EDI solutions in large companies – A case study with 3Com

 

Tom Trunda
Global EDI Project Manager, 3Com

Falk von Westarp
Institute of Information Systems, Frankfurt University

 

With over $6 billion in annual revenues, 3Com is one of the largest players in the electronics and network communications industry worldwide. Mainly driven by the request of strong US business partners 3Com implemented an EDI solution based on the ANSI X12 standard in 1995. Due to the ongoing globalization EDIFACT was additionally implemented in 1998 since a large number of the international business partners uses this standard. EDI decisions in general are made by the EDI Operations unit, which is part of the highly centralized IS Organization department. Within the different business units there are also EDI analysts who decentrally coordinate the interdependencies between EDI data flow and business processes.

3Com uses EDI with about 15% of its approximately 200 business partners (suppliers and distributors). Redesigning the distribution channel management the company has recently focused on larger distributors that are more likely to support EDI. This explains the fact that already about 50 per cent of the company’s suppliers are EDI capable. With EDI becoming more and more a significant strategic issue for enterprises, especially in the computer industry, 3Com tries to convince more of its business partners to use EDI; for new suppliers and distributors it is a requirement already. 3Com expects that financial services for payment processes will be integrated in its EDI network within the next year.

Like many other companies, 3Com started its EDI solution based on the PC technology. Because of the rapid increase of the data volume, especially driven by the recent acquisition of U.S. Robotics, the solution was moved to a Unix platform. For the data transfer 3Com uses a private VAN by IBM.

Focusing on the costs of implementation four areas can be separated.

The annual costs of running the solution are estimated at $350,000 for personnel, $36,000 for the data transmission (VAN services), and about $17,000 for additional external services, such as software license agreements and outside contracting consultants. 3Com also sets aide a significant portion of the budget for continuing education and professional conferences.

Compared to the benefits, the costs of the EDI solution seem to be rather reasonable. At 3Com the costs of manually processing an order process are calculated at $38 compared to $1.35 using EDI. This sums up to estimated savings of $750,000 in sales order and invoice processing. Taking also the reduction of data entry errors, efficiency increases due to better warehouse management, and reduction of processing delays into account, the EDI Operations department estimates overall savings of $1.3 million. These figures are expected to increase dramatically next year since 3Com is in the middle of consolidations due to the merger with U.S. Robotics. At the moment the EDI systems of the two companies are in the process of integration.

In the future 3Com plans to use the Internet as a transport medium for EDI. Investigations with business partners are planed for the middle of 1999, soon after the current consolidations come to an end. Besides data entry through online forms (Intra- and Extranet) the automated data exchange between two computer systems based on TCP/IP will be part of the solution.

The Internet-based EDI solution is planned to be technically separated from the existing systems, and will especially be designed to guarantee security and liability. In the future, XML might be integrated in the solution to add functionality.

3Com sees the most important advantages in saving transmission costs. Furthermore, through faster and immediate data transfer over the Internet response time can be reduced significantly (compared to the usual batch processing in VANs).

At the moment the Internet is not yet seen as a sufficient transport medium for EDI data, mainly because of reliability problems. Nevertheless, 3Com expects that 10-15% of its EDI will be based on the Internet until the year 2000 and even 85-100% until the year 2005.