Forced by competitor moves to make the system available to travel agents in the
mid-1970s, American observed an increase in sales volume that offset additional
costs. American then began to list auto rentals and hotel reservations (i.e., the prod-
ucts of other travel related companies) in the system. Over time these listings were
replaced with electronic links to the auto company’s or hotel’s reservation systems,
thus making SABRE an interorganizationalsystem. And American, too, began to list
the flights of other airlines for a fee. When deregulation of the airline industry oc-
curred in the late 1970s, American found itself in possession of information about
passenger demand and preferences which its competitors did not have. This situation
permitted it to structure rates and schedule flights in a profitable manner. In fact, the
airline reservation system is so profitable, that the president of American Airlines said
recently that if he had to sell either the reservation system or the airline he would sell
the airline.
(ii) Electronic Data Interchange. Electronic data interchange (EDI) is the electronic
transfer of business information from a computer application in one company to a
computer application in another company using standards to structure the data
needed to carry out the transaction.^17 An example would be a buyer sending a pur-
chase order as an EDI transaction directly to a supplier’s order entry system. In-
voices, delivery notices, bills of lading, and customs declarations are examples of
business transactions that can be exchanged in electronic form between computers
rather than as written communication through the mails, or by fax. The key concepts
here are the exchange of structuredbusiness information among firms without human
intervention.Two categories of advantages result. The first one comes from the elim-
ination of the exchange of paper documents among firms and the clerical steps in-
volved in handling them. The second one occurs when the complete work process is
restructured.
EDI is growing rapidly in Europe and Asia, but less so in the United States. This
is because with only three times zones and no customs barriers there is less of an in-
centive in America to install these systems than in the remainder of the world. Keen^18
reports that EDI has doubled the speed of trucks crossing Europe; there is less time
waiting at customs and handling paperwork. Hong Kong (Tradelink) and Singapore
(TradeNet) have established EDI value-added networks to position their cities better
in the wider world trading network. Hong Kong has over 100,000 trading firms each
sending between 2,000 and 10,000 documents a year. SWIRE, a typical trading com-
pany, has 300 employees, of whom 120 work on documentation, handling nearly one
half million bills of lading per year, supported by the same number of shipping pa-
pers comprised of 7 to 8 documents each.^19
EDI IMPACTS. The direct impacts of EDI include labor savingsin data transcription,
control, error investigation and correction; fewer delaysin data handling; and re-
duced timeto transmit and process data. These are reflected in improved inventory
management, better control of transportation and distribution, reduced administrative
costs (frequently by a factor of 10 in per-document costs), better cash management,
28.5 NEW BUSINESS PARADIGMS 28 • 13(^17) Keen, 1991.
(^18) Keen, 1992.
(^19) Id.