need be, for real-time decision-making, and that it ultimately allows IBM to speed the process of getting new products to market. IBM and Leap Technologies have avoided the thorny issue of translation software standards by standardizing on the same CAD/CAM software package, in this case IBM's CATIA.

Another perspective comes from the resin side of the business. Quantum Chemical's USI Div. in Cincinnati is gearing up for EDI implementation to allow for faster, more efficient exchange of information with its customers. Applications include order processing, billing, and payments. Quantum's EDI coordinator Thomas Norcom reports that as a new user, previously developed EDI systems pose problems for Quantum. To avoid the need to maintain and support a multitude of incompatible electronic interchange approaches, Quantum has elected to participate with other chemical industry companies in the Chemical Industry Data Exchange (CIDX) committee. Through this group it will adopt, support, and promote development of EDI conventions that conform to the X12 standard established by ANSI.

WHAT'S AHEAD

Besides more widespread use, EDI is certain to increase in functionality. Right now it doesn't directly affect the actual manufacturing processes that add value to material. But that's the direction EDI is headed in the not too distant future. According to the experts, EDI will be used to send mold machining instructions, for example, directly to an NC machine's controls.