Electronic Messages Are Taming the Paper Tiger : Data Exchange by Computer Plows Deeply Into Blizzard of Office Memos

Paper is being supplanted by electronic pulses in a communications revolution that is sweeping through corporate offices and factories across the country.

The upheaval, which will intensify in the next three years, is expected to change the way companies order equipment, pay bills and do business with their subsidiaries and franchises. It will also change the way the government deals with contractors and taxpayers and bring about yet another evaluation of the nature of clerical work.

All this is being made possible by electronic data interchange, the high-speed transmission, reception, processing and storage of critical information, using computers and telephone lines.

To some extent, 3,500 companies in various industries now use EDI, according to EDI’s trade group, the Electronic Data Interchange Assn. in Washington. About 10,500 companies, most of them large, will have EDI in 1991, according to the association, which represents 275 companies using the system.

Paper reduction and the possible loss of thousands of clerical jobs are the byproducts of EDI. The system’s key objective is to cut operating costs by improving the efficiency and accuracy of business communications.

EDI, or some form of it, has been in development since the 1970s, according to Nicole V. Willenz, manager of EDI systems for Price Waterhouse, a Big Eight accounting firm based in Chicago. But corporate interest in the new communications process began to take hold only in the last two years, according to Willenz in a recent Price Waterhouse report.

General Motors Corp. was among those to take an interest. Working with its computer-services subsidiary, Electronic Data Systems Corp., the auto maker is using computers to order supplies in many of its assembly plants and to pay bills in 17 of its 30 operating divisions.

Ultimately, GM hopes to eliminate the 300,000 paper checks it sends out every month to nearly 6,000 suppliers, said Roger J. Cadaret, who oversees the project for GM. But Cadaret said he could not give a specific timetable for reaching that point.

Nor is it easy to assign specific cost savings to the company’s move toward EDI, he said.

“EDI changes the way you do business so drastically, it gets so deeply penetrated into your operations, it’s almost impossible to make cost comparisons (between the EDI way and the paper route),” Cadaret said.

But the Automotive Industry Action Group, an ad hoc coalition of auto makers and suppliers formed to push for the standardization of EDI systems, estimated that domestic car companies could save $200 per car by sending information electronically in all of their operations.

The industry now wastes $2 billion annually handling paper bills and invoices, filling out order forms and documenting supplier charges, the car group said.

The automakers are not the only ones saving money by avoiding paper. According to the Price Waterhouse report:

- The Treasury Department saved $60 million in postage expenses in 1986 by eliminating the mailing of paper checks and implementing electronic fund transfers. Savings for 1987 and 1988 are expected to be higher because of increases in postal rates, although exact figures are not yet available.

- Douglas Aircraft Co. is slashing up to $5 per transaction from the cost of handling purchase orders by going to an EDI system.

- First National Bank of Chicago is working on an EDI supply ordering system that could save the company $2 million a year.

- The grocery industry, one of the heaviest users of EDI technology for purchasing and direct store delivery, estimated that it is saving $300 million annually using electronic information transfers.

- Both the U.S. Postal Service and the Department of Defense are working on EDI systems that they say will save their operations, and taxpayers, millions of dollars in yearly costs.

EDI saves money by reducing most work related to the preparation and filing of paper involved in business, said Janet Madigan, spokeswoman for the EDI association.