Modern EDI: How Data Is Critical To Your Logistics Needs

The goal of modern EDI is to make the business of managing transportation and logistics smoother and easier for everyone in the supply chain – including shippers.

Through standardization, integration, automation, and simplification, EDI (Electronic Data Interchange) has become the lifeblood of the logistics industry, and something you might want to be aware of if you’re shipping products.

What is Modern EDI?

Modern EDI is a protocol that allows two systems to connect with one another for the purpose of exchanging data electronically.

Developed in the early 1960’s, this EDI protocol was first used to send shipment information between the Du Pont company and Chemical Leahman Tank Lines.

Later in 1982, other large companies like Ford and GM realized the potential benefits and began requiring their suppliers transfer information through EDI. Within a decade EDI was being used by roughly 12,000 businesses.

Since then, their numbers have continued to grow as businesses capitalized on the efficiencies gained by exchanging information through this secure channel.

How Does EDI Work?

To understand the fundamentals of how EDI works, we must first understand the terminologies. According to EDI Basics, the following definitions apply:

• Standard format– Because EDI documents must be processed by computers rather than humans, a standard format must be used so that the computer will be able to read and understand the documents. A standard format describes what each piece of information is and in what format (e.g., integer, decimal, mm/dd/yy). Without a standard format, each company would send documents using its company-specific format and, much as an English-speaking person probably doesn’t understand Japanese, the receiver’s computer system doesn’t understand the company-specific format of the sender’s format.

  • There are several EDI standards in use today, including ANSI, EDIFACT, TRADACOMS, and ebXML. And, for each standard, there are many different versions, e.g., ANSI 5010 or EDIFACT version D12, Release A. When two businesses decide to exchange EDI documents, they must agree on the specific EDI standard and version.
  • Businesses typically use an EDI translator – either as in-house software or via an EDI service provider – to translate the EDI format so the data can be used by their internal applications and thus enable straight-through processing of documents.

• Business documents– These are any of the documents that are typically exchanged between businesses. The most common documents exchanged via EDI are purchase orders, invoices, and advance ship notices. But there are many, many others such as the bill of lading, customs documents, inventory documents, shipping status documents, and payment documents.

• Business partners– The exchange of EDI documents is typically between two different companies, referred to as business partners or trading partners. For example, Company A may buy goods from Company B. Company A sends orders to Company B. Company A and Company B are business partners.

• Computer-to-computer– EDI replaces postal mail, fax, and email. While email is also an electronic approach, the documents exchanged via email must still be handled by people rather than computers. Having people involved slows down the processing of the documents and also introduces the potential for a host of errors. Instead, EDI documents flow straight through to the appropriate application on the receiver’s computer (e.g., the Order Management System) and processing can begin immediately. A typical manual process involves lots of paper and people, the EDI process does not.

EDI for Logistics

Logistics companies rely on EDI data to simply get things done. From on-boarding a new trading partners, to customer communications, connecting and integrating EDI transport data across the supply chain is of the utmost importance.

Being able to scale quickly is what every logistics company wants to be able to do. Modernized EDI systems give organizations the control needed to do business with customers and trading partners around the planet.

These critical data exchanges are based on four key factors:

• standardization
• automation
• integration
• and simplification

Using this foundation, companies can send and receive electronic documents: Tradacoms, EANCOM, X12, EDIFACT, HIPAA, ODETTE, VDA, and much more.

Modern EDI provides the capability to accommodate and leverage all of these communication standards quickly and efficiently across the entire logistics industry.

Moreover, every industry, from transportation and logistics to manufacturing and retail has its own recurring EDI transactions. And for the record, each EDI document transaction contains a certain amount of important data. Without it, the EDI document is practically useless.

EDI and Transportation

As transportation has evolved, Electronic Data Interchange has become a requirement in the transportation industry. Shippers, brokers and carriers all try to integrate and exchange information as fast as possible.

With logistics blooming and escalating to millions of transactions, EDI enables the exchange of invoices, remittances, shipping manifests, BOLs, and shipping statuses.

The major benefits of EDI in transportation is in reduced manual tasks, decreases costs, and the eduction human error.

Transportation Related EDI Examples

The Downsides of Modern EDI

For one, EDI communication is always one-way; information is sent from system A to system B without confirmation in the transaction set. To confirm reception, system B would have to send a transaction back to system A.

The second major disadvantage of EDI is that, due to network issues, transmission delivery times can be unpredictable. In other words, transmissions can take anywhere from fifteen minutes to four hours.

This can be a major deterrent to EDI in an age where time is money, and information needs to be exchanged immediately.