Security Issues

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Security is still a number one concern for businesses that want to adopt EDI or e-commerce. Many businesses perceive that e-commerce transactions are insecure and unreliable. Despite the assurances of technological security mechanisms (such as encryption and authorization mechanisms, digital signatures and certification authorities), trading partners in business- to-business e-commerce do not seem to trust the personnel involved in the transactions. In this section we discuss security risks from three perspectives–namely technical, political and behavioral perspectives.

Technical Perspective

Business partners are subject to security attacks and intrusions by hackers. The security break-ins not only result in revenue losses for businesses, but also result in projecting adverse perceptions of e-commerce security. The information transmitted may be vulnerable at various points, including the trading partner’s in-house applications, interface, translation software, network connection or communication management, as well as the carrier’s network and mailbox services. The widespread use of Internet-based EDI has not only changed the way business is conducted, but has also introduced new risks that need to be addressed. The Internet, originally designed for scientific research use, emphasizes open communication and has many inherent security flaws. For example, Internet-based EDI security is still an administrative nightmare with problems from eavesdropping, password sniffing, data modification, spoofing and repudiation (Bhimani, 1996; Drummond, 1994). Other e-commerce risks include snooping, misuse, theft, corruption of information, theft of identity and personal threats. Cross-vulnerabilities that exist between interdepen- dent trading partners in an e-commerce network can put organizations at risk due to the “domino effect” of one trading partner’s security failure comprising the integrity of the other trading partner’s system (Jamieson, 1996; Marcella et al., 1998). Given the computer-dependent nature of the automotive industry, it is important for business partners to build and maintain trustworthy relationships in order to mitigate risks from a technical perspective.

Political Perspective

Power, which is “the capability of a firm to exert influence on another firm to act in a prescribed manner,” is an important contextual factor in EDI adoption, because of its influence.

Previous studies in the automotive industry suggest that Ford applied power when their EDI network was introduced (Webster, 1995). Ford’s main objective was to gain competitive advantage by locking their suppliers into their system, and their competitors out of them. Ford made it clear to their established suppliers that they should use EDI. Although Ford did provide their suppliers with initial training and software to run on IBM machines, suppliers with incompatible systems or with no systems were requested to find appropriate solutions as quickly as possible. Clearly, this was a situation where coercive power exercised by Ford was seen in establishing connections that involved the expense of the suppliers buying new equipment. Examples of coercive sources of power an automotive manufacturer may exercise include, slow delivery on vehicles, slow payment on warranty work, unfair distribution of vehicles, turndowns on warranty work, threat of termination and bureaucratic red tape. It is here where trust can develop. Ford can either choose to see it proactively and renew their suppliers’ contract or choose to punish their suppliers by terminating their contracts. The absence of collaboration or prior consensus about the structure, function and design of these networks provided suppliers with few opportunities to develop their knowledge and expertise in EDI use (Ratnasingam, 2000).

Similarly, Hart and Saunders (1997) suggest that EDI adoption was due to the pressure from the more powerful trading partners, usually buyers. Their findings indicated that power was negatively related to the volume of EDI transactions, reflecting that while electronic networks may facilitate easier exchanges, they may not necessarily lead to increases in the frequency of business transactions. EDI not only affects the efficiency of coordination, but also the power dependency and structural aspects of inter-organizational relationships. Thus, power exists on two levels: (1) as a motive, and (2) as a behavior.

Behavioral Perspective

The automotive industry is centered on assembling motor vehicles that involved standardized routine business operations. Buyers observe their supplier’s behavior in their daily transactions, communications and business operations. Over a period of time, buyers are able to predict the performance of their suppliers. Ford possessed a set of strict measures that they applied when their suppliers did not cooperate. Their suppliers’ competencies, product quality, timeliness of delivery, service quality and how they resolved disputes were observed. The supplier performance checklist determined whether to renew the contracts of their suppliers.

“Our suppliers do have to meet the standards outlined in the Suppliers’ Performance Assessment. Although, our suppliers have been trading with us for a long time, we usually undertake a screening test to examine their credibility, technical ability and skills. A standard of 85% and above was expected in their performance.” — Ford EDI Coordinator

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