Accountancy & Management: Software that builds bridges: Roger Trapp examines a guide described as an off-the-shelf tool kit for managers

SOME time ago Levi Strauss, the maker of jeans and other casual clothing, decided it wanted to introduce a high-tech system of exchanging data for all its retailers.

Although the shops were keen to go along with the move, they did not have the necessary systems that would help them order new stock. Levi was so determined to proceed with the changes that it developed a special stock management system for them.

The system operates through the shops sending Levi either point-of- sale information on sales and the period over which they have occurred, or basic stock counts. Levi compares this information with the shop's previous restocking models and either suggests an order or makes it itself.

Such an approach has benefits for the retailer in ensuring that sales are not lost through unavailability of particular products or styles. But it is also a significant aid to Levi, since the system locks the shops into the company as a preferred supplier and therefore brings competitive advantage.

This mutually beneficial arrangement is made possible by a technological development known as EDI, or electronic data interchange. Already widely used in the retail and motor industries, this much-in-vogue concept is essentially paperless administration that involves the electronic transmission and processing of data, such as standard business forms, from one computer system to another.

The idea is not just a gimmick. There are real benefits. It saves time and money and allows personnel to concentrate on maximising business opportunities instead of run-of-the- mill administration, increasing their 'added value' to the company.

The particular potential of electronic financial data interchange (EFDI) - and the comparative lack of information about it - has prompted the Chartered Institute of Management Accountants to produce a simple guide to the principles behind it.

Couched in warnings that 'technology is always the servant, never the master' and 'it is important not to get swept along on a tide of euphoria', the guide is intended to be a jargon-free tool kit that enables the user to select elements and put together a systematic approach to the business problem.

The book, published in loose-leaf form, is the work of a group chaired by Chris Dewey, an assistant director of Hill Samuel Bank with responsibility for information technology administration. Although working in the area himself, he is concerned that computers are still surrounded by too much jargon and technology.

Accordingly, the book makes it clear that 'EDI is a business and strategic management opportunity. It is not a technology issue.' Mr Dewey cites Superdrug as an example of a company that does not use technology for the sake of it but saw EDI as a logical step in helping it improve its supply chain management.

From this flows the need for any EDI moves to be part of a general business strategy - and this must be backed up by an understanding of the issues involved by senior managers.

'It is about building bridges between other companies and yourselves,' Mr Dewey says. 'And once you have built them, both you and your partner hopefully are in a win- win situation.'

By this he means that both the supplier and customer are gaining from such improvements as streamlined accounting functions, better financial control, fewer clerical errors, cost savings and hence greater profitability, as well as developing a partnership rather than a confrontational approach to business.

But for all the obvious benefits - and Mr Dewey warns that the cost savings may not arrive as quickly as consultants predict - there is still some suspicion about the idea of co- operating too closely with other companies.

This is partly due to the lack of technical expertise at senior levels of management. 'We have to get computer-literate managers into senior positions because there are opportunities to be had,' Mr Dewey says. 'There has to be an awareness of the potential and of the cost.'

But security fears also play a part. These tend to focus on the feeling that files are more readily accessible, the possibility that data can be tampered with during transmission and the idea that EDI grants access to a whole range of information - and not just that intended.

However, it is relatively easy to deal with these worries by such means as constructing barriers that restrict access to certain types of information and controlling who may use the system. Mr Dewey is adamant that these concerns should not hold companies back from taking an initiative that could put them some way ahead of the competition. Secrecy is a high price to pay for missing out on this, he says.

Nor is the technology limited to large organisations or those whose trading partners are as sophisticated as themselves. By using a Royal Mail service called Edipost, EDI users can communicate with all their partners - whether or not they have EDI systems - without having to do the same transaction electronically and on paper, which is costly and inefficient.

Edipost simply intercepts all electronic documents bound for non-EDI companies and prints and posts them. The system is used by Barclays Bank, for instance, to offer business customers an electronic payment settlement service.

And in case the small company needs any convincing of the applicability of the system, Mr Dewey tells the story of what happened when his car broke down in a remote part of France.

The closest garage - though tiny and some way off the beaten track - was able to find the parts required on a computer screen and order them for delivery the next day.

'All that is needed is a software package that can be bought off the shelf,' he says.

Electronic (Financial) Data Interchange, a Tool Kit for Financial and Non-Financial Managers, is published by the Chartered Institute of Management Accountants.

(Photograph omitted)