Electronic data interchange is a must-have for logistics companies. EDI makes trade with commerce partners fast and efficient by using standardized formats and accompanying logistics forms while saving money and boosting information accuracy. The technology, which can be best thought of as a language that enables easy communication between at least two computer systems, is in use by almost all large retailers, so for your logistics firm to do business with these companies, you must also utilize EDI.
While the benefits of EDI for logistics are numerous, there are some caveats. These include high initial costs and the need for constant maintenance by trained professionals. However, the limitations are easily overcome when you engage a third-party EDI provider.
Standards
EDI is used by logistics firms worldwide, but the formats used vary by country, continent, and industry. A standardized format lets all parties involved in a transaction know which information goes where on each logistics document.
Without an agreed-upon format, each party's documentation type would likely differ, allowing crucial information to appear missing when it is simply in another location "unseen" by the EDI system. This seemingly absent data would cause work and shipping stoppages, requiring human intervention and resulting in delays all along the supply chain. That would cost revenue and customers.
When choosing the standard your company will use for its EDI transactions, your logistics firm should ensure that the major players with which you plan to do business use the same one. For example, the most common EDI standard used by companies in the U.S. and Canada is ASC X12. Developed by the American National Standards Institute over four decades ago, it is updated every three to five years.
Other frequently used EDI standards are:
Logistics forms
Trading partners use shipping and logistics forms (commonly called transactions) to gather and transmit relevant information about shipments. Transactions include order documents, shipment confirmations, receipts, receipt confirmations, inventory adjustments, stock statuses and more. Their layout differs from standard to standard, which is why knowing the in-use standards of your trading partners is so critical.
Because it is one of the most common EDI formats in the world, X12 has among the most-used EDI transaction sets in use globally. These include:
Why use EDI and its transaction sets for logistics? The perks are numerous and compelling from a business standpoint. Some of the most significant benefits are:
1. Lower operating costs
EDI also helps keep you in the black owing to its automation of what were previously manually done tasks. Without repetitive, time-consuming work such as data entry on forms, employees find themselves freed up to do other, higher-level work that generates revenue.
2. Improve business cycle speeds
The sooner a product is shipped and received by the customer, the better for all entities involved. That's why reducing the time between order and delivery is critical for a logistics company to stand out in the market. EDI speeds up business cycles considerably because of its process automation, which cuts inefficiencies everywhere.
3. Reduce human error and improve record accuracy
With less human intervention comes less human error. When you employ EDI, your company's error rate will take a nosedive -- while your accuracy skyrockets.
4. Increase business efficiency
With the automation of repetitive, often dull tasks, such as data entry, your company can experience huge gains in team efficiency (not to mention an increase in employee satisfaction rates). For example, workers are no longer required to fill in numerous individual fields for each purchase record or order. Instead, with EDI, a business can automatically generate and send such forms.
5. Enhance transaction security
Using EDI in lieu of paper-based systems also increases the security of your and your customer's data. This is because it employs various security standards and communications protocols that paper-based systems cannot match.
6. Improve compliance
As mentioned previously, almost all large retailers use EDI. So for compliance purposes, your logistics company will need to use EDI, too. In addition, adopting EDI standards used by desired or potential trading partners makes them aware that your company has to know how to keep trade moving at a fast, efficient clip.
Increase customer satisfaction: Happy customers are generally returning customers -- and buyers who refer others to your business. With EDI's shorter wait times and more accurate orders, your company is far more likely to have and keep such clients.
Of course, no technological implementation is without its drawbacks. For EDI, while the benefits greatly outweigh any difficulties in its implementation and use, challenges include the following:
High perceived upfront costs: While EDI can (and does) save companies significant spending down the line, its implementation can be pricey. Much of this is owed to hardware and software and the redevelopment of currently used applications to work with EDI.
Time-consuming initial setup: EDI is not a quick, turnkey solution. Owing to its bespoke nature, it can take weeks to implement, and numerous variables are involved, including the formats used by a company's trading partners. The developer must take into account each of these.
Too many standards: Because multiple EDI standards are in use today, smaller companies may use a standard that is incompatible with the standard(s) used by larger potential trading partners, blocking them from doing business with these bigger companies.
Costly system protection: EDI requires additional security systems to protect its data. This protection includes but is not limited to malware, hacking and virus prevention measures.
Data backups and maintenance: Using EDI in your logistics business means regular maintenance and updates and troubleshooting any problems that may arise. During routine system upkeep, your company will also require backup, which is an additional expense.
The above list of downsides is not exhaustive, and it is little wonder that some logistics companies struggle with the decision to implement EDI. However, there is a solution: outsourcing your EDI needs to a trusted third party. This is a company that will provide you with a cloud-based or SaaS service you won’t need to purchase or house onsite. Once hired, the company takes on the full responsibility of EDI service set-up, maintenance and repair, including operating systems, translation software, maintenance contracts, and mapping.
Let Remedi be your trusted third-party EDI provider. When you use our services, you can rest assured you are getting experience and excellence – when you need it. Leave the hiring of skilled professionals and the expense of purchasing and housing bulky EDI-related hardware to us. With Remedi as your partner, you get the best of both worlds: best-in-class EDI support and a lean operation.
In the meantime, you can review some recent EDI for Logistics use cases to learn how Remedi has helped other long-haul and rail carriers, ports authorities and other logistics firms be more efficient and position themselves for growth.