EDI-Enabled Channel Transformation: Extending Business Process Redesign Beyond the Firm

This paper examines the relationship between process reengineering and channel performance for firms implementing electronic data interchange (EDI) ordering within the U.S. grocery industry. Both quantitative and qualitative data sources are combined to demonstrate that channel transformation (interorganizational reengineering) involving both technological innovation (EDI) and redesign of replenishment processes enables performance improvements more than an order of magnitude greater than implementation of EDI ordering alone. New replenishment processes, enabled by EDI, provide retailers with 50-100 percent higher inventory turns for products using continuous replenishment processes (CRP) relative to retailer performance using traditional ordering processes. Firms adopting EDI for ordering without reengineering ordering processes have failed to realize statistically significant improvements in inventory levels or stockouts. This demonstrates the potential for extending the business process reengineering concept to include the entire supply chain.