Merging Just-in-Time (JIT) Inventory Management with Electronic Data Interchange (EDI) Impacts on the Taiwan Electronic Industry

Abstract

This paper compares the firm merging Electronic Data Interchange (EDI) with just-in-time (JIT) inventory management, to the firm with traditional inventory methods for the purpose of deter-mining the impact of both methods on reducing inventory cost. JIT inventory management eliminates waste which includes all material, equipment, inventories and labor since JIT requires the production of just the right quantities and results in elimination of waste. (EDI) is the electronic exchange of information, documents and business transactions between computers. The information transmitted in manufacturing includes purchase orders, shipping and freight invoices, and bills of lading. There are many advantages to using EDI transaction over a traditional paper exchange environment. When the exchange of information is electronic the transactions are instantaneous. Thus, the processing and handling of paper and input of data are eliminated with no rekeying of data. Therefore, the chances of errors, time spent on auditing, and tracing errors are all significantly decreased. Additionally, the use of electronic commerce was able to cut down the lead time of purchasing and speed up inventory turnover to achieve just-in-time inventory management. Therefore, the merging of JIT with EDI has brought unprecedented benefits to users, especially with the increase in the use of international sourcing. The use of information technology to control the value chain cycle is crucial in the electronic industry, since it requires effective and efficient inventory control to speed up production and cut down inventory cost. This is an exploratory research project facilitated via the case study method. Two hubs and their suppliers were investigated to reveal the use of electronic commerce in the electronic industry based on the value chain theory. The findings are the firm merging EDI with JIT will result in a higher percentage of transactions as compared with the firm using EDI with traditional inventory method. This higher percentage of transactions by EDI results in reduced supply chain inventory cost due to using EDI to reduce paper work and errors in rekeying of data, audit tracing errors, etc. Thus, the firm merging JIT with EDI results in significantly reducing supply chain inventory cost.