How is EDI used in Logistics?

Posted by Brooke Lester on May 4, 2022 2:16 PM

How is EDI Used In Logistics

Electronic Data Interchange has been a critical technology in logistics operations for decades. Businesses playing numerous roles in the logistics value chain use EDI solutions to exchange data and documents digitally instead of relying on traditional, time-consuming paper-based processes.

EDI comes with several irrefutable benefits for logistics companies.  According to research, firms can shave off as much as 70% of their document processing costs by adopting EDI solutions. In addition, some estimates suggest that EDI can improve customer delivery time by 30%, translating into substantial customer satisfaction and market share gains.

Furthermore, EDI solutions can do much more than facilitate B2B document sharing thanks to rapid technological advancements. As a result, EDI has gained even deeper inroads in logistics, becoming a must-have for modern-day logistics firms.

We answered questions about EDI's importance in logistics operations in recent articles. Today, we shall discuss the history of EDI for logistics and transportation, how current businesses are benefiting, and what the future possibly holds for logistics EDI.


The History of EDI

EDI was first introduced to logistics in the early 1960s when a DuPont logistics officer, Edward A. Guilbert, developed a standardized electronic messaging system to send messages between DuPont and Chemical Leaman Tank Lines.

Before this system, DuPont was grappling with mountains of paper, which used to move from one place to another through a cumbersome transportation network. The paper trail and the manual processing that accompanied it caused countless errors and delays.

In 1965, the Holland-America steamship line created its electronic messaging standard, triggering widespread EDI adoption among shipping lines, railroads, and trucking companies. However, increased EDI usage undermined interoperability due to format differences between trading partners.

So, the Transportation Data Coordinating Committee (TDCC) was established in 1968 to develop EDI standard formats for oceanic shipping companies, trucking companies, railroads, and airlines.

Although it took until the early 1990s for EDI to gain mainstream logistics integration, the protocol was a critical facilitator of early globalization. For example, logistics firms no longer had to rely on slow postal services to send documents around the world. Instead, they could use EDI for instant long-distance communication in the pre-Internet era.

Today, EDI has evolved into the primary channel for logistics and transportation companies to share documents like purchase orders, invoices, and shipping notifications.

Some industry watchers believe that even with the proliferation of digital technology, EDI will remain the principle B2B transaction channel for several years to come.

The Role of EDI in Freight and Logistics

Some of the world's biggest logistics firms, including DHL, UPS, FedEx, and Maersk Line, harness EDI to unlock benefits like:

  • Faster, streamlined communications
  • Lower operating costs
  • Reduced document processing errors
  • Better utilization of human resources
  • Increased transaction security

Faster, streamlined communications

EDI helps logistics companies communicate with their trading partners in real-time. Instead of relying on faxes or phone calls, firms can use EDI to send and receive messages instantly within and beyond their walls.

Lower operating costs

EDI helps logistics companies save money by reducing the data management expenses associated with paperwork. Instead of relying on data clerks and postal services, transporters can use EDI to communicate cost-effectively through the Internet.

Reduced document processing errors

EDI helps logistics companies reduce errors associated with manual processing. Instead of asking staff to process and reconcile documents manually, firms can use EDI for automated tracking and tracing of transactions at every stage in the supply chain.

Better utilization of human resources

EDI helps logistics companies increase productivity by freeing staff time spent on document processing. Rather than assigning employees to do repetitive activities like preparing purchase orders and invoices and correcting errors, companies can automate the tasks with EDI, leaving more staff free to focus on other value-adding projects.

Increased transaction security

EDI helps logistics companies protect their data by avoiding the risk of unauthorized access via Internet-connected computers. EDI is regarded as a more secure option than traditional e-commerce transactions, which typically require the use of credit cards and logins, and passwords.

The Future of EDI in Logistics

The COVID-19 pandemic and trade complications have exacerbated the need for innovative IT solutions, particularly for the logistics sector.  According to a DDC report, over 41% of industry leaders re-evaluated their digital transformation priorities to enforce better business transactions, enhance integration, stay competitive, and adapt to the next generation supply chain.

However, the same study revealed that, despite EDI's prevalence, most logistics firms only use EDI to manage transactions between trading partners. Most respondents cited regulatory compliance concerns as the main barrier to widespread digital disruption in logistics.

Meanwhile, the Internet is more prevalent today than ever before, and enterprises are becoming increasingly tech-savvy. Realizing this potential, IPaaS solution providers are hard at work developing resources that could theoretically become worthy alternatives to EDI.

Nevertheless, EDI still has immense value in logistics. So far, EDI has stayed ahead because of its ability to get the job done, and more importantly, continuously adapt to industry requirements. With businesses increasingly expecting more from their B2B transaction channels and blockchain, IoT, and AI emerging to support more innovation, the EDI scene is set to become even more exciting down the road.

EDI Integration is Key for Logistics Firms

EDI has made a massive impact on logistics. By simplifying supply chain communications, EDI solutions have rewarded companies with superior visibility and control, resulting in higher profits and sustainable growth.

As with many technologies, EDI does not come in a one-size-fits-all package. Therefore, if you consider deploying or updating EDI infrastructure, it is crucial to choose the software that meets your specific needs. The ideal EDI platform must provide an integrated approach to your entire enterprise system, offering increased visibility into operations while improving customer service.

The complexity of EDI systems and transactions makes it critical to choose the right solution and keep it optimized at all times. As a result, many in the transportation industry rely on third-party specialists to implement and manage their EDI capabilities for guaranteed business success.

Remedi has been active in EDI since 1994, helping companies across various industries take full advantage of EDI integration solutions.

Contact a Remedi expert today and learn how we can help guide your integration journey and implement the EDI options your business needs for maximum results.