Electronic Data Interchange

Before the dawn of the computer age, intra- and inter-business activities, especially purchasing and selling of products and services, were paper-intensive. Paper documents such as purchase orders, invoices, shipping notices, and bills of lading needed to be prepared in multiple copies. These copies had to be approved, signed, preserved in files for a certain duration, forwarded to trading partners and processed in a myriad of ways. Purchasing and selling activities rippled through the entire organization and tied in manufacturing, logistics, accounting, finance and human resources, among other areas. The documents then multiplied exponentially. Additionally, these documents were organization-specific, meaning there were no standard formats. The lack of standard format resulted in extra processing time; incoming purchase orders needed to be converted into the organization’s sales order. In the 1960s, giant corporations had to deal with a mountain of paperwork and employ armies of clerks to process those documents. The associated costs and their effect on the bottom line alarmed managers. The idea of electronic surrogates for these documents and Electronic Data Processing (EDP) began to look attractive. In the late 1960s, the idea of an electronic exchange of standardized documents had taken a firm root in the transportation industry. The age of EDP has arrived and EDI was on the forefront of the wave and became more sophisticated over the next several decades.