EDI: Enabling Efficiency and Precision in the Supply Chain
Last updated on June 30th, 2023 at 12:28 pm
In the modern-day business world, streamlining logistics processes are pivotal for the success of commerce businesses. EDI, or Electronic Data Interchange, is an electronic format for transferring business information between computer systems. EDI allows businesses to exchange information such as purchase orders, shipping notices, invoices, and other documents without the use of human intervention.
EDI provides several key benefits in the facilitation of efficient business transactions.
Speed and Accuracy: By employing EDI, business cycles can be accelerated by over 60%. Rather than enduring days or weeks of waiting time through traditional postal services, transactions can now be exchanged within minutes. EDI significantly enhances data quality, resulting in a substantial reduction of 30-40% in error-prone transactions caused by illegible handwriting, lost faxes or mail, as well as keying and re-keying mistakes.
Document Exchange: EDI allows various business documents to be exchanged electronically. These documents can be transmitted directly between the computer systems of trading partners, eliminating the use of paper-based and manual processes.
Standardization: in EDI, business documents use standardized formats such as ANSI X12, EDIFACT, or XML ensuring consistency and uniformity in data formats, making it easier for trading partners to exchange, ingest and process the information accurately. These systems can map data from the sender’s format to the receiver’s format and vice versa.
Cost Savings: EDI can lower transaction costs by at least 35%. By getting rid of the need for paper-based documents, manual entries, and their related processing costs, EDI helps businesses reduce operational expenses, improve supply chain efficiency, and increase overall productivity. For instance, a major electronics manufacturer calculates the cost of processing an order manually at $38 compared to just $1.35 for an order processed using EDI
How EDI is Utilized in Logistics
Using an EDI system allows companies to automate slow manual processes such as human data entry and traditional manual communication methods, allowing businesses to gain the speed needed to keep up with increasing purchase orders.
When a customer purchases an order, the order data is used within an EDI system to create a warehouse shipping order. This then gets sent to the warehouse who now knows it is time to get the products packed and shipped. The logistics provider’s EDI system would then start the fulfillment process. The system uses the existing purchase order to generate an EDI 945, which confirms the shipment of the order.
During the fulfillment process, organizations continue exchanging EDI transaction sets with buyers and other trading partners to “request and provide information as products move through the supply chain.”
Benefits of using EDI in Logistics Management
In logistics, EDI plays a vital role in multiple aspects.
- Order Processing: When a buyer places an order, the data is electronically transferred to the supplier using EDI. The order information is sent in a standardized format that can be integrated into the recipient’s systems which reduces errors and speeds up the order processing cycle.
- Shipment Tracking: EDI allows time tracking and tracing of shipments throughout the logistics process. Transport information such as carrier information, pickup requests, and delivery notifications can be exchanged electronically between the shipper and carrier which advances supply chain efficiency and allows faster and more active management of any delays or problems.
- Inventory Management: When it comes to inventory, EDI plays a crucial role in maintaining up-to-date inventory records. When products are either shipped or received, trading partners are informed to update inventory levels which then allows improved inventory planning, a reduction in overstocking and ensures time respected replenishment based on demand.
Case Study: EDI dramatically reduces onboarding time for a transportation company
Heartland Logistics, an organization that provides bulk transportation and shipping services to agricultural companies, spent way too much time developing integrations which ended up delaying the company’s ability to gain revenue. Before the company started using an EDI company, it took as long as 6 months to get a new trading partner. After using it, that time reduced to as little as 5 days.
Heartland Logistics process of addressing EDI problems had gotten much easier using the EDI platform. If a problem were to occur, Heartland’s IT team would receive a real-time notification that explains the issue and the solution in detail. John Kuhlmann, President of Heartland Logistics Group, says that in the past they had no idea why certain transactions would fail, but with the help of EDI, they now know why the transaction failed and how it can be fixed.
Future advances in EDI Technology within Logistics
IBM says that the true future lies in the use of B2B integration and disruptive technologies such as blockchain and AI to “deliver innovative levels of multi-party supply chain collaboration.”
EDI will continue advancing in real-time tracking and visibility which could involve integrating with IoT devices and sensors placed in cargo that could track location, temperature and humidity among others. \With enhanced visibility, there will be more accurate delivery estimates and improved supply chain planning.
Artificial Intelligence (AI) technology has the potential to “revolutionize” logistics by automating processes and advancing decision making. EDI systems could use AI technology to predict demand patterns, optimize routing, and automate routine tasks.