Electronic data interchange has been an efficiency booster for logistics companies everywhere for more than half a century. The technology, which is akin to an intercomputer language, allows data to move between trading partners directly and maintain compliance. In order to do this, EDI uses several standardized formats so the systems involved can easily 'read' the documentation being sent and received--saving time, hassle and expense for all involved. Read on to learn why EDI and the standards used are so crucial for logistics companies today.
What are EDI Standards in Logistics?
Worldwide, EDI utilizes several standardized formats to ensure that companies in business together can transmit and receive data quickly and accurately. By letting supply-chain players' computers know what is contained in each line of data, these formats allow computers to quickly register and understand the documents they receive. Lacking a common language, logistics companies might all use their own variations of the same documents, leading to confusion and shipping stoppages.
Common EDI Standards
The most common EDI standards used today are ASC X12, UN/EDIFACT, ODETTE, TRADACOMS, EANCOM, HIPAA and VDA. Because most of these standards are updated on a regular basis, many have multiple versions (i.e., EDIFACT version D12, Release B). Prior to beginning work together, logistics companies must determine which format they will use, as each standard uses its own set of documents.
The main standard used in North America is ASC X12. It was developed by the American National Standards Institute in the late 1970s with the aim of developing a universal format for EDI that would ease trading between partners. The ANSI revises X12 every three to five years and gives the latest version an updated name that includes the new version and release numbers.
In the 1980s, the United Nations developed a European standard for EDI transactions, the UN/EDIFACT. While it is used mainly by countries in Europe, American logistics firms with intercontinental business support UN/EDIFACT standards, too.
ODETTE (the Organization for Data Exchange by Tele Transmission in Europe) was developed as the EDI standard for the European automotive sector. Like the X12, it is continually updated. Its formats include the commonly used OFTP and OFTP2.0.
TRAding DAA COMmunicationS, usually referred to simply as TRADACOMS, is the primary standard for EDI logistics transactions within the United Kingdom. Created in the early 1980s, it is a precursor to UN/EDIFACT that was kept in use by GS1 UK (formerly the UK Article Numbering Association) following UN/EDIFACT's release.
EANCOM (Electronic Data Interchange for Administration, Commerce and Transport) is a subset of the UN/EDIFACT standard. Originally made for the European retail sector, it has since been adopted for use in the healthcare and construction industries as well.
The Health Insurance Portability and Accountability Act EDI document standard was developed following the 1996 passage of HIPAA legislation in the U.S. to aid health-care-related EDI transactions.
VDA, Verband der Automobilindustrie, is the German automotive-industry association. The VDA EDI, which has no naming conventions for its data elements, is the German automotive standard. It is used primarily by German auto manufacturers and suppliers.
Common EDI Logistics Transactions
All EDI logistics transactions contain crucial trade-related data in certain document locations, but the specifics differ between industries. Trading partners must adhere to the agreed-upon, sector-specific EDI standards that define the location of each data point on every document. All documents receive transaction numbers that enable logistics firms to consolidate their transport dealings and bolster order processing.
The most common EDI logistics transactions include:
- Air Shipment Information
- Motor Carrier Rate Proposal
- Air Freight Details and Invoice
Air shipment information
An EDI 104 is an Air Shipment Information transaction set that includes details about an air-carrier shipment. This information comprises cargo fees and transaction-charge totals. It can be used to convey shipment-related bill-of-lading and ration information.
Motor Carrier Rate Proposal
An EDI 106, a Motor Carrier Rate Proposal, is a transaction set used by a motor carrier to give rate proposals to another party in the supply chain, such as a shipper or receiver. These are of particular importance in the trucking industry.
Air Freight Details and Invoice
An Air Freight Details and Invoice transaction set, an EDI 110, is used to provide customers invoices containing itemized charges related to the air shipment of an order. This might include the original invoices, past-due bills, balance-due bills and any revisions.
EDI Standards Ensure Logistics Compliance
In many ways, EDI standards make the logistics world turn. One of the ways they do this is by helping ensure EDI compliance, or the completion of requirements set forth by trading partners to conduct business with them.
Almost all large retailers require EDI in their transactions with partners. Logistics companies that are not in compliance when it comes to EDI will be unable to implement the needed EDI solutions or utilize the suite of EDI documents used by the partner. Without these, the company risks losing the trust it has likely built up with the other entity as well as significant future revenue.
By adopting the EDI standards in use by trading partners, a logistics company lets possible partners know it has the know-how to conduct streamlined trade using industry-recognized and -approved technology. It also assures that it keeps the confidence it has instilled.
Barriers to EDI Implementation in Logistics
When considering EDI implementation, the main challenge logistics companies encounter is the need for a dedicated information technology team to do it. Once it's implemented, the company will also need the expertise and time of a tech team to run, troubleshoot and update its EDI communications with partners. All this can be daunting as a prospect to a mid-sized logistics firm, not to mention costly once undertaken.
An excellent solution is to outsource EDI operations with an off-site provider. Remedi has the staff with the specialized training needed to help logistics companies manage and monitor, 24/7, their EDI services. By outsourcing with Remedi, a company doesn't need to worry about purchasing expensive, bulky hardware, having (and paying for) the real estate to house it or fixing any problems that may arise. Remedi takes care of all of it.
Today, being EDI compliant is critical to the success of any logistics company hoping not just to scale, but to succeed in the marketplace. EDI makes transactions and communications that were once painstaking and time-consuming instantaneous and accurate, helping keep the supply chain running smoothly and customers happy.
Find out what EDI can do for your logistics business. Request a complimentary integration/EDI assessment today.