Impact of electronic data interchange technology on quality improvement and inventory reduction programs: A field study

Despite the impressive growth in the use of EDI technology by U.S. manufacturing companies, there is a paucity of research examining the impacts of this technology on manufacturing performance. The authors systematically investigate the effects of routine and exception EDI transactions on the quality improvement and inventory reduction programs of 65 outside processors employed by LTV Steel, one of the major steel producers in the U.S. The present results provide evidence for the favorable impacts in firms using routine EDI transactions. Performance improves with higher quality and lower inventory. The authors also find quality improving with lower levels of inventory. The analysis supports the hypothesis that firms using routine EDI transactions achieve synchronized manufacturing for JIT environments, while those with EDI exception transactions are able to mitigate the negative impacts of process uncertainties as a result of timely information. Furthermore, the interactions between the quality improvement and inventory reduction programs magnify the beneficial impact of EDI transactions.