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At 3M, electronic data interchange (EDI) is integrated into several aspects of the company's business practices and strategies. This article will focus on how the technology is being developed and integrated within the procurement cycle at 3M.
3M purchases goods and services from about 70,000 domestic suppliers. Our plan for the 35,000 suppliers who receive purchase orders from us is to implement EDI with those that account for 75 percent of our invoices. This will account for about 2,000 suppliers. We plan to develop other electronic strategies for the rest of the suppliers to whom we send purchase orders.
Because some of the benefits of EDI are derived from the number of transactions rather than the dollar value of transactions processed, the criteria that we use to select our EDI suppliers are :
* They have a large volume of invoices.
* They currently process EDI transactions with other companies.
* They use EDI for some phase of EDI procurement with 3M.
* They have invoices that require intensive manual processing.
* They were referred by a 3M purchasing agent.
* They are certain manufacturing suppliers.
EDI at 3M
The effort to use EDI for procurement began within 3M's Purchasing Department in 1987 and was expanded to the Accounts Payable Department in 1991 as a separate initiative.
A key success factor in any EDI project is the support of executive management. This support has been present in 3M for several years. In December 1993, a meeting was held with senior management from the Purchasing and Finance Departments to discuss several issues, one of which was EDI. Information was shared on how the Accounts Payable Department had been able to re-allocate resources because of the increase in the receipt of freight EDI invoices. Over the past five years, the volume of all freight invoices has more than doubled while at the same time, resources needed to process these invoices have been reduced by 75 percent. Five years ago, the EDI freight penetration was at about 10 percent; today, penetration is almost 90 percent. This success led management to support the development of the Procurement EDI...