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EDI – The Key Solution for Your Supply Chain

Nowadays, organizations must handle the flow of goods and services from suppliers to customers efficiently in order to remain competitive. This includes operations such as inventory management, order processing and shipping.

EDI (electronic data interchange), is one of the most widely used supply chain digitization solutions, playing a crucial role in optimizing supply chain processes by providing real-time visibility into processes, bringing multiple benefits to companies including efficiency improvements and cost reductions.

Definition of EDI in the supply chain

The implementation of EDI in the supply chain can automate various processes, such as:

  • Order to cash
  • Facilitating communication between buyers and suppliers through the electronic exchange of purchase orders, invoices and other relevant documents

This automation improves:

  • Efficiency by reducing manual data entry errors and eliminating the need for paper-based processes
  • Real-time tracking of shipments
  • Timely delivery of orders 

EDI also brings multiple benefits to the production process, as it automates critical tasks, such as:

  • Monitoring inventory levels
  • Improving delivery times and production scheduling accuracy 

Furthermore, EDI integration with inventory management systems allows real-time monitoring of stock levels, enabling timely replenishment and minimizing shortages. Another example of optimization in the supply chain is distribution, where EDI helps automate shipments with logistics partners and subsequent tracking of deliveries, providing greater control over distribution operations and visibility, and improving supply chain efficiency.

How does EDI work in supply chain?

What distinguishes EDI from other data exchange systems is the standardization of documents exchanged, which is achieved through a common language following industry standards, (EDIFACT in the large-scale retail trade, ODETTE in the automotive sector, ASC X12, etc.).

As a result, it is possible to carry out all the transactions that usually take place between partners, by exchanging the following documents electronically: orders, transport documents, shipping notices, invoices, inventories, price lists, and many more.

With EDI, it is possible to exchange electronic documents in business relations between companies and customers, distributors, suppliers, logistics operators, public administration, etc. Initially used in the automotive industry, EDI systems are now widespread in many other sectors, such as retail, pharmacy, oil and gas, transport, tourism, manufacturing and healthcare.

You are in charge of everything in electronic data interchange (EDI), and you choose what information is transmitted. Many different types of data can be shared using EDI technologies.


 

Generally, sending supply chain EDI documents include three important stages.
First stage: Get the documents ready to send to the trading partners. The collection and categorization of the data you wish to convey is the first stage in implementing EDI. For instance, instead of printing a purchase order, your process creates a file with all the necessary information. 
Second stage: Map and translate, to convert the documents into an EDI format. In order to convert your internal data format into the supply chain EDI standard format, the next step is to submit your electronic information.
Third step: Send your business partner your translated EDI docs .Your business documents are ready to be delivered once a document has been converted into an appropriate EDI format, and the next stage is to decide how you will interact, meaning which channel to use with each of your partners in order to carry out that transmission.

EDI standards
The key to the development of EDI solutions, the primary driver of their adoption, and the reason why the technology is so widely employed is the use of standard EDI languages. An important element in the integration of the information systems of businesses involved in any kind of business relationship has been and continues to be the creation of universal standards for the creation of electronic documents that can be understood by any trading partner with the appropriate technology.

EDI standards come in various forms. Some have been spread across numerous sectors or geographical areas, while others have been established for particular industries. The following are some of the most popular EDI standards:

  • EDIFACT: Commonly used especially in Europe and in many industries, such as logistics and transportation, retail, healthcare and many more.
  • ODETTE and VDA: Common standards developed and used in the automotive industry between OEMs and suppliers in the automotive supply chain.
  • ANSI X12: a standard for the exchange of electronic documents used by North American companies in multiple Industries, and now spreading in other countries.
  • UBL: Universal Business Language (UBL) is based on an XML language, also used in many industries including finance, the public sector and others to exchange electronic messages between buyers and suppliers.
  • Compliance on e-invoicing: This is a key objective for many tax payersas e-invoicing is spreading and becoming mandatory in many countries. Sellers are or will be required to send invoices to customers, report e-invoices to local tax authorities’ systems, and meet legal requirements and standards for electronic invoice exchange.

The future of EDI in 
Companies seeking operational efficiency, cost savings, and client satisfaction should strategically integrate EDI into the supply chain management process. EDI integration optimizes the procurement, production, and distribution processes by automating crucial tasks, increasing productivity, reducing errors, and offering real-time visibility. Companies are at the forefront of supply chain optimization thanks to EDI integration, which enables businesses to thrive in a vibrant and cut-throat global economy. Apart from solutions tools such as ERP, supply chain management tools, warehouse and transport management systems, how will the future look for EDI in supply chain?

EDI will undoubtedly remain a crucial solution for many businesses. However, to enable cutting-edge levels of collaboration between all different supply chain parties, B2B integration with disruptive trend technologies such as AI or Blockchain and IOTs must be applied and advanced. Innovation in this respect is driven by Comarch

Author: Vince Cirillo 
Linkedin: https://www.linkedin.com/in/vince-cirillo-a3153771/ 
Biography: Vince leads global Data Exchange solutions at Comarch, drawing on his extensive experience in the supply chain and automotive industry in several countries. He has developed a passion for enabling digital business and supporting companies in enhancing their business processes through digital transformation.

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