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Reaping EDI benefits through a pro-active approach
ELSEVIER
Information & Management 28 (1995) 185-195
Research
Reaping EDI benefits through a pro-active approach H.H. Teo *, B.C.Y. Tan, K.K. Wei, L.Y. Woo Department of Information Systems and Computer Science, National University of Singapore, 10 Kent Ridge Crescent Singapore 0511 Republic of Singapore
Abstract
EDI are emerging as a popular means for organizations to exchange trade documents that accomplish business transactions. This study examines the impact of Tradenet, a well-known system in Singapore, on the effectiveness and efficiency of its participants. Organizational effectiveness was measured in terms of international competitiveness, inventory control, and customer quantity. Organizational efficiency was gauged using preparation cost, exchange cost, and document flow. A survey was carried out on Tradenet participants. The results show that all, irrespective of organizational characteristics, attained enhanced organizational efficiency by participating. Furthermore, participants that planned ahead, participated in Tradenet early, or integrated Tradenet with their internal MIS, benefited more in terms of increased organizational effectiveness. The results suggest that organizations can reap greater benefits from their involvement in EDI by taking a proactive approach.
Keywords: Interorganizational systems; Electronic Data Interchange; Tradenet; Organizational effectiveness; Organizational efficiency
I. Introduction
Interorganizational systems (IOS) are "automated information systems shared by two or more organizations" [2]. Recently, they have attracted considerable attention among information systems researchers [6,9,11-13,47]. The body of existing literature on them is dominated by case studies that discuss how sponsors of lOS have used these systems to improve their competitive positions in the marketplace. Little research effort has been expended in examining whether other participants, other than sponsors, benefited from their participation in IOS in terms of organizational effectiveness and efficiency.
* Corresponding author.
Electronic Data Interchange (EDI) constitute an important subset of IOS. EDI facilitate direct computer-to-computer exchange of business documents between organizations thereby permitting them to perform some business functions more effectively and efficiently [26]. These systems are emerging as a key tool in reshaping the method by which organizations interact in response to environmental factors such as global competition, risk, service, and cost [36]. Quoting Edward Lucerne, an executive with IBM information systems group:"Doing business without an EDI will soon be like doing business without a telephone." [30] Two well-known examples of EDI are:"Levi Strauss, an apparel manufacturer, installed LeviLink, an EDI linking it with its retailers, to speed up processing of orders and to respond quickly to
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changing consumer tastes. The functions of LeviLink include the management of inventory, management and reconciliation of purchase orders, tracking of purchase orders, processing and payment of invoices, capturing of point of sale information, and analysis of market trends." [40] "General Motors, in an attempt to cut down its automobile design and manufacturing time, initiated an EDI with all its chemical suppliers to transact business documents such as purchase orders, invoices, bills of lading, and other documents." [22] Many potential benefits can accrue from the proper use of EDI. These include improved customer service, increased sales, decreased administrative costs, decreased manufacturing costs, decreased inventory costs, improved data control, and reduced clerical errors [17] that result in improved productivity, enhanced competitive advantage, reduced financial exposure, and better cash management [28]. The literature on potential benefits of EDI are more descriptive than prescriptive in nature [e.g. [18]]. Studies investigating factors that promote successful use of EDI are lacking. However, as EDI become an increasingly viable alternative way for organizations to perform business transactions, it is imperative that factors contributing to the successful use of EDI be identified and prescriptive guidelines drawn and disseminated. This study surveys the participants of Tradenet, an established EDI system in Singapore, and identifies factors that distinguish more from less successful participants.
2. Tradenet
Tradenet is the first nationwide EDI system to be implemented in the world linking organizations in the trading community to facilitate international trade [44]. Participants of Tradenet include government agencies, intermediaries (such as freight forwarders, shipping agents, and air cargo agents), traders, financial institutions (such as banks and insurance agents), and port and airport authorities (see Figure 1). The primary objective of Tradenet is to speed-up cargo clear-
Fig. 1. The Tradenet participants in Singapore
ance and lower the cost of paperwork involved in international trade. Quoting Yeo Seng Teck, former chief executive officer of the Trade Development Board of Singapore:"Tradenet is aimed at enhancing the competitiveness of our trading sector and positioning Singapore as a key node in the international trading network... It is expected to generate a savings of S$1 billion (about US$600 million) annually for the trading community based on a conservative estimate of 1% reduction in the cost of paperwork involved in international trade." [39] Tradenet runs on an IBM 3090 mainframe computer owned and operated by Singapore Network Services. It is linked via modem dial-up or leased lines to all participants. Each participant uses IBM mainframe terminals or personal computers to interact with Tradenet. When performing a business transaction, a participant simply fills out the necessary trade document displayed on the computer screen and sends the information into Tradenet. It will "intelligently" route the trade document to the relevant government agencies and trading partners. Participants can use Tradenet to exchange trade documents with their local and overseas trading partners. In contrast, before Tradenet, traders and intermediaries had to visit each government agency several times
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to submit and obtain approval of their trade documents. Besides providing exchange capabilities for trade documents, Tradenet also provides information services on country profile and regulations, trade directories, trade statistics, international trade codes, controlled item lists, flight and vessel schedules, cargo market information, currency exchange rates, customs rates, textile quota, and global marketing information. Payments for Tradenet services, government duties, and processing fees by participants can be made electronically. Relative to the cost of manual submission of trade documents, the cost of using Tradenet is low. Singapore Network Services collects S$6.50 for every trade document submitted through Tradenet (the cost of manually submitting a trade document was S$10.00). In addition, Singapore Network Services charges a monthly Tradenet subscription fee of S$50.00 and S$0.50 for every 1000 characters of data transmitted. For organizations that do not have sufficient business transaction volumes to justify an investment in personal computers to link to Tradenet, Service Centres were established in various parts of Singapore in 1990 to provide IBM mainframe terminals for access to Tradenet. By 1991, Tradenet had completely replaced the traditional manual process of submitting trade documents. Since its inception in January 1989, Tradenet has been hailed as a success and has won a "Partners for Leadership" award from the Society of Information Management of the United States [43]. The number of participants increased substantially from about 50 in January 1989 to about 2200 by middle of 1993 [20]. Tradenet is also being used by more than 30 organizations in Malaysia, the nearest neighbour [45]. By the end of 1990, Tradenet processed about 75% of the total volume of trade documents in Singapore. Among these trade documents, 95% were processed within 15 minutes. Given the width and depth of Tradenet usage, it has the potential to impact participants significantly and is therefore a worthy candidate for research. Some information on Tradenet is also available in Cash et al.
[3].
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3. Research model
3.1. Independent variables The management information systems (MIS) literature has suggested numerous organizational variables as potential forces mediating the successful use of MIS. These variables can be categorized into controllable, partially controllable, and uncontrollable variables [19]. In this study, we focus on one uncontrollable variable: organizational size, and three controllable variables: impetus for participation; duration of participation; and systems integration.
3.2. Dependent variables Delone and McLean [16] review the MIS literature and arrive at a taxonomy of six classes of measures for the successful use of MIS. These are information system quality, information quality, information use, user satisfaction, user impact, and organizational impact. Our study focuses on organizational impact because it is an important indicator of the successful use of an EDI. Organizations will only participate in and sustain an EDI if there are tangible benefits. Among the six classes of measures, organizational impact is also the least studied and understood. Two key aspects of organizational impact are organizational effectiveness and efficiency. Surveys of EDI participants reveal that organizational effectiveness can also be measured in terms of enhanced competitiveness, improved inventory control, better organizational communication, and increase in number of trading partners [17,23]. EDI proponents argue that it offers participants the opportunity to improve their international competitiveness in response to global competition through increased responsiveness and lower operating costs [14,42]. They also posit that faster flow of accurate information through an EDI enables organizations to reduce warehouse costs, clerical expenses, and tied-up capital in inventory, thereby improving overall inventory control. Furthermore, these authors suggest that EDI could increase an organization's market share by reaching out to customers in geographically disperse areas. In our study, the three aspects considered are interna-
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tional competitiveness, inventory control, and customer quantity. Measures for organizational efficiency can be elicited from the MIS literature. Chervany and Dickson [5] and Emery [21] used operating cost reduction as their measure for organizational efficiency. In an interview with data processing executives of several large organizations, Rivard and Huff [35] assessed the benefits of using specific MIS in terms of cost reduction and profit growth. Johnston and Vitale [27] propose that the impact of an lOS on organizational efficiency can be measured using cost reduction, revenue increase, and sales growth. A survey of the participants of an EDI shows that cost reduction, paperwork reduction, better access to information, and accuracy of information are good measures of organizational efficiency. In our study, the three document aspects examined are preparation cost, exchange cost, and flow.
4. Research hypotheses
4.1. Organizational size Ein-dor and Segev posit that organizational size has an impact on the successful use of MIS. Compared to large organizations, small organizations suffer from resource poverty [49], a condition characterized by inadequate financial resources, lack of trained human resources, and severe time constraints for management decisions imposed by a volatile competitive environment. Hence, large organizations are likely to be more able to accommodate and make good use of MIS than small organizations. Delone [15] suggests that there is a relationship between organizational size and successful use of MIS. Large organizations are likely to use MIS more effectively. Using net income as a measure of organizational performance, Turner [46] reports that large banks make better use of MIS than small banks. However, a study on the TRADE-projects in Europe shows that EDI helped small organizations to better use their resources for international trade [32]. Nevertheless, in view of the many pieces of evidence in favour of large organizations, we believe that large organizations are likely to benefit more from their participation in EDI than small organizations. Hence, when using an EDI:
Hypothesis la:
Large organizations will experience more improvement in international competitiveness than small organizations.
Hypothesis lb:
Large organizations will experience more improvement in inventory control than small organizations.
Hypothesis lc:
Large organizations will experience more increases in customer than small organizations.
Hypothesis ld:
Large organizations will experience more reduction in document preparation cost than small organizations.
Hypothesis le:
Large organizations will experience more reduction in document exchange cost than small organizations.
Hypothesis lf:
Large organizations will experience more reduction in document flow than small organizations.
4.2. Impetus for participation Chan [4] suggests that planning for EDI adoption, streamlining workflow, and preparing for change are critical success factors for organizations using EDI. Organizations can benefit from a proactive approach when deciding whether to participate in EDI. Gable [25] emphasizes that proactive organizational involvement is critical when engaging consultants to perform computer system selection. Planning policies and leadership in information technology were also found to play an enabling role for organizations seeking competitive advantage [31]. In our study, organizations that planned their involvement in EDI are labelled initiators, while those that participated in EDI due to external pressures are termed reactors. When participating in an EDI: Hypothesis 2a:
Initiators will experience more improvement in
Hypothesis 2b:
Initiators will experience more improvement in
international competitiveness than reactors. inventory control than reactors. Hypothesis 2c:
Initiators will experience more increases in customer than reactors.
Hypothesis 2d:
Initiators will experience more reduction in document preparation cost than reactors.
Hypothesis 2e: •Initiators will experience more reduction in document exchange cost than reactors. Hypothesis 2f:
Initiators will experience more reduction in document flow than reactors.
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4.3. Duration of participation Rogers [37] characterizes the adoption of innovation as a two-step process. First, the early adopters implement innovation because of its qualities. Second, the late adopters focus on and learn from the experience of early adopters who can attain and sustain competitive advantage through organizational learning, and by leveraging unique resource strengths to make it difficult for competitors to duplicate their innovation [10]. American Airlines and Rosenbluth Travel Corporation are examples of organizations that sustain their competitive advantage by the use of lOS. On the other hand, research evidence also suggests that early adoptors may not be able to sustain competitive advantage [7,34,48] because most innovations soon become strategic necessities [8]. In our study, organizations that participated in an EDI since its inception are labelled pioneers, while those that adopted an EDI later are termed followers. In spite of conflicting evidence, we believe that pioneers are likely to benefit more from their participation in an EDI. Hence, when using an EDI: Hypothesis 3a:
Pioneers will experience m o r e i m p r o v e m e n t in international competitiveness t h a n followers.
Hypothesis 3b:
Pioneers will experience m o r e i m p r o v e m e n t in
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transcription. Likewise, data received from trading partners through EDI can be used directly by the internal MIS. By limiting manual involvement in the information exchange process, the link between the EDI and the internal MIS can help to expedite business transactions and reduce clerical errors. This observation is supported by Nolan's [33] stage model, which posits that the integration of MIS, establishment of controls, delineation of planning policies, and alignment of MIS to organizational mission are characteristics of effective and efficient organizations. In our study, organizations that integrated EDI with their internal MIS are labelled integrators, while those that did not are termed segregators. Hence, when participating in an EDI: Hypothesis 4a: Integrators will experience m o r e i m p r o v e m e n t in international competitiveness t h a n segregators. Hypothesis 4b: Integrators will experience m o r e i m p r o v e m e n t in inventory control t h a n segregators. Hypothesis 4c: Integrators will experience m o r e increases in c u s t o m e r t h a n segregators. Hypothesis 4d: Integrators will experience m o r e reduction in d o c u m e n t p r e p a r a t i o n cost t h a n segregators. Hypothesis 4e: Integrators will experience m o r e reduction in d o c u m e n t exchange cost t h a n segregators. Hypothesis 4f: Integrators will experience m o r e reduction in d o c u m e n t flow t h a n segregators.
inventory control t h a n followers. Hypothesis 3c:
Pioneers will experience m o r e increases in c u s t o m e r t h a n followers.
H y p o t h e s i s 3d:
Pioneers will experience m o r e reduction in d o c u m e n t p r e p a r a t i o n cost t h a n followers.
Hypothesis 3e:
Pioneers will experience m o r e reduction in d o c u m e n t exchange cost t h a n followers.
Hypothesis 3f:
5. Research methodology
5.1. The questionnaire
Pioneers will experience m o r e reduction in d o c u m e n t flow t h a n followers.
4.4. Systems integration To reap more benefits from the use of an EDI, organizations can integrate it with their internal MIS. When organizations link an EDI to their internal MIS, data that are stored electronically can be sent to trading partners with minimal
The questionnaire used in this study was adapted from Kavan and Van Over [29] and refined using Tradenet documents obtained from Singapore Network Services. It was pretested on five Tradenet participants. Feedback from the pretest was used to improve the clarity, conciseness, and layout of the questionnaire [24] which consisted mainly of close-ended questions requiring respondents to circle an appropriate number. This made the task of completing the questionnaire easy and fast.
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5.2. The participants The Tradenet participants were selected from a directory of all EDI participants in Singapore, as published by Singapore Network Services. This directory lists the names, addresses, and telephone numbers of 1145 organizations that participated in the various EDI (such as Tradenet, Medinet, Lawnet) managed and operated by them. No information was available to distinguish Tradenet participants from those in the other EDI. Hence, the questionnaire was sent to all organizations listed in the directory. They were asked to indicate their EDI systems so that the responses from Tradenet participants could be isolated and analyzed. The questionnaire was addressed to the managing directors of the organizations. They were likely to be cognizant of many aspects of their organizations and more able to provide accurate and correct information. Also, even if the managing directors were not able to answer some questions, they were likely to be able to direct those questions to their appropriate employees.
5.3. The survey An envelope containing a cover letter explaining the significance of the study, a copy of the questionnaire, and a self-addressed return envelope with postage was sent to each organization. After 2 weeks, follow-up telephone calls were made to all organizations that had not responded to encourage them to return the questionnaire. Similar follow-up telephone calls were made after another 2 weeks. The postal service returned 35 questionnaires because these could not be delivered to the named organization at the stated address. Apparently, they had changed their names or addresses or gone out of business. Among the remaining 1110 organizations, responses were received from 328 organizations yielding a response rate of about 30%. However, 118 out of the 328 responses could not be used for two reasons. First, some questionnaires were incomplete despite repeated calls to these organizations to seek answers. Second, some organizations were not Tradenet par-
ticipants. The remaining 210 responses were used in this study. All organizations which responded were given a copy of the results.
5.4. Independent variables Organizational size was determined using the number of employees. The definition of large and small organizations varies from country to country and industry to industry. In Singapore, trading organizations with more than 50 employees are considered large organizations [41]. Since the majority of Tradenet participants were trading organizations, this number was used: that is, those with more than 50 employees were labelled large. There were 94 large organizations and 114 small organizations in our study. Organizations were divided into initiators and reactors. A total of 98 initiators and 112 reactors were involved in our study. Organizations were divided into pioneers and followers. Organizations that participated in Tradenet in 1989 were labelled pioneers. A total of 111 pioneers and 99 followers were involved in our study. Organizations were also differentiated based on whether they had integrated Tradenet with their internal MIS. A total of 40 integrators and 170 segregators were involved in our study.
5.5. Dependent variables Each of the six dependent variables were measured by a single close-ended question. No attempt was made to use standard instruments to measure these, because of the lack of such instruments. Each question could be answered simply by circling an appropriate number on a 7-point Likert scale. The questions were: a. What is the impact of Tradenet on the international competitiveness of your organization? - Improve 1 2 3 4 5 6 7 Deteriorate b. What is the impact of Tradenet on the inventory control of your organization? - Improve 1 2 3 4 5 6 7 Deteriorate c. What is the impact of Tradenet on the customer quantity of your organization? Increase 1 2 3 4 5 6 7 Decrease -
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Table 1 Mean (standard deviation) of organizational effectiveness
Organizational size Large organizations Small organizations Impetus for participation Initiators Reactors Duration of participation Pioneers Followers Systems integration Integrators Segregators
International competitiveness
Inventory control
Customer quantity
4.79 (1.51) 4.93 (1.54)
3.54 (1.56) 4.11 (1.51)
4.21 (0.89) 4.47 (1.22)
5.18 (1.42) 4.59 (1.56)
4.07 (1.51) 3.66 (1.57)
4.52 (1.11) 4.21 (1.05)
5.19 (1.33) 4.51 (1.65)
4.13 (1.37) 3.55 (1.69)
4.41 (1.04) 4.29 (1.15)
5.58 (1.06) 4.70 (1.57)
4.05 (1.55) 3.81 (1.55)
4.58 (1.26) 4.31 (1.04)
Pairs of values with significant differences are shown in bold.
Table 2 Mean (standard deviation) of organizational efficiency
Organizational size Large organizations Small organizations Impetus for participation Initiators Reactors Duration of participation Pioneers Followers Systems integration Integrators Segregators
Document preparation cost
Document exchange cost
Document flow
5.80 (1.27) 5.70 (1.11)
4.82 (1.69) 4.97 (1.66)
4.81 (1.73) 4.78 (1.69)
5.88 (1.09) 5.65 (1.28)
5.05 (1.68) 4.74 (1.66)
4.88 (1.61) 4.72 (1.79)
5.83 (1.09) 5.68 (1.31)
5.02 (1.57) 4.74 (1.78)
4.90 (1.64) 4.68 (1.78)
5.90 (0.93) 5.72 (1.25)
5.35 (1.21) 4.78 (1.75)
5.30 (1.11) 4.68 (1.80)
Pairs of values with significant differences are shown in bold.
Table 3 Results of T-tests for organizational effectiveness
Organizational size Impetus for participation Duration of participation Systems integration
International competitiveness
Inventory control
Customer quantity
p p p p
p p p p
p p p p
= = = =
0.498 0.004 * * 0.001 * * 0.001 * *
= = = =
0.010 * * 0.057 0.007 * * 0.375
= = = =
0.084 0.037 * 0.421 0.160
• * p<0.01, * p<0.05.
Table 4 Results of T-tests for organizational efficiency
Organizational size Impetus for participation Duration of participation Systems integration • * p<0.01, * p<0.05.
Document preparation cost
Document exchange cost
Document flow
p p p p
p p p p
p p p p
= = = =
0.550 0.146 0.358 0.402
= = = =
0.522 0.184 0.226 0.051
= = = =
0.887 0.524 0.343 0.037 *
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d. What is the impact of Tradenet on the document preparation cost of your organization? - Increase 1 2 3 4 5 6 7 Decrease e. What is the impact of Tradenet on the document exchange cost of your organization? - Increase 1 2 3 4 5 6 7 Decrease f. What is the impact of Tradenet on the document flow of your organization? - Increase 1 2 3 4 5 6 7 Decrease
Systems integration had significant effects on international competitiveness (p = 0.001) and document flow (p = 0.037). The direction of these effects confirms the hypotheses. Integrators experienced a greater improvement on international competitiveness and a greater reduction on document flow than segregators. Hence, hypotheses 4a and 4f were supported but hypotheses 4b, 4c, 4d, and 4e were not supported.
6. Data analysis and results
7. Discussion and implications
6.1. Data analysis
A student t-test was used to detect significant effects. A 5 percent level of significance was used. Tables 5 and 6 present the descriptive statistics of the dependent variables, for different categories of organizations, pertaining to organizational effectiveness and efficiency respectively. Tables 7 and 8 report the results of the t-tests on the dependent variables measuring organizational effectiveness and efficiency respectively. 6.2. R e s u l ~
Organizational size had a significant effect on inventory control (p = 0.010). However, contrary to hypothesis lb, small organizations experienced a greater improvement on inventory control than large organizations. Hence, hypotheses la, lb, lc, ld, le, and if were not supported. Impetus for participation had significant effects on international competitiveness (p = 0.004) and customer quantity (p = 0.037). As hypothesized, initiators benefited more in terms of enhanced international competitiveness and increased customer quantity than reactors. Hypotheses 2a and 2c were supported. Hypotheses 2b, 2d, 2e, and 2f were not supported. Duration of participation had significant effects on international competitiveness (p = 0.001) and inventory control (p = 0.007). As hypothesized, pioneers reaped more benefits in international competitiveness and improved inventory control than followers. Hypotheses 3a and 3b were supported but hypotheses 3c, 3d, 3e, and 3f were not supported.
7.1. Discussion
Organizational effectiveness was measured in terms of international competitiveness, inventory control, and customer quantity. Contrary to the hypotheses, the results show that small organizations experienced greater increase in organizational effectiveness than large organizations (with differences in inventory control reaching statistical significance). These results can be explained by considering the unique characteristics of EDI. Tradenet is developed and managed by a large specialized organization. To encourage participation in Tradenet, the cost of performing business transactions is kept low. This permits small organizations with limited resources to participate and perform their business transactions electronically, an advantage which, prior to the introduction of Tradenet, belonged solely to large organizations. Hence, Tradenet helps small organizations to better leverage their limited resources. This result is consistent with that from the study on TRADE-projects in Europe, where EDI were found to benefit small organizations more than large ones. As hypothesized, initiators benefited more in terms of organizational effectiveness than reactors (with differences in international competitiveness and customer quantity reaching statistical significance). Pioneers also benefited more in terms of organizational effectiveness than followers (with differences in international competitiveness and inventory control reaching statistical significance). This finding is consistent with some studies on commercial banks: early adoption of
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Automated Teller Machine technology was positively associated with increased market share [1,38]. Further longitudinal studies need to be conducted to determine whether pioneers could sustain their first-mover advantages. Moreover, integrators experienced enhanced organizational effectiveness more than segregators (with differences in international competitiveness reaching statistical significance). These results suggest that it pays for organizations to be proactive. As in other studies, organizations that adopted a proactive approach towards their involvement in EDI benefited more. All the measures for document preparation cost, document exchange cost, and document flow had values greater than the neutral. Thus, participants can benefit from Tradenet in terms of organizational efficiency, irrespective of size, impetus, duration, and systems integration.
7.2. Implications for practice This study demonstrates the usefulness of EDI systems as a medium for performing business transactions. Organizations should seriously contemplate participating in EDI systems when possible. In addition to enhanced efficiency, organizations can attain increased effectiveness from their participation. By planning ahead, initiators can adjust their business strategies by considering new business alliances, reaching out to more customers and suppliers, and competing in new markets. Initiators can also streamline their workflow to reflect the electronic means of performing business transactions and prepare themselves for the change. By participating early in EDI, pioneers can gain several first-mover advantages. Integrators also benefit considerably from the links between EDI and their internal MIS. Integrators can alter their business processes rapidly to respond to opportunities and challenges without being bogged down by inflexible manual business processes. 8. Conclusion The results of this study were collected through an attitudinal survey on Tradenet participants. In
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generalizing the findings, it should be noted that Tradenet operates in a unique context. First, it was sponsored by a government agency that monopolizes the services associated with international trade. Second, Tradenet received strong political backing from the government which tout it as a strategic tool to improve the overall country competitiveness. Third, Tradenet was implemented in a collectivistic society where societal norms emphasize common benefits over individual gains. Hence, the results of this study could be contingent upon the unique economic, political, and cultural environment of Tradenet. Any attempt to generalize the findings to EDI systems operating in different environments must be done with care and caution. On the whole, Tradenet participants perceived that it has enhanced their organizational efficiency. However, on top of efficiency, the participants that adopted a proactive stance by planning ahead for their participation, participating in Tradenet early, or integrating it with their internal MIS perceived increased organizational effectiveness. In conclusion, organizations can benefit more from their participation in Tradenet, and possibly other EDI, by taking a proactive approach.
Acknowledgements The authors would like to thank the editor and the anonymous reviewers for their constructive comments.
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Data Interchange: Foundations and Survey Evidence on Current Use," Journal of Information Systems, 1990, 1, pp. 81-91. F.J. Fowler, Survey Research Methods, Sage: Newbury Park, CA, 1988. G.G. Gable, "Consultant Engagement for Computer System Selection," Information and Management, 1991, 20(2), pp. 83-93. K.C. Hinge, Electronic Data Interchange: From Understanding to Implementation, American Management Association: New York, NY, 1988. H.R. Johnston and M.R. Vitale, "Creating Competitive Advantage with Interorganizational Information Systems, " MIS Quarterly, 1988, 12(2), pp. 152-165. B.C. Kavan and D. Van Over, "Electronic Data Interchange: A Research Agenda," Proceedings of the
Twenty-Third Annual Hawaii International Conference on System Sciences, 1990, 4, pp. 192-197. [29] B.C. Kavan and D. Van Over, "Electronic Data Interchange: An Analysis of Current Adopters," Working Paper, University of Georgia, 1991. [30] P. Keefe, "Can you afford to ignore EDI?" Computerworld, 6 January 1988. [31] W. King, V. Grover, and E. Hufnagel, "Seeking Competitive Advantage using Information Intensive Strategies: Facilitators and Inhibitors," in K.C. Laudon and J.A. Turner, (eds.), Information Technology and Management Strategy, Prentice Hall: Englewood Cliffs, NJ, 1989. [32] S. Klein, "A Conceptual Framework for the Assessment of EDI," Proceedings of the Twenty-Fifth Annual Hawaii International Conference on System Sciences, 1992, 4, pp. 369-379. [33] R.L. Nolan, "Managing the Crises in Data Processing," Harvard Business Review, 1979, 57(2), pp. 115-126. [34] B.H. Reich and I. Benbasat, "An Empirical Investigation of Factors Influencing the Success of Customer-Oriented Strategic Systems," Information Systems Research, 1990, 1(3), pp. 325-347. [35] S. Rivard and S.L. Huff, "User Developed Applications: Evaluation of Success from the DP Department Perspective," MIS Quarterly, 1984, 8(1), pp. 30-50. [36] J.F. Rockart, and J.E. Short, "IT in the 1990s: Managing Organizational Interdependence," Sloan Management Review, 1989, 30(2), pp. 7-17. [37] E.M. Rogers, Diffusion of Innovations, The Free Press: New York, NY, 1983. [38] Santos, B.L.D. and Peffers, K. "The Effects of Early Adoption of Information Technology: An Empirical Study," Proceedings of the Twelfth Annual International Conference on Information Systems, 1991, pp. 127-140. [39] Singapore Aircargo, "Electronic Paperless Trading for Singapore by Early 1989," August 1988. [40] B. Sehr, "Levi Strauss Strengthens Customer Ties with Electronic Data Interchange: LeviLink Network Carries Order and Shipment Information," Computerworld, 30 January 1989.
H.H. Teo et al. / Information & Management 28 (1995) 185-195 [41] SME Committee, SME Master Plan: Report on Enterprise Development, Economic Development Board: Singapore, May 1989. [42] Sokol, P.K. EDI: The Competitive Edge, New York, NY: McGraw-Hill, 1989. [43] The Business Times, "Tradenet Wins IT International Award from US Body," 2 October 1990. [44] The Straits Times, "Computerised Network can Save up to $1billion in Paperwork," 22 April 1988. [45] The Straits Times, "More than 30 Malaysian Firms Link Up with Tradenet," 10 June 1992. [46] J.A. Turner, "Firm Size, Performance, and Computer Use," Proceedings of the Third Annual International Conference on Information Systems, 1982, pp. 109-120. [47] N. Venkatraman and J.E. Short, "Baxter Healthcare: Evolution from ASAP to Valuelink in the Hospital Supplies Marketplace," Proceedings of the Twenty-Fifth Annual Hawaii International Conference on System Sciences, 1992, 4, pp. 666-677. [48] M.R. Vitale, "The Growing Risks of Information Systems Success," MIS Quarterly, 1986, 10(4), pp. 327-334. [49] J.A. Welsh and J.F. White, " A Small Business is Not a Little Big Business," Harvard Business Review, 1981, 59(4), pp. 18-32. Hock-Hai Teo received his B.Sc. (Hons.) degree in Computer and Information Sciences, in 1990 from the National University of Singapore. He was a systems analyst from 1990 to 1992 in Urban Redevelopment Authority and has been a Teaching Assistant since 1992 at the National University of Singapore, where he is currently pursuing his M.Sc degree. His research interests include group support systems, database management systems, Electronic Data Interchange, and strategic information systems planning.
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Bernard C.Y. Tan received his B.Sc. (Hons.) and M.Sc. degrees in Computer and Information Sciences, in 1989 and 1991 respectively, from the National University of Singapore. He was a Research Assistant from 1989 to 1991 and has been a Teaching Assistant since 1991 at the National University of Singapore, where he is currently pursuing his Ph.D. degree. His research interests include Group Support Systems, Electronic Data Interchange, and Decision Support Systems. KwokoKee Wei received his D.Phil (1986) in Computer Science from University of York, United Kingdom. He is presently a Senior Lecturer in Department of Information Systems and Computer Science at the National University of Singapore. He has published in journals such as MIS Quarterly, IEEE Transactions on Systems, Man, and Cybernetics, ACM Sigmod Records, and International Journal of Human-Computer Studies. His current research interests include Group Support Systems, User-Database Interaction, and Electronic Data Interchange. Lee.Yong Woo received his M.Sc degree in Organizational Psychology from the Manchester School of Management, United Kingdom. He is a Senior Lecturer in Department of Information Systems and Computer Science at the National University of Singapore (NUS). He has performed extensive consulting work both domestically and abroad. Additionally, he has previously served in Singapore Airlines as an Assistant Director of Finance prior to joining NUS. His current research interests include project management, strategic information systems planning, and Electronic Data Interchange.
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Research
Reaping EDI benefits through a pro-active approach H.H. Teo *, B.C.Y. Tan, K.K. Wei, L.Y. Woo Department of Information Systems and Computer Science, National University of Singapore, 10 Kent Ridge Crescent Singapore 0511 Republic of Singapore
Abstract
EDI are emerging as a popular means for organizations to exchange trade documents that accomplish business transactions. This study examines the impact of Tradenet, a well-known system in Singapore, on the effectiveness and efficiency of its participants. Organizational effectiveness was measured in terms of international competitiveness, inventory control, and customer quantity. Organizational efficiency was gauged using preparation cost, exchange cost, and document flow. A survey was carried out on Tradenet participants. The results show that all, irrespective of organizational characteristics, attained enhanced organizational efficiency by participating. Furthermore, participants that planned ahead, participated in Tradenet early, or integrated Tradenet with their internal MIS, benefited more in terms of increased organizational effectiveness. The results suggest that organizations can reap greater benefits from their involvement in EDI by taking a proactive approach.
Keywords: Interorganizational systems; Electronic Data Interchange; Tradenet; Organizational effectiveness; Organizational efficiency
I. Introduction
Interorganizational systems (IOS) are "automated information systems shared by two or more organizations" [2]. Recently, they have attracted considerable attention among information systems researchers [6,9,11-13,47]. The body of existing literature on them is dominated by case studies that discuss how sponsors of lOS have used these systems to improve their competitive positions in the marketplace. Little research effort has been expended in examining whether other participants, other than sponsors, benefited from their participation in IOS in terms of organizational effectiveness and efficiency.
* Corresponding author.
Electronic Data Interchange (EDI) constitute an important subset of IOS. EDI facilitate direct computer-to-computer exchange of business documents between organizations thereby permitting them to perform some business functions more effectively and efficiently [26]. These systems are emerging as a key tool in reshaping the method by which organizations interact in response to environmental factors such as global competition, risk, service, and cost [36]. Quoting Edward Lucerne, an executive with IBM information systems group:"Doing business without an EDI will soon be like doing business without a telephone." [30] Two well-known examples of EDI are:"Levi Strauss, an apparel manufacturer, installed LeviLink, an EDI linking it with its retailers, to speed up processing of orders and to respond quickly to
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changing consumer tastes. The functions of LeviLink include the management of inventory, management and reconciliation of purchase orders, tracking of purchase orders, processing and payment of invoices, capturing of point of sale information, and analysis of market trends." [40] "General Motors, in an attempt to cut down its automobile design and manufacturing time, initiated an EDI with all its chemical suppliers to transact business documents such as purchase orders, invoices, bills of lading, and other documents." [22] Many potential benefits can accrue from the proper use of EDI. These include improved customer service, increased sales, decreased administrative costs, decreased manufacturing costs, decreased inventory costs, improved data control, and reduced clerical errors [17] that result in improved productivity, enhanced competitive advantage, reduced financial exposure, and better cash management [28]. The literature on potential benefits of EDI are more descriptive than prescriptive in nature [e.g. [18]]. Studies investigating factors that promote successful use of EDI are lacking. However, as EDI become an increasingly viable alternative way for organizations to perform business transactions, it is imperative that factors contributing to the successful use of EDI be identified and prescriptive guidelines drawn and disseminated. This study surveys the participants of Tradenet, an established EDI system in Singapore, and identifies factors that distinguish more from less successful participants.
2. Tradenet
Tradenet is the first nationwide EDI system to be implemented in the world linking organizations in the trading community to facilitate international trade [44]. Participants of Tradenet include government agencies, intermediaries (such as freight forwarders, shipping agents, and air cargo agents), traders, financial institutions (such as banks and insurance agents), and port and airport authorities (see Figure 1). The primary objective of Tradenet is to speed-up cargo clear-
Fig. 1. The Tradenet participants in Singapore
ance and lower the cost of paperwork involved in international trade. Quoting Yeo Seng Teck, former chief executive officer of the Trade Development Board of Singapore:"Tradenet is aimed at enhancing the competitiveness of our trading sector and positioning Singapore as a key node in the international trading network... It is expected to generate a savings of S$1 billion (about US$600 million) annually for the trading community based on a conservative estimate of 1% reduction in the cost of paperwork involved in international trade." [39] Tradenet runs on an IBM 3090 mainframe computer owned and operated by Singapore Network Services. It is linked via modem dial-up or leased lines to all participants. Each participant uses IBM mainframe terminals or personal computers to interact with Tradenet. When performing a business transaction, a participant simply fills out the necessary trade document displayed on the computer screen and sends the information into Tradenet. It will "intelligently" route the trade document to the relevant government agencies and trading partners. Participants can use Tradenet to exchange trade documents with their local and overseas trading partners. In contrast, before Tradenet, traders and intermediaries had to visit each government agency several times
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to submit and obtain approval of their trade documents. Besides providing exchange capabilities for trade documents, Tradenet also provides information services on country profile and regulations, trade directories, trade statistics, international trade codes, controlled item lists, flight and vessel schedules, cargo market information, currency exchange rates, customs rates, textile quota, and global marketing information. Payments for Tradenet services, government duties, and processing fees by participants can be made electronically. Relative to the cost of manual submission of trade documents, the cost of using Tradenet is low. Singapore Network Services collects S$6.50 for every trade document submitted through Tradenet (the cost of manually submitting a trade document was S$10.00). In addition, Singapore Network Services charges a monthly Tradenet subscription fee of S$50.00 and S$0.50 for every 1000 characters of data transmitted. For organizations that do not have sufficient business transaction volumes to justify an investment in personal computers to link to Tradenet, Service Centres were established in various parts of Singapore in 1990 to provide IBM mainframe terminals for access to Tradenet. By 1991, Tradenet had completely replaced the traditional manual process of submitting trade documents. Since its inception in January 1989, Tradenet has been hailed as a success and has won a "Partners for Leadership" award from the Society of Information Management of the United States [43]. The number of participants increased substantially from about 50 in January 1989 to about 2200 by middle of 1993 [20]. Tradenet is also being used by more than 30 organizations in Malaysia, the nearest neighbour [45]. By the end of 1990, Tradenet processed about 75% of the total volume of trade documents in Singapore. Among these trade documents, 95% were processed within 15 minutes. Given the width and depth of Tradenet usage, it has the potential to impact participants significantly and is therefore a worthy candidate for research. Some information on Tradenet is also available in Cash et al.
[3].
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3. Research model
3.1. Independent variables The management information systems (MIS) literature has suggested numerous organizational variables as potential forces mediating the successful use of MIS. These variables can be categorized into controllable, partially controllable, and uncontrollable variables [19]. In this study, we focus on one uncontrollable variable: organizational size, and three controllable variables: impetus for participation; duration of participation; and systems integration.
3.2. Dependent variables Delone and McLean [16] review the MIS literature and arrive at a taxonomy of six classes of measures for the successful use of MIS. These are information system quality, information quality, information use, user satisfaction, user impact, and organizational impact. Our study focuses on organizational impact because it is an important indicator of the successful use of an EDI. Organizations will only participate in and sustain an EDI if there are tangible benefits. Among the six classes of measures, organizational impact is also the least studied and understood. Two key aspects of organizational impact are organizational effectiveness and efficiency. Surveys of EDI participants reveal that organizational effectiveness can also be measured in terms of enhanced competitiveness, improved inventory control, better organizational communication, and increase in number of trading partners [17,23]. EDI proponents argue that it offers participants the opportunity to improve their international competitiveness in response to global competition through increased responsiveness and lower operating costs [14,42]. They also posit that faster flow of accurate information through an EDI enables organizations to reduce warehouse costs, clerical expenses, and tied-up capital in inventory, thereby improving overall inventory control. Furthermore, these authors suggest that EDI could increase an organization's market share by reaching out to customers in geographically disperse areas. In our study, the three aspects considered are interna-
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tional competitiveness, inventory control, and customer quantity. Measures for organizational efficiency can be elicited from the MIS literature. Chervany and Dickson [5] and Emery [21] used operating cost reduction as their measure for organizational efficiency. In an interview with data processing executives of several large organizations, Rivard and Huff [35] assessed the benefits of using specific MIS in terms of cost reduction and profit growth. Johnston and Vitale [27] propose that the impact of an lOS on organizational efficiency can be measured using cost reduction, revenue increase, and sales growth. A survey of the participants of an EDI shows that cost reduction, paperwork reduction, better access to information, and accuracy of information are good measures of organizational efficiency. In our study, the three document aspects examined are preparation cost, exchange cost, and flow.
4. Research hypotheses
4.1. Organizational size Ein-dor and Segev posit that organizational size has an impact on the successful use of MIS. Compared to large organizations, small organizations suffer from resource poverty [49], a condition characterized by inadequate financial resources, lack of trained human resources, and severe time constraints for management decisions imposed by a volatile competitive environment. Hence, large organizations are likely to be more able to accommodate and make good use of MIS than small organizations. Delone [15] suggests that there is a relationship between organizational size and successful use of MIS. Large organizations are likely to use MIS more effectively. Using net income as a measure of organizational performance, Turner [46] reports that large banks make better use of MIS than small banks. However, a study on the TRADE-projects in Europe shows that EDI helped small organizations to better use their resources for international trade [32]. Nevertheless, in view of the many pieces of evidence in favour of large organizations, we believe that large organizations are likely to benefit more from their participation in EDI than small organizations. Hence, when using an EDI:
Hypothesis la:
Large organizations will experience more improvement in international competitiveness than small organizations.
Hypothesis lb:
Large organizations will experience more improvement in inventory control than small organizations.
Hypothesis lc:
Large organizations will experience more increases in customer than small organizations.
Hypothesis ld:
Large organizations will experience more reduction in document preparation cost than small organizations.
Hypothesis le:
Large organizations will experience more reduction in document exchange cost than small organizations.
Hypothesis lf:
Large organizations will experience more reduction in document flow than small organizations.
4.2. Impetus for participation Chan [4] suggests that planning for EDI adoption, streamlining workflow, and preparing for change are critical success factors for organizations using EDI. Organizations can benefit from a proactive approach when deciding whether to participate in EDI. Gable [25] emphasizes that proactive organizational involvement is critical when engaging consultants to perform computer system selection. Planning policies and leadership in information technology were also found to play an enabling role for organizations seeking competitive advantage [31]. In our study, organizations that planned their involvement in EDI are labelled initiators, while those that participated in EDI due to external pressures are termed reactors. When participating in an EDI: Hypothesis 2a:
Initiators will experience more improvement in
Hypothesis 2b:
Initiators will experience more improvement in
international competitiveness than reactors. inventory control than reactors. Hypothesis 2c:
Initiators will experience more increases in customer than reactors.
Hypothesis 2d:
Initiators will experience more reduction in document preparation cost than reactors.
Hypothesis 2e: •Initiators will experience more reduction in document exchange cost than reactors. Hypothesis 2f:
Initiators will experience more reduction in document flow than reactors.
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4.3. Duration of participation Rogers [37] characterizes the adoption of innovation as a two-step process. First, the early adopters implement innovation because of its qualities. Second, the late adopters focus on and learn from the experience of early adopters who can attain and sustain competitive advantage through organizational learning, and by leveraging unique resource strengths to make it difficult for competitors to duplicate their innovation [10]. American Airlines and Rosenbluth Travel Corporation are examples of organizations that sustain their competitive advantage by the use of lOS. On the other hand, research evidence also suggests that early adoptors may not be able to sustain competitive advantage [7,34,48] because most innovations soon become strategic necessities [8]. In our study, organizations that participated in an EDI since its inception are labelled pioneers, while those that adopted an EDI later are termed followers. In spite of conflicting evidence, we believe that pioneers are likely to benefit more from their participation in an EDI. Hence, when using an EDI: Hypothesis 3a:
Pioneers will experience m o r e i m p r o v e m e n t in international competitiveness t h a n followers.
Hypothesis 3b:
Pioneers will experience m o r e i m p r o v e m e n t in
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transcription. Likewise, data received from trading partners through EDI can be used directly by the internal MIS. By limiting manual involvement in the information exchange process, the link between the EDI and the internal MIS can help to expedite business transactions and reduce clerical errors. This observation is supported by Nolan's [33] stage model, which posits that the integration of MIS, establishment of controls, delineation of planning policies, and alignment of MIS to organizational mission are characteristics of effective and efficient organizations. In our study, organizations that integrated EDI with their internal MIS are labelled integrators, while those that did not are termed segregators. Hence, when participating in an EDI: Hypothesis 4a: Integrators will experience m o r e i m p r o v e m e n t in international competitiveness t h a n segregators. Hypothesis 4b: Integrators will experience m o r e i m p r o v e m e n t in inventory control t h a n segregators. Hypothesis 4c: Integrators will experience m o r e increases in c u s t o m e r t h a n segregators. Hypothesis 4d: Integrators will experience m o r e reduction in d o c u m e n t p r e p a r a t i o n cost t h a n segregators. Hypothesis 4e: Integrators will experience m o r e reduction in d o c u m e n t exchange cost t h a n segregators. Hypothesis 4f: Integrators will experience m o r e reduction in d o c u m e n t flow t h a n segregators.
inventory control t h a n followers. Hypothesis 3c:
Pioneers will experience m o r e increases in c u s t o m e r t h a n followers.
H y p o t h e s i s 3d:
Pioneers will experience m o r e reduction in d o c u m e n t p r e p a r a t i o n cost t h a n followers.
Hypothesis 3e:
Pioneers will experience m o r e reduction in d o c u m e n t exchange cost t h a n followers.
Hypothesis 3f:
5. Research methodology
5.1. The questionnaire
Pioneers will experience m o r e reduction in d o c u m e n t flow t h a n followers.
4.4. Systems integration To reap more benefits from the use of an EDI, organizations can integrate it with their internal MIS. When organizations link an EDI to their internal MIS, data that are stored electronically can be sent to trading partners with minimal
The questionnaire used in this study was adapted from Kavan and Van Over [29] and refined using Tradenet documents obtained from Singapore Network Services. It was pretested on five Tradenet participants. Feedback from the pretest was used to improve the clarity, conciseness, and layout of the questionnaire [24] which consisted mainly of close-ended questions requiring respondents to circle an appropriate number. This made the task of completing the questionnaire easy and fast.
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5.2. The participants The Tradenet participants were selected from a directory of all EDI participants in Singapore, as published by Singapore Network Services. This directory lists the names, addresses, and telephone numbers of 1145 organizations that participated in the various EDI (such as Tradenet, Medinet, Lawnet) managed and operated by them. No information was available to distinguish Tradenet participants from those in the other EDI. Hence, the questionnaire was sent to all organizations listed in the directory. They were asked to indicate their EDI systems so that the responses from Tradenet participants could be isolated and analyzed. The questionnaire was addressed to the managing directors of the organizations. They were likely to be cognizant of many aspects of their organizations and more able to provide accurate and correct information. Also, even if the managing directors were not able to answer some questions, they were likely to be able to direct those questions to their appropriate employees.
5.3. The survey An envelope containing a cover letter explaining the significance of the study, a copy of the questionnaire, and a self-addressed return envelope with postage was sent to each organization. After 2 weeks, follow-up telephone calls were made to all organizations that had not responded to encourage them to return the questionnaire. Similar follow-up telephone calls were made after another 2 weeks. The postal service returned 35 questionnaires because these could not be delivered to the named organization at the stated address. Apparently, they had changed their names or addresses or gone out of business. Among the remaining 1110 organizations, responses were received from 328 organizations yielding a response rate of about 30%. However, 118 out of the 328 responses could not be used for two reasons. First, some questionnaires were incomplete despite repeated calls to these organizations to seek answers. Second, some organizations were not Tradenet par-
ticipants. The remaining 210 responses were used in this study. All organizations which responded were given a copy of the results.
5.4. Independent variables Organizational size was determined using the number of employees. The definition of large and small organizations varies from country to country and industry to industry. In Singapore, trading organizations with more than 50 employees are considered large organizations [41]. Since the majority of Tradenet participants were trading organizations, this number was used: that is, those with more than 50 employees were labelled large. There were 94 large organizations and 114 small organizations in our study. Organizations were divided into initiators and reactors. A total of 98 initiators and 112 reactors were involved in our study. Organizations were divided into pioneers and followers. Organizations that participated in Tradenet in 1989 were labelled pioneers. A total of 111 pioneers and 99 followers were involved in our study. Organizations were also differentiated based on whether they had integrated Tradenet with their internal MIS. A total of 40 integrators and 170 segregators were involved in our study.
5.5. Dependent variables Each of the six dependent variables were measured by a single close-ended question. No attempt was made to use standard instruments to measure these, because of the lack of such instruments. Each question could be answered simply by circling an appropriate number on a 7-point Likert scale. The questions were: a. What is the impact of Tradenet on the international competitiveness of your organization? - Improve 1 2 3 4 5 6 7 Deteriorate b. What is the impact of Tradenet on the inventory control of your organization? - Improve 1 2 3 4 5 6 7 Deteriorate c. What is the impact of Tradenet on the customer quantity of your organization? Increase 1 2 3 4 5 6 7 Decrease -
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Table 1 Mean (standard deviation) of organizational effectiveness
Organizational size Large organizations Small organizations Impetus for participation Initiators Reactors Duration of participation Pioneers Followers Systems integration Integrators Segregators
International competitiveness
Inventory control
Customer quantity
4.79 (1.51) 4.93 (1.54)
3.54 (1.56) 4.11 (1.51)
4.21 (0.89) 4.47 (1.22)
5.18 (1.42) 4.59 (1.56)
4.07 (1.51) 3.66 (1.57)
4.52 (1.11) 4.21 (1.05)
5.19 (1.33) 4.51 (1.65)
4.13 (1.37) 3.55 (1.69)
4.41 (1.04) 4.29 (1.15)
5.58 (1.06) 4.70 (1.57)
4.05 (1.55) 3.81 (1.55)
4.58 (1.26) 4.31 (1.04)
Pairs of values with significant differences are shown in bold.
Table 2 Mean (standard deviation) of organizational efficiency
Organizational size Large organizations Small organizations Impetus for participation Initiators Reactors Duration of participation Pioneers Followers Systems integration Integrators Segregators
Document preparation cost
Document exchange cost
Document flow
5.80 (1.27) 5.70 (1.11)
4.82 (1.69) 4.97 (1.66)
4.81 (1.73) 4.78 (1.69)
5.88 (1.09) 5.65 (1.28)
5.05 (1.68) 4.74 (1.66)
4.88 (1.61) 4.72 (1.79)
5.83 (1.09) 5.68 (1.31)
5.02 (1.57) 4.74 (1.78)
4.90 (1.64) 4.68 (1.78)
5.90 (0.93) 5.72 (1.25)
5.35 (1.21) 4.78 (1.75)
5.30 (1.11) 4.68 (1.80)
Pairs of values with significant differences are shown in bold.
Table 3 Results of T-tests for organizational effectiveness
Organizational size Impetus for participation Duration of participation Systems integration
International competitiveness
Inventory control
Customer quantity
p p p p
p p p p
p p p p
= = = =
0.498 0.004 * * 0.001 * * 0.001 * *
= = = =
0.010 * * 0.057 0.007 * * 0.375
= = = =
0.084 0.037 * 0.421 0.160
• * p<0.01, * p<0.05.
Table 4 Results of T-tests for organizational efficiency
Organizational size Impetus for participation Duration of participation Systems integration • * p<0.01, * p<0.05.
Document preparation cost
Document exchange cost
Document flow
p p p p
p p p p
p p p p
= = = =
0.550 0.146 0.358 0.402
= = = =
0.522 0.184 0.226 0.051
= = = =
0.887 0.524 0.343 0.037 *
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d. What is the impact of Tradenet on the document preparation cost of your organization? - Increase 1 2 3 4 5 6 7 Decrease e. What is the impact of Tradenet on the document exchange cost of your organization? - Increase 1 2 3 4 5 6 7 Decrease f. What is the impact of Tradenet on the document flow of your organization? - Increase 1 2 3 4 5 6 7 Decrease
Systems integration had significant effects on international competitiveness (p = 0.001) and document flow (p = 0.037). The direction of these effects confirms the hypotheses. Integrators experienced a greater improvement on international competitiveness and a greater reduction on document flow than segregators. Hence, hypotheses 4a and 4f were supported but hypotheses 4b, 4c, 4d, and 4e were not supported.
6. Data analysis and results
7. Discussion and implications
6.1. Data analysis
A student t-test was used to detect significant effects. A 5 percent level of significance was used. Tables 5 and 6 present the descriptive statistics of the dependent variables, for different categories of organizations, pertaining to organizational effectiveness and efficiency respectively. Tables 7 and 8 report the results of the t-tests on the dependent variables measuring organizational effectiveness and efficiency respectively. 6.2. R e s u l ~
Organizational size had a significant effect on inventory control (p = 0.010). However, contrary to hypothesis lb, small organizations experienced a greater improvement on inventory control than large organizations. Hence, hypotheses la, lb, lc, ld, le, and if were not supported. Impetus for participation had significant effects on international competitiveness (p = 0.004) and customer quantity (p = 0.037). As hypothesized, initiators benefited more in terms of enhanced international competitiveness and increased customer quantity than reactors. Hypotheses 2a and 2c were supported. Hypotheses 2b, 2d, 2e, and 2f were not supported. Duration of participation had significant effects on international competitiveness (p = 0.001) and inventory control (p = 0.007). As hypothesized, pioneers reaped more benefits in international competitiveness and improved inventory control than followers. Hypotheses 3a and 3b were supported but hypotheses 3c, 3d, 3e, and 3f were not supported.
7.1. Discussion
Organizational effectiveness was measured in terms of international competitiveness, inventory control, and customer quantity. Contrary to the hypotheses, the results show that small organizations experienced greater increase in organizational effectiveness than large organizations (with differences in inventory control reaching statistical significance). These results can be explained by considering the unique characteristics of EDI. Tradenet is developed and managed by a large specialized organization. To encourage participation in Tradenet, the cost of performing business transactions is kept low. This permits small organizations with limited resources to participate and perform their business transactions electronically, an advantage which, prior to the introduction of Tradenet, belonged solely to large organizations. Hence, Tradenet helps small organizations to better leverage their limited resources. This result is consistent with that from the study on TRADE-projects in Europe, where EDI were found to benefit small organizations more than large ones. As hypothesized, initiators benefited more in terms of organizational effectiveness than reactors (with differences in international competitiveness and customer quantity reaching statistical significance). Pioneers also benefited more in terms of organizational effectiveness than followers (with differences in international competitiveness and inventory control reaching statistical significance). This finding is consistent with some studies on commercial banks: early adoption of
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Automated Teller Machine technology was positively associated with increased market share [1,38]. Further longitudinal studies need to be conducted to determine whether pioneers could sustain their first-mover advantages. Moreover, integrators experienced enhanced organizational effectiveness more than segregators (with differences in international competitiveness reaching statistical significance). These results suggest that it pays for organizations to be proactive. As in other studies, organizations that adopted a proactive approach towards their involvement in EDI benefited more. All the measures for document preparation cost, document exchange cost, and document flow had values greater than the neutral. Thus, participants can benefit from Tradenet in terms of organizational efficiency, irrespective of size, impetus, duration, and systems integration.
7.2. Implications for practice This study demonstrates the usefulness of EDI systems as a medium for performing business transactions. Organizations should seriously contemplate participating in EDI systems when possible. In addition to enhanced efficiency, organizations can attain increased effectiveness from their participation. By planning ahead, initiators can adjust their business strategies by considering new business alliances, reaching out to more customers and suppliers, and competing in new markets. Initiators can also streamline their workflow to reflect the electronic means of performing business transactions and prepare themselves for the change. By participating early in EDI, pioneers can gain several first-mover advantages. Integrators also benefit considerably from the links between EDI and their internal MIS. Integrators can alter their business processes rapidly to respond to opportunities and challenges without being bogged down by inflexible manual business processes. 8. Conclusion The results of this study were collected through an attitudinal survey on Tradenet participants. In
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generalizing the findings, it should be noted that Tradenet operates in a unique context. First, it was sponsored by a government agency that monopolizes the services associated with international trade. Second, Tradenet received strong political backing from the government which tout it as a strategic tool to improve the overall country competitiveness. Third, Tradenet was implemented in a collectivistic society where societal norms emphasize common benefits over individual gains. Hence, the results of this study could be contingent upon the unique economic, political, and cultural environment of Tradenet. Any attempt to generalize the findings to EDI systems operating in different environments must be done with care and caution. On the whole, Tradenet participants perceived that it has enhanced their organizational efficiency. However, on top of efficiency, the participants that adopted a proactive stance by planning ahead for their participation, participating in Tradenet early, or integrating it with their internal MIS perceived increased organizational effectiveness. In conclusion, organizations can benefit more from their participation in Tradenet, and possibly other EDI, by taking a proactive approach.
Acknowledgements The authors would like to thank the editor and the anonymous reviewers for their constructive comments.
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H.H. Teo et al. / Information & Management 28 (1995) 185-195 [41] SME Committee, SME Master Plan: Report on Enterprise Development, Economic Development Board: Singapore, May 1989. [42] Sokol, P.K. EDI: The Competitive Edge, New York, NY: McGraw-Hill, 1989. [43] The Business Times, "Tradenet Wins IT International Award from US Body," 2 October 1990. [44] The Straits Times, "Computerised Network can Save up to $1billion in Paperwork," 22 April 1988. [45] The Straits Times, "More than 30 Malaysian Firms Link Up with Tradenet," 10 June 1992. [46] J.A. Turner, "Firm Size, Performance, and Computer Use," Proceedings of the Third Annual International Conference on Information Systems, 1982, pp. 109-120. [47] N. Venkatraman and J.E. Short, "Baxter Healthcare: Evolution from ASAP to Valuelink in the Hospital Supplies Marketplace," Proceedings of the Twenty-Fifth Annual Hawaii International Conference on System Sciences, 1992, 4, pp. 666-677. [48] M.R. Vitale, "The Growing Risks of Information Systems Success," MIS Quarterly, 1986, 10(4), pp. 327-334. [49] J.A. Welsh and J.F. White, " A Small Business is Not a Little Big Business," Harvard Business Review, 1981, 59(4), pp. 18-32. Hock-Hai Teo received his B.Sc. (Hons.) degree in Computer and Information Sciences, in 1990 from the National University of Singapore. He was a systems analyst from 1990 to 1992 in Urban Redevelopment Authority and has been a Teaching Assistant since 1992 at the National University of Singapore, where he is currently pursuing his M.Sc degree. His research interests include group support systems, database management systems, Electronic Data Interchange, and strategic information systems planning.
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Bernard C.Y. Tan received his B.Sc. (Hons.) and M.Sc. degrees in Computer and Information Sciences, in 1989 and 1991 respectively, from the National University of Singapore. He was a Research Assistant from 1989 to 1991 and has been a Teaching Assistant since 1991 at the National University of Singapore, where he is currently pursuing his Ph.D. degree. His research interests include Group Support Systems, Electronic Data Interchange, and Decision Support Systems. KwokoKee Wei received his D.Phil (1986) in Computer Science from University of York, United Kingdom. He is presently a Senior Lecturer in Department of Information Systems and Computer Science at the National University of Singapore. He has published in journals such as MIS Quarterly, IEEE Transactions on Systems, Man, and Cybernetics, ACM Sigmod Records, and International Journal of Human-Computer Studies. His current research interests include Group Support Systems, User-Database Interaction, and Electronic Data Interchange. Lee.Yong Woo received his M.Sc degree in Organizational Psychology from the Manchester School of Management, United Kingdom. He is a Senior Lecturer in Department of Information Systems and Computer Science at the National University of Singapore (NUS). He has performed extensive consulting work both domestically and abroad. Additionally, he has previously served in Singapore Airlines as an Assistant Director of Finance prior to joining NUS. His current research interests include project management, strategic information systems planning, and Electronic Data Interchange.