1.EDI Application under Change
In 1996, a number of partners agreed on the action plan for electronic commerce, among these the Danish Chamber of Commerce (DDH) and the Confederation of Danish Industries (DI). The action plan focused strongly on increasing the application of the international EDIFACT standards in business-to-business (b2b) transactions. It was believed that this international standard was the means to facilitate globalization of Danish business, while simultaneously reducing the administrative load internally in the value chain. In Denmark, the biggest actors in EDI application are companies within the provisions trade, the financial sector and the public health services. They have all prepared actual guidelines to UN/EDIFACT.


In 1998, the action plan for electronic commerce was updated. New transport media for EDI and the development of inexpensive conversion tools have shown a potential to reduce some of the barriers indicated in studies of EDI application in Denmark and abroad. However, at the same time that a number of obstacles for diffusion of EDI in b2b relations are reduced or disappear completely, new challenges appear, especially in production and wholesale businesses. In particular, it is favorable to establish EDI solutions with trading partners where the trading pattern involves a large volume and accruing of transactions with a given number of steady business partners. With the advance of new market relations the assumptions on EDI application are under pressure.

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Internationalization of Danish companies is another area where EDI application is under pressure. Establishing Danish subsidiaries or business partners abroad and foreign acquisition/formation of subsidiaries in Denmark may increase EDI application, also in the twenty first century. The business challenges deriving from the massive reorganization of patterns in connection with electronic commerce include a wide measure of uncertainty and confusion concerning almost all decision variables: economy, technique, safety, communication, marketing, integration, advertising, etc.


The study from the Copenhagen Business School on EDI application in Denmark from 1995-1997 indicates an increase in the number of companies that are able to send and receive EDIFACT messages. The increase in the number of given location numbers was at the same level in the first six months of 1998 as in 1997.
The number of EDIFACT messages sent via VANS has increased both measured in numbers and volume. For the period 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 the size of the messages. In the first six months of 1998, 29 per cent more messages have been sent and 32 per cent more bytes. Provided the growth continues the rest of the year, we estimate that the total increase will reach approx. 60 per cent.


If we compare the number of bytes sent via VANS in EDIFACT format in June 1998 with the number sent in June 1995, the number has increased by approx. 118 per cent over the three years. Measured in terms of number of messages we see that in June 1998 177 per cent more messages were sent than in June 1995. These growth rates are at a higher level than the former study indicated.


All in all, we may conclude that the growth in EDI in Denmark measured in terms of number of users, number of messages and number of bytes sent shows and probably will continue to show substantial rates of increase. However, despite the positive development there are still challenges to face in connection with EDI.


Some challenges are related to the continued diffusion of EDI in the value chain and to SMEs. Another issue that must be dealt with is the new technical openings for EDI solutions. Partly, the technical development will enable us to choose new transport media for EDI, and partly it will allow us to solve the safety problems in connection with application of open network.


2.EDI and Electronic Commerce
In the report Electronic Commerce and New Organizational Forms we outlined the following research problems in connection with the market theme:
Identifying relevant theories/methods on diffusion of new technology in general, IT products in specific and, in particular, electronic commerce products.

Analyzing the pilot project Trade Documents in order to assess the difficulties related to implementation of new electronic commerce products.

Identifying barriers and incentives for intake of electronic commerce products.

Following-up on standardization efforts EDIFACT based as well as other (new) de facto standards.

Integrating Internet applications with the companies other systems.

Preparing multimedia material to advance diffusion, in specific in SMEs.


Figure 1. Diffusion of electronic commerce
Contrary to the common view on electronic commerce, EDI constitutes the core in the current electronic commerce in Denmark. The diffusion of EDI is far larger than business-to-consumer (b2c) Internet commerce. Therefore, it is necessary to take a closer look at the business processes b2b in electronic commerce. The purpose of applying EDI is to optimize the overall business process across company lines. When business processes cross company lines, there tends to be a certain waste of resources. They involve cost consuming processes that do not increase the product or the service they support in value. Such waste of resources may include double work, e.g. information printed out by one computer has to be entered in another. For example, a manufacturer may palletize goods and invoice them to a wholesaler. When the wholesaler has to distribute the goods to the retailers, he has to repack the pallets and prepare new invoices. If the manufacturer knew how the goods to be palletized were to be distributed at the retail level, he might be able to palletize in such a way as to save the wholesaler from palletizing and invoicing anew. Many resources may also be wasted because information available at a later stage of the business process is not available in the first stages of the process. Information on consumption of goods in the last link of the overall supply chain may contribute to optimize planning and thus improve the employment of resources and inventory control. Thus, the purpose of EDI is:
to avoid double work
to ensure that up-to-date information is available enabling work to be made where it is optimally independent of company lines and
to ensure through information access about the overall business process that wastes of resources are eliminated or reduced.


2.1Security
The need for security will always be subject to relative and thus different evaluations. The basic security can be evaluated as supply security, which ought to be given high priority by everybody. Other security needs listed below must depend on an assessment of data sensitivity and the possible consequences of unauthorized access to e.g. personal and financial information.


It is expected that a digital signature will solve most of the above mentioned security elements related to transport of EDI via Internet. However, there will still be a range of security measures that are relevant for parties engaged in EDI. Similar to ordinary mailing there are the familiar risk that a message may be lost or that the sender of a message is not who he/she pretends to be (authenticity).


In addition, we have the new security problems in connection with transfer of electronic messages. There may be a risk of unintended retransmission. There may be a problem with the integrity of the message, i.e. is it possible to protect a message to the effect that no changes can be made in the message during transport between sender and receiver. An aspect of the integrity issue is the possibility of concealing the message, i.e. the message cannot be read by unauthorized persons.


A final relevant aspect in terms of security is whether it is possible to ensure that sender or receiver cannot subsequently refuse knowledge of a message. Until now this problem has been solved by sending onerous messages to a receiver by registered mail.


2.2Exchange of EDI via VANS, Regular or Called up Telephone Connections or Internet
The companys choice of transport media for its EDI traffic is independent of the standards employed by the company and the degree of data integration it wishes to have in its value chain and internally in the company. It is no longer necessary to use a VANS operator in order to apply EDIFACT. However, now VANS operators also offer Internet based solutions. Many companies employ multiple solutions for transport of EDI messages.


With the introduction of the Internet technology, it has become much easier and less costly to connect computer systems across company lines and independent of geographical locations. The Internet standards also have the advantage that data can be exchanged electronically even though one of the partners employs a simple and inexpensive computer system. On an international level, efforts are made within standardization to develop EDIINT, which is a concept dealing with exchange of EDI via Internet. The concept provides the framework for determining which security elements, protocols, etc. is necessary to include in Internet based EDI exchange. Application of SSL security standards will improve security for a correct identification of receiver and sender. Furthermore, application of Internet technology makes it possible to reduce the operative costs distinctively in connection with data communication.


For a number of companies, Internet is the obvious medium for exchange of EDI, especially by interface to small companies and in b2c commerce. We believe that the next few years will see a number of solutions within this area. For b2b, supply security is hampered by the Internet infrastructure, and the distribution of responsibility makes it difficult to trace and check mailed documents. For a number of companies, it will probably still be the best solution to apply VANS based EDI solutions or direct connection. Irrespective of the fact that the Internet provides flexibility in the exchange, e.g. in connection with format types (e.g. EDIFACT format, point separated files, screen entry/display, print), the complete data integration basically depends on workflow analyses and data discipline in the companies and cooperative partners. The Internet technology does not solve this problem.


By using a VANS operator a company is independent of which communication forms their business partners choose to employ, which reduces costs. In addition, a VANS operator provides a range of options, such as backup, checking, conversion and distribution of individual messages. The opportunities offered by the VANS operator include a high degree of security that messages will arrive correctly, i.e. supply security is improved. If a company only has a few business partners where the EDI exchange only involves a relatively low number of transactions, a VANS solution will often be too expensive. However, if a company has many partners, the advantages are substantial.
By employing regular or called up telephone connections the company itself is fully responsible for implementation and operation. This implies that the company itself must handle all the functions that VANS can offer, of course provided they are necessary. It is vital that a range of aspects in connection with supply security is carefully considered. It might, for example, be necessary for a company to set up its own systems to check and log messages.
3.EDI Initiatives in the Danish Chamber of Commerce and the Confederation of Danish Industries
The Confederation of Danish Industries and the Danish Chamber of Commerce have jointly launched the EDI project Trade Documents. The purpose of the project is to determine standards for EDI trade documents, primarily within the mechanical engineering and metalworking industries. The project is directly based on the daily routines in the nine participating companies. The project aims to develop software that can handle the functions for which the companies have prepared standards. Besides this joint project, the Confederation of Danish Industries and the Danish Chamber of Commerce have taken other initiatives within the EDI field.


One of the initiatives launched by the Confederation of Danish Industries is the WWW Company of the Week. Since July 1998, the Confederation of Danish Industries has weekly highlighted a company that has drawn attention to itself on the Internet owing to outstanding and practical homepages. The objective is to stimulate member companies to use of the Internet.


The Confederation of Danish Industries informs its members through books and pamphlets. Below, we will mention some examples of publications with relation to electronic commerce. Digitale netvrk industriens udfordring (Digital network a challenge for industry), which is a pamphlet discussing current examples of the importance of digital network for Danish industry. Danske virksomheders brug af EDI (Danish companies use of EDI) a study of Danish companies use of EDI. EDI et voksende krav ved handel med den offentlige sektor i Sverige (EDI a growing requirement in trading with the public sector in Sweden) a practical guide in how to engage in commerce via EDI.


As part of the general information service on EDI, the Danish Chamber of Commerce in cooperation with the EDI Council and Microsoft have prepared a manual Best Practice for Elektronisk Handel og EDI (Best Practice for Electronic Commerce and EDI). The manual is a basic introduction to the concept electronic commerce. The manual focuses on the importance of electronic commerce in future and who will benefit from using electronic commerce in the company. In cooperation with Eurochambers efforts are made to exert influence on EU in order to support electronic commerce.
4.Project Hypotheses
The research project will examine three hypotheses:
The diffusion of Internet commerce does not erode the number of middlemen. On the contrary, it gives them new roles and redefines their business relations.

Internationalization of Danish trade and industry increases the application of EDI solutions. The Confederation of Danish Industries has made a study of EDI and Danish companies. The conclusions of the study can be used as a point of departure in the further work with internationalization.

The effects of EDI solutions on business processes are due to the hard work of a few large companies. The effects are independent of the transport media. In other words, it is not necessarily economic aspects that have an impact on diffusion of electronic commerce.


The three hypotheses will be examined in three part-projects, all of which are related to the Danish Chamber of Commerce and the Confederation of Danish Industries.


5.Research Projects
5.1Part-project I: Trade Documents
The Danish Chamber of Commerce has approx. 2000 member companies out of which only a handful uses VANS today. For members of the Confederation of Danish Industries the ratio is a bit higher. A joint project between the Danish Chamber of Commerce and the Confederation of Danish Industries has been engaged in developing software for EDI. Two production companies, Aalborg Industries A/S and Danfoss Hydraulik A/S, including related sub-suppliers, constitute the pilot groups in connection with the project Trade Documents. The development of software and solutions was completed at the end of 1998. This part-project is examining EDI application in the nine companies that participate in the project Trade Documents based on four variables: volume, depth, diversity and breadth.


The variable volume is measured by determining the number of EDI documents in e.g. the purchasing function in relation to the total number of documents in the purchasing function. If, for example, Aalborg Portland annually receives 10,000 documents in EDI format in connection with cement orders out of a total of 100,000 documents, the value of the volume is 0.1 or 10%. The higher the value of the variable volume is, the higher is the proportion of the total number of documents handled via EDI. The variable depth in EDI application measures whether we deal with real EDI application or merely entry of data by one party only. To derive the full benefit of EDI requires that both receiver and sender integrate EDI with their own systems. This variable is not quantified, but described qualitatively. The variable breadth measures the number of cooperative partners who apply EDI. For example, a company receives invoices in EDIFACT format from 18 suppliers and in flat files, e-mail, fax or other types of format from 1,011 suppliers. This makes the value of the breadth 18/1,011 = 0.02 or 2%. The higher the value is, the higher is the score of the variable breadth. Finally, the variable diversity measures on which type of messages EDI is applied. If a company sends 15 different types of documents to the public sector, but only one of these is sent via EDI, the value is 1/15 or 7%. We will prepare a structured interview guide to clarify the variables. The measurements will be made every three months in the first year and twice in the remaining time of the project.


5.2Part-project II: Internationalization
Part-project II outlines ownership and document flow in Danish companies in relation to their global/domestic cooperative partners. It has often been stated that Danish companies cannot demand that their foreign cooperators apply EDI if they do not want to. Or that Danish companies are forced to apply proprietary solutions and direct connection solutions instead of e.g. EDIFACT and Internet based transport. It is our hypothesis that the internationalization of business, other things being equal, will stimulate application of electronic commerce. One of the factors that will strengthen internationalization within the EDIFACT field is the monetary unit, the introduction of a common currency, ECU. In order to clarify this hypothesis we will examine how many Danish companies are owned by foreign companies, how many foreign companies are owned by Danish companies, the number of Danish subsidiaries abroad and the related document flow. In consultation with the Confederation of Danish Industries, the Danish Chamber of Commerce and Eurochambers, we will choose a number of value chains, where application of EDI and its value chains will be examined.


5.3Part-project III: Incentives and Barriers
This project takes its point of departure in the incentives and barriers illustrated in the report Elektronisk Handel og Nye Organisationsformer (Electronic Commerce and New Organizational Forms).


IncentivesBarriers
Economic gainThe advantages and strong points of the Internet have not been sufficiently described
Faster adjustment to the marketLack of incentives
Increased competitivenessImplementation problems
New ways of expandingLack of critical mass
Increased opportunities for internationalization
Information division
Rationalization opportunities
To comply with the Danish Chamber of Commerce and the Confederation of Danish Industries we will especially examine the uncertainty of the effect of EDI solutions on business processes, incentives, the general resistance against changes, lack of adjustment to the organizational changes introduced by EDI and the legislative uncertainty.


Through the study of incentives and barriers we will try to indicate the areas that members of the Danish Chamber of Commerce and the Confederation of Danish Industries can stimulate positively, e.g. the economic opportunities and the overall business potential.


6.Project Output
Each of the three part-projects involves an application-oriented perspective and an academic output. The project, Trade Documents, will constitute the background for the empirical input in relation to a targeted, coordinated EDI effort. As part of the study we will produce a video about the EDI project.


Part-project I will produce a paper titled The Effect of a Targeted Effort in Relation to EDI Application. The objective of the paper is to illustrate which factors motivate companies to choose and apply EDI in business processes. The paper will examine whether small and medium-sized businesses are able to control the development, or whether large companies and groups set the pace for integration of EDI in trade and industry. The purpose of the study is to enable companies to evaluate whether coordinated efforts in reality will give a return that measures up to the resources used in a project such as Trade Documents.


The second paper will illustrate the new role that middlemen and manufacturers might play in connection with electronic commerce. Based on information that at present is available about electronic commerce b2c, we will analyze the changes, if any, in relation to the middlemens role in the value chain. It will be relevant to look at the business sectors that are most in front in electronic commerce, as for example car dealers. Another issue related to the new role of middlemen is whether the role of manufacturers will change as a result of the direct contact with the end user.


A third paper will deal with whether EDI application has had a positive impact on the objectives of the Treaty of Rome concerning free movement of goods and services. Another aspect in connection with the free movement of goods and services is whether EDI application may constitute a technical trade barrier. Partly, we may look at the work performed in Eurochambers, and partly at the results from part-project II.


A fourth paper will focus on barriers and incentives. In specific, it may deal with EDI standard contracts for electronic data exchange. Do terms in standard contracts prevent companies from applying EDI domestically or internationally? An objective may be to look at different countries in specific the USAs standard contracts, perhaps within special trade organizations. We may examine whether there are significant variations within the EU in relation to the standard contract prepared by the EU , and whether standard contracts in the USA vary significantly from the EU standard contract. For the Confederation of Danish Industries and the Danish Chamber of Commerce, the project will indicate the differences and similarities in relation to the standards applied by the two organizations. During the project a CD-ROM will be produced illustrating electronic commerce. The CD-ROM is a means of communicating EDI and a concrete guide like the Internet manual.


Three two-day seminars will be arranged for the parties involved in the project. At the seminars we will discuss the concrete results available at the time. The seminars will also be an excellent forum for presenting the next steps in the process, just as it will be an opportunity to communicate visions and trends within the area.


7.Parties Involved
John Zimmermann, market information manager, the Confederation of Danish Industries
H.C. Andersens Boulevard, 1787 Copenhagen V.
Telephone 3377 3377
emailprotected
Steen Rytlig, head of department, the Danish Chamber of Commerce
Brsen, 1217 Copenhagen K
Telephone 3395 0500
emailprotected
Bjarne Emig, development manager, the EDI Council
Brsen, 1217 Copenhagen K
Telephone 3395 0500
emailprotected
Kim Viborg Andersen, associate professor, Ph.D.-supervisor and project participant a quarter of the time.
Center for Electronic Commerce, Department of Informatics, Copenhagen Business School
Howitzvej 60, 2000 Frederiksberg
Telephone 3815 2437
emailprotected
Helle Zinner, Ph.D. student on full time for three years, Center for Electronic Commerce, Department of Informatics, Copenhagen Business School
Howitzvej 60, 2000 Frederiksberg
Telephons 3815 2452
emailprotected
We seek participation from a national advisory board:
Jan Damsgaard, assistant professor, Aalborg University
Department: Institute 8
Address: FrB.7, room E2-209
emailprotected
Jens Hrlck, associate professor, rhus University
Department of Management
rhus University
8000 rhus C
emailprotected
Moreover, we seek participation from an international advisory board:
John L. King, professor, Information and Computer Sciences,
University of California
430C CS
Irvine, CA 92697 USA
emailprotected
Kalle Lyytinen, professor,
Department of Computer Science and Information Systems
University of Jyvskyl
Mattilanniemi, Building MaD, 3rd floor
P.O.Box 35
40351 JYVSKYL FINLAND
emailprotected
8. Schedule of Project
1.1.1999-31.12.19991.1.2000-31.12.20001.1.2001-31.6.2001
123456789101112131415161718192021222324252627282930
Month: jfmamjJasondjfmamjjasondjfmamj
Video recording
Video
Pilot survey
ICIS, IFIP 8.2
Two-day workshops
Study of work in Eurochambers
Study EDI application in Europe
Bled, ECIS
Study period in the USA
CD-ROM
Academic in-/output =
Output for DDH and DI =
Bibliography
Helle Zinner, Ph.D. student on full time for three years, Center for Electronic Commerce, Department of Informatics, Copenhagen Business School
Howitzvej 60, 2000 Frederiksberg
Telephons 3815 2452