Electronic commerce and document interchange:
EDI applications in the private and public
Kim Viborg Andersen,
Niels Bjørn-Andersen & Niels
Released May 12th 1998
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About the survey
Publication in 3rd USENIX Workshop
on Electronic Commerce, September 1998
in World Computer Conference (ITBM) in Beijing, China, August 2000
Application of electronic commerce and electronic document interchange
are an incentive to automate, informatize and reorganize work processes
in our own and our business partners' organizations.
In the mid-1990s a range of highly industrialized countries such as
the US, Sweden, the Netherlands and, in particular, Denmark took the initiative
to increase application of EDI between companies and between companies
and the public sector.
In Denmark, a number of partners adopted a plan of action for electronic
commerce in 1996 - a plan that became known as the EDI Agenda. The plan
focused heavily on increasing application of the international EDIFACT
standards in business-to-business transactions. This international standard
was considered a means to facilitate the globalization of Danish trade
and industry in addition to a reduction of the administrative loads (waste
work) internally in the value chain and in the communication with the public
Since then a range of selective tests have been made of the scale of
the EDIFACT dissemination in 1995, 1996 and 1997 by e.g. the Confederation
of Danish Industries and the Ministry of Education and Research (1996,
1997). The measurements indicate that an increasing number of companies
and public organizations exchange data electronically from computer to
computer in connection with placing orders, invoicing, shipping, pharmacy
prescriptions, reporting, etc.
However, the selective tests have also shown that a range of companies
still apply their own standards in the interchange of data with their business
partners - the so-called proprietary standards. The media, in particular,
has been preoccupied with ensuring that the transport for interchange of
data is not merely their own data links and VANS-operators (such as Dan
Net A/S, IBM and Kommunedata), but also TCP/IP protocols
on the Internet and their own closed networks, Extranet/Intranet.
In 1996, EDI solutions were almost synonymous with transport via a company’s
own data links or VANS-operators. The data format was normally proprietary
on the company’s own links and EDIFACT-based via VANS. Such solutions were
characterized by high supply security and data protection. Since then,
the Internet technology has made its breakthrough with Internet as a method
of transport, open client/server solutions by means of World Wide Web technology,
e-mail standards with document attachments and application of all these
technologies on both the Internet and the closed networks between business
partners. Today, these alternatives open up for new and mixed EDI-solutions,
which in different measures apply EDIFACT-messages or existing proprietary
message formats. The Internet technologies also allow EDI solutions where
it is mostly one of the partners in the data interchange who benefits from
the full integration between the data interchange and the company’s own
data processing. In such circumstances, the other partner has no cost increases
In principle, the EDI application can be quantified in several ways
today. First, the interchange of data can be viewed partly in terms of
the transport level (normally the company’s own network, VANS or the Internet)
and partly in terms of the message format (normally the company’s own formats
or EDIFACT-based formats). Second, an important parameter is the degree
of integration between data interchange and data processing, partly in
the company and partly in the company’s cooperative partners. The extent
of the integration will typically vary at the two ends when the cooperative
partners do not have EDI integrated directly with their own systems. Normally,
we will see this solution in the application of form-based EDI,
where the cooperative partners apply e.g. a Webbrowser in which a form
is completed/updated and returned electronically to the company’s systems.
In relation to the company/consumer this solution can be seen as the first
step in electronic commerce, but it can also be applied between cooperative
A complete classification of today’s EDI application will include more
than twelve categories which in this report have been grouped into three
Proprietary standards that include all EDI where the messages are never
based on EDIFACT standards.
EDIFACT-based standards that include all EDI where the message on its way
is based on EDIFACT, i.e. also form-based EDI that is converted
to EDIFACT "on the reverse side".
In the beginning of 1998 the Danish EDI Council launched the present study
in order to clarify any changes in the application of EDI both in terms
of scope and as a means of transport. In addition, the mandate of the study
comprises an evaluation of EDI application in the years to come. In the
study, which was made between January and mid-April 1998, we have gathered
data from the seven most important VANS-operators, eight large private
companies and organizations, ten industry associations and thirteen public
organizations. In addition, we have interviewed a number of other organizations
in order to obtain background material for the report. The main conclusions
of the study are:
Browser-EDI that describes the form-based EDI that is not EDIFACT-based
(and not converted to EDIFACT "on the reverse side").
There has been a sharp increase in the number of companies capable of sending
and receiving EDIFACT messages. The analysis of the number of users of
the EDIFACT standard in Denmark shows a particular increase in the number
of small companies among the new users of EDIFACT. From 1995 to 1996 the
total number of companies that could send/receive EDIFACT messages increased
by 26 per cent compared to 31 per cent from 1996 to 1997. Among the small
companies the increase amounted to 90 per cent from 1996 to 1997.
More EDIFACT messages have been sent via VANS measured both in terms of
number and size. From 1995-1997 the EDIFACT application has increased on
average by approx. 45 per cent annually in terms of number of messages
and by approx. 33 per cent in terms of size of messages. If we compare
the number of bytes via VANS in EDIFACT-format in December 1997 with the
number in January 1995, the increase amounts to approx. 82 per cent over
the three years. Measured in terms of messages, the study shows that 176
per cent more messages were sent in December 1997 compared with January
An increase in EDI application is first and foremost seen in the first
links in the supply chain, in a few business sectors and in the large companies.
It is especially the health sector, the distributive trades and the financial
sector that account for the marked increase in EDIFACT traffic via VANS.
In the distribution of goods it is the large retail chains that are at
the front in EDIFACT application, while the large companies such as Mærsk,
Lego, Grundfos and Danfoss have been the motive force within the industry.
EDI application involves especially placing of orders and invoices that
are sent electronically between companies. However, the two types of documents
are often supplemented by a range of other documents such as change in
orders, time of delivery and payment.
A meaningful application of EDIFACT requires a substantial volume and accrual
in addition to determined formats in the individual business transactions.
This is a crucial barrier to the dissemination of EDIFACT application in
connection with deliveries from supply companies to e.g. public organizations.
At present, it is very limited how much companies apply browser-EDI for
business-to-business trade. Only five per cent of the companies have used
the Internet for electronic commerce, whereas approx. 35 per cent of the
companies use EDI via VANS or proprietary (closed) circuits. As yet, the
companies are not convinced that supply security and data protection can
be guaranteed on the Internet.
It is predicted that browser-EDI, which can be called a relatively inexpensive
integration of the extreme ends of the value chains, will continue to make
headway with great benefits for that end of the communication where the
EDI, possibly the EDIFACT message, is integrated into the company’s other
business processes. Therefore, the solution must be seen as a first step
towards full integration in the "browser end" in order that data also can
be interchanged electronically with the other business processes.
The companies will increasingly apply browser-EDI so they themselves can
offer "VANS-services" and service/sales via Web-pages on the Internet.
According to our estimates this will not reduce the number of companies
that apply EAN-numbers or the number and the size of EDIFACT-transmissions.
Modern management accounting systems have a considerable potential in connection
with increasing EDI application. There are substantial tasks ahead in connection
with an integration of EDI into the companies’ internal systems.
At present, the public sector is not the primary force within EDIFACT application,
with the exception of the MedCom-project (the health sector). In 1998,
we will see a range of EDIFACT initiatives, but the major part will tend
toward datawarehousing and datamining by means of EDI. And a substantial
part of these via browser-EDI. We have yet to see the full impact of EDIFACT
application on the public sector.
It is expected that the public sector will apply electronic procurement
more and more, not only via Basis Procurement, but also via on-line booking
and reservation at e.g. DSB (the Danish state-owned railway company), SAS,
hotels, bookstores, software firms, consultants, educational establishments,
etc. It is characteristic that public organizations are focusing more on
alleviating the administrative load in their own work processes rather
than on the interchange with their cooperative partners.
It is in our favor that current EDI-pilot projects in the public sector
are rendered visible for other companies, public institutions and trade
associations. Such measures will reinforce further EDI application.
The importance of the EDI Agenda cannot be quantified directly, and although
it has never been the direct purpose of our study to measure the effects
of the Agenda, a picture begins to emerge, nevertheless. When we look at
the large companies (Danfoss, Grundfos, FDB, etc.) it is characteristic
that they have no need for the EDI Agenda. They manage well without the
Agenda and have been able to "order" their suppliers and shipping agents
to use EDI. On the other hand, it is evident that the EDI Agenda has played
a major role in giving EDI a higher priority on the agenda of trade associations
and in the public sector. The interest in EDI has been very poor among
the major part of trade association members and most public organizations.
In such a situation, where EDI projects have competed with other developments
projects (introduction of SAP, year 2000 problems, etc.), the EDI Agenda
has helped to place EDI on the agenda through stimulating a range of projects
that otherwise would not have been organized until a later date.
The potential for introducing further EDI solutions is smaller in the financial
sector than in other sectors, as banks and insurance companies already
have an extensive EDI application in proprietary formats. The coming change
of all communication between all parties on the mortgage credit market
to a total EDIFACT-based Intranet solution indicates a change in technology.
We estimate that there is a potential for EDI to increase by 20-40 per
cent in the financial/insurance sector over the next three years. In addition,
we expect a sharp increase in the customer-oriented services via the Internet.
Within the transport sector, where EDI has been applied for a number of
years, it is estimated that further EDI solutions will increase by 20-40
per cent over the next three years.
The potential for additional EDI solutions within production and commerce
is considerable, partly because the number of applications are relatively
few, and partly because there is an excellent potential for enhancing efficiency.
The only applications that have some importance are found in retail at
the end of the value chain towards the suppliers, in large manufacturing
companies towards their suppliers and in agriculture. Apart from agriculture,
where EDI is estimated to increase by 30-40 per cent over the next three
years, EDI within the other areas is estimated to increase by 70-95 per
cent. In other words, we expect an extremely large increase in EDI applications
within this sector.
We also estimate that the potential for further EDI solutions within the
public sector will be considerable over the next three years. According
to our estimation EDI applications will increase by approximately 50 per
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About the study
This report has been made at the request of the Danish EDI Council
who asked us to make a survey of the EDI development in the period 1995-1997
and to give a prognosis of EDI application in the years to come.
The data retrieval has been made from January 6 1998 to April 2 1998.
Based on a cooperative agreement with the Center for IT Research
we will conduct further interviews until August 31 1998 and make a data
analysis in order to establish the scope of electronic commerce in the
public and private sector.
We are greatly indebted to VANS-operators, companies and public organizations
for their readiness to cooperate and participate in the interviews.
The research assistants, Lotte Mangor, M.Sc. student in Economics and
Business Administration, and Tine Bjørn-Andersen, M.Sc. student
in Business Administration and Computer Science, have assisted in the data
processing of the material collected. However, it is solely the authors
who are responsible for the report: associate professor Kim Viborg Andersen
(project manager), professor Niels Bjørn-Andersen and associate
professor Niels Christian Juul, Department of Informatics, Copenhagen Business
For further information on the report, please contact Kim Viborg Andersen,
by tel.: +45-3815-2437 , fax. +45-3815-2437 or by e-mail.
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