October 2011 | Commentary | IT Matters

Building Operational Excellence Through EDI

Tags: Electronic Data Interchange (EDI)

Chad Collins is vice president of marketing and strategy, HighJump Software, 952-947-4088

While many companies leverage EDI (electronic data interchange) to comply with trading partner requirements, few take advantage of EDI to drive operational excellence. Limiting EDI use to fundamental transactions, such as purchase orders and invoices, leaves money on the table and misses an opportunity to strengthen customer service and overall competitiveness.

Companies achieve the greatest operational excellence gains by expanding EDI across a broad spectrum of transactions and integrating it with a warehouse management system to create visibility through the supply chain. Supply chain benefits of EDI usage include:

  1. Enhanced visibility. EDI can enable a sharper understanding of your supply chain to reduce inventory carrying costs. You can stock only what you need.
  2. Reduced labor costs. Companies using EDI for advanced shipping notices (ASNs) can save up to 40 percent of labor costs associated with inbound processing.
  3. Minimized freight costs. Using EDI in concert with a transportation management system can minimize transport expenses while maintaining high service levels through load consolidation and mode selection.
  4. Improved customer service. Customers, suppliers, and regulators benefit from the seamless flow of critical business information among partners.

Increasing Shipment Visibility

Import regulations change often and continually require more data to be captured and reported. For example, Customs and Border Protection's Importer Security Filing initiative, commonly known as 10+2, requires importers and vessel operating carriers to provide additional advance trade data. Companies can leverage this data to increase inbound supply chain visibility.

The 10+2 rules require importers to provide Carrier Status Messages, which are used to track the physical movement of cargo containers as they travel through the supply chain. This information is also useful to importers and end customers, because it helps them forecast delivery dates and make better shipping decisions if a delay occurs in the import process.

Given the benefits, why don't more companies fully leverage EDI for ASNs? The main reason is that ASNs are complex, highly customized transactions that can be difficult to implement because the EDI system must keep track of all trading partner specifications.

Another reason is geography. Although many companies source products from Asia, many suppliers in the region have limited EDI infrastructure.

Promoting EDI Adoption

What can be done to increase EDI adoption? First, retailers can keep specifications as simple as possible. If they limit ASNs to capture only the most critical information, their trading partners will have an easier time complying, and EDI adoption will increase.

In addition, it is helpful to deploy a supplier management portal as part of your EDI system. This tool will help you share electronic documents with lower-volume suppliers who do not have EDI capabilities. To drive the most value for all parties, EDI should be a two-way street.

Whether you are looking to plan your labor more effectively, identify cross-docking opportunities, or simply make better use of your space, EDI can help accomplish these goals. It is a valuable tool that is often overlooked or misunderstood.