The Portable MBA in Finance and Accounting, 3rd Edition

Information Technology and the Firm 547

Electronic Data Interchange (EDI) allows companies to communicate and
conduct electronic commerce from one computer to another. EDI is one of the
industry’s growing uses for data communications, and many companies are using
it to send purchase orders to their suppliers, thereby lessening the time it takes
for purchase orders to be mailed and then entered and processed by the suppli-
ers. Inventories are lowered by speeding up the turnaround time of ordering
and receiving goods and materials. On the f lip side, many suppliers use EDI to
send their customers advance ship notifications (ASN), advising them of what
has been shipped so that they can prepare their warehouses for the goods and

EXHIBIT 16.5 Model of wide area network (local area network and
Internet connection using open communications
protocol, c. 1997).

Server

Minicomputer

Mainframe

Internet

(TCP/IP)

Router

Server

Minicomputer

Mainframe

Client

Client

(e.g., branch office)

Key:

= Processing capacity (e.g., the ability to run program code)

TCP/IP = Transmission Control Protocol/Internet Protocol

Local

area

network

(TCP/IP)