Research report. Can EDI benefit adopters?

Although the potential for EDI (Electronic Data Interchange) to improve performance of firms involved in industry value chain is widely known, little evidence regarding improved performance for the entire supply channel has been reported. Some researchers have found that EDI networks can benefit EDI champion, but it remains largely unclear whether EDI adopters-who are often coerced to implement the electronic networks by the champion-gain similar payoffs from their EDI investments. To measure impacts of EDI investments for the EDI adopters, we have investigated the performance of 31 grocery retail chains (EDI adopters) that implemented EDI networks with Campbell (EDI champion) for a supply channel reengineering innovation known as "continuous replenishment process." Analysis of daily data on inventory and stockouts levels for the 31 retail chains demonstrates that these EDI adopters have achieved a significant increase in their inventory turns while simultaneously reducing stockouts as a result of this EDI-enabled supply channel reengineering. This paper thus provides empirical evidence that EDI adopters can achieve dramatic performance improvements if EDI networks are used for interfirm process reengineering.