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NET GAINS

The Internet's high speed, low cost and interoperability have already made it a potent force in on-line retailing to consumers. These same attributes are also encouraging many retailers and wholesalers to enhance and streamline their business-to-business communications by using this medium.One of the biggest questions on distributors' minds, however, is the fate of electronic data interchange as the

The Internet's high speed, low cost and interoperability have already made it a potent force in on-line retailing to consumers. These same attributes are also encouraging many retailers and wholesalers to enhance and streamline their business-to-business communications by using this medium.

One of the biggest questions on distributors' minds, however, is the fate of electronic data interchange as the Internet's power continues to evolve. Companies that have already made significant investments in EDI systems may be reluctant to abandon this medium, even for one offering lower costs and increased functionality.

Many industry experts see EDI and the Internet being gradually combined. Indeed, the Internet may be the key to bringing EDI's benefits to smaller companies that have not had the resources to use it before.

Like the Internet itself, ideas about its business-to-business uses are changing rapidly. "A lot of companies are still struggling with how they are going to use the Internet," said Bob Drury, vice president of management information systems for Schnuck Markets, St. Louis. "But some are pretty secure in it."

Schnuck is using the Internet for business-to-business functions with one of its suppliers, Earthgrains, St. Louis. Schnuck uses software developed by a third-party software company to take files from traditional EDI functions and transmit them via the Internet.

"The software enables us to take existing investments previously done through EDI and use the Internet, as opposed to private lines or value-added networks," said Drury. "The files stay the same but the transaction is different, which is good. Now we don't have to engage a bunch of new software."

Schnuck began testing the exchange with Earthgrains last month. "[The software] has worked very well for us," Drury said.

Few retailers believe the transition will happen overnight. Bill Homa, chief information officer of Hannaford Bros., Scarborough, Maine, believes it will take a while for major players to move from EDI to the Internet.

"Most [large companies] have been using EDI for years, and it really works," said Homa. "I don't see the major players shifting their volume from where it is to the Internet any time soon."

"It's an evolutionary step," said Drury. "Naturally, any radical change involves an enormous amount of risk. You can't do it overnight and expect people to change."

Drury believes many companies will be attracted both by the Internet's lower costs and its expanded functions. "The Internet is so flexible," he said. "You can send EDI, e-mail, audio and visual events. It's the first time we've had this type of medium."

Almost every retailer who spoke with SN agrees that using the Internet for business-to-business purposes will benefit smaller companies that cannot afford the start-up costs associated with EDI use.

"It opens up a whole new area for the smaller businesses that could not afford the proprietary costs [of EDI] in the past," Homa said.

Most retailers and wholesalers said they believe the convergence of EDI's standards with the Internet's reach is the direction the industry is headed.

"Is the Internet the way of the future?" asked Greg Zwanziger, director of electronic commerce for Supervalu, Minneapolis. "Yes. Does that mean traditional EDI is going away? Probably not. Instead, we are seeing a marriage of the two."

One aspect of the linkage is the development of UCC Net, a pilot program sponsored by the Uniform Code Council, Dayton, Ohio, to establish a common platform for an industry extranet. The goal of UCC Net is to develop a secure, Internet-based pipeline for companies to communicate and conduct business transactions.

In addition, developers expect the link to act as an electronic marketplace for retailers, manufacturers and trading partners to communicate and conduct business over the Internet.

"UCC Net right now is in the development stages," said Zwanziger. In addition to Supervalu, Wegmans Food Markets, Rochester, N.Y.; Kroger Co., Cincinnati; Ralston Purina Co., St. Louis; Procter & Gamble, Cincinnati; and Frito-Lay, Plano, Texas, are involved in the UCC Net pilot. The companies plan to begin testing the connection and transmitting data among themselves by May.

Distributors told SN that one of the biggest concerns about use of the Internet for business communications, the security of transmissions, transactions and proprietary documents, has been largely addressed via the application of new technologies.

"While it was an issue a couple of years ago," encryption technologies have become so advanced that sending files through the Internet to a trading partner can be one of the safest ways of sending information, Zwanziger said.