Using Simulation to Evaluate Electronic Data Interchange

Abstract

Reluctance of organizations to invest in electronic data interchange (EDI, Internet based EDI, and XML/EDI) is largely due to their inability to assess the return on these investments. We identify prescriptive and evaluative methodologies for analyzing investment in EDI: non-financial methods, purely financial methods, and financial and strategic consideration methods. We also show how computer simulation can be used as a tool for assessing EDI. Evaluating the benefits resulting from EDI implementation were illustrated through the well-known Beer Game. Our analysis and review also identifies difficulties involved in assessing the benefits of EDI in supply chains.