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Posts Tagged ‘EDI’

Doing more with less.  That’s what most customers are trying to do when they ask about EDI.  Increasing business velocity… new supply chain channels (that often skip traditional pieces, like retailers)… and the desire to use their existing accounting and supply chain tools to do more – automatically.

Historically, manufacturing was one of the key sweet spots for EDI (electronic data interchange).  Over the years, three types of document were most common: purchase orders, ASNs (Advanced Shipping Notices) and invoices.

Today, the range has been extended.  Payment orders, remittance advice, warehouse shipping orders, file transfers, freight manifests and lots of other data now changes hands between supplier and customer automatically, with relatively little human intervention.  And as long as nothing changes, EDI is pretty much hands-off, once up and running.  Today, companies are sharing more documents and data, with less staff, than ever before – mostly, because they have to.

eRetailers (Amazon, Wayfair, etc.) have helped change the rules as goods move from manufacturer or distributor to customer without ever passing through a retailer.

So who’s doing EDI?  According to a survey conducted done in 2015 and 2016 of readers of MSDynamicsWorld, about half were already EDI users or customers, and among those, about one-fourth used legacy commercial systems, another one-third used a “custom” solution, and over 40% had already begun using more modern commercial EDI systems, which are now commonly available to run with most accounting and ERP systems on the market today.

Given the explosion in users and document types, EDI clients all face similar challenges, and survey respondents cited the most common as…

  • Customizations: the most polarizing issue. Nearly 80% of users had some sort of customizations, with about 20% describing “extensive” mods.  Most cited “business rules validation” as the main contributor, especially when those “rules” change frequently.  Others noted the need for modifications driven by new features powered by their underlying ERP/accounting systems.  While survey respondents reported preferring fully “out-of-the-box” solutions, they acknowledged that customizations are often needed.
  • The second most-cited challenge was “error handling,” followed by “managing transaction levels” (i.e., we keep getting busier…).
  • Onboarding new trading partners was cited as a challenge, as were the challenges of educating personnel in EDI usage.
  • Managing support and service costs is always a challenge when volume is predicated on external factors, as is the case with EDI, and transaction costs are always an irritant, especially when audits reveal their sizable investment here.

Perhaps the most important takeaways: legacy systems are becoming a thing of the past as leaner and more flexible EDI solutions become available, and those “home grown” solutions are freighted with an awful lot of excess baggage in terms of costs and maintenance requirements.

As the technology has evolved, more companies than ever before are choosing to adopt commercially available standalone EDI systems that they can integrate with their existing accounting and order processing software.  And as the costs of doing so decline, along with the need for customization levels, the trend is expected only to continue.

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ediMassachusetts based software company RedTail Solutions is a long-time provider of EDI solutions.  Recently they published a paper (which you can download here) entitled “Implementing EDI for the First Time” that provides some simple steps to getting started and engaging your organization for an EDI implementation.

Electronic Data Interchange (EDI) is simply a common set of technology protocols between companies that enables electronic interfacing with many of your suppliers, vendors or customers.  It’s a common way to transmit forms and data including purchase orders, sales orders, shipping notices and other common business documents.

Following are a few of their key points on Getting Started, and then, on Engaging Your Organization for an EDI deployment:

Getting Started: Planning, Red Tail notes, is as always essential.  Some of your own internal processes will be changed along the way.  Here’s what to do in your planning stage:

  • Define which trading partners to implement and in what sequence
  • Identify trading partner contacts, resources and required documents
  • Summarize results of your implementation discovery process with your EDI provider
  • Outline integration requirements for your EDI/ERP system, including custom tailoring
  • Define roles for functional teams and management
  • Describe roles for internal/external tech resources
  • Establish timelines and milestones.

Engaging Your Organization: EDI will change how some of your staff (sales, accounting, order fulfillment) will work.  Communication is critical in this stage.  Functional teams and management should work together to present:

  • Why are we using EDI?
    • (Labor/error reduction; improved ROI from ERP; support business growth; as a platform for other ROI like Warehouse Management (WMS), etc.)
  • How the quote-to-cash (or at least, order-to-cash) process will change post-EDI
  • What steps and sequences will we need to follow for EDI?
  • How much time will it take?
  • How will each team member be involved?

Red Tail’s report goes on to talk about installation… activating and maintaining trading relationships… being a good supplier… and managing change in your organization.  You can see the full report, linked above, for the rest of their advice on EDI implementation.

 

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Our firm’s recent implementation of a complex EDI system for a large Tier One automotive supplier sparked the idea for a few comments about the subject of electronic data interchange.

EDI has been around for many years, since the 80’s at least.  It’s a mature and fast way of transmitting data, like purchase orders, shipping notices and invoices between trading partners.  While prevalent in major industries like automotive, it’s a technology that’s deployed at a wide variety of firms.  Its use in smaller firms is usually driven by demand from higher end trading partners (think Walmart) and others who demand a formalized structure for exchanging standard, common data or ‘forms’ between firms.

While some thought EDI might have faded by today, given the emergence of technologies like XML, the fact is, it’s here, its use is actually growing, and it’s here to stay for a good while.  There are some self-evident reasons for this:

EDI is mature.  It’s cheap and it works.  It ubiquitous, in that it’s been an e-commerce standard for a decade or more.  It’s not industry-specific – it has application across multiple industries and geographies.  And it’s network independent, running across value added networks and dial-up protocols and today’s internet standards.

Moreover, EDI has some clear benefits to its users:

It lowers overall transaction costs – considerably.  It’s incredibly fast, and once it’s working, it just keeps working – meaning, you can process a lot more orders (purchase or sales, as just two examples).  You can integrate it with your MRP to determine future requirements (shameless plug: Just ask us!).  It reduces lead times and can help reduce inventory levels when used as an aid in forecasting (see previous point).  It eliminates paper and document re-keying.  It upgrades the quality of your relationship with your trading partners.  And more often than not, it gives you a competitive edge.

Today EDI is found across the business spectrum from retail to automotive, and across the globe.  And it’s being fine-tuned today for the internet, where those who use it can do more, with less.

We’ve talked in more depth about the fundamentals of EDI here and here in the past.  You owe it to yourself to check into it.  It’s just one more arrow in the quiver of your improved productivity. 

 

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In our prior post we touched briefly on the challenges IT departments have in the sometimes conflicting standards, or more often, the demanding standards, of large customers.  Put simply, if Walmart says ‘we communicate purchase orders this way and you will too’ your choice is basically to sell to them, and adhere to their standard, or not sell to them at all.  Ditto for most of the large automotive suppliers, and other large entities. 

However, there is a foundation for standards in the EDI (Electronic Data Interchange) world that can at least begin to get you in the game.  If you’re a smaller firm looking to do business with a larger customer, it’s a game you want to play.

Essentially, to electronically transfer data from one point to another requires agreement in advance on a number of parameters.  Some, like the medium and transport protocol, or the encryption and data formats, must be agreed upon by trading partners in advance.  In practice, there are certain de facto standards.  The aforementioned Walmart requires something called the AS2 protocol.  Such protocols control and govern things like encryption and various session parameter controls.

Early EDI documents were designed to be small, because communications transmission over serial lines was slow.  This could lead to confusion if the details of a transaction were too terse.  Did the client who ordered 10 boxes of widgets intend 10 boxes of 10 widgets, or maybe 10 cases of 100 each?  A lot of testing, agreeing and re-testing were required to get it right.

Today’s systems feature faster transmission and more extensive language (or grammar) capabilities, through the use of the emerging standard called XML, for Extensible Markup Language.  The result of XML use has become more detailed and generally less ambiguous trading documents.

There are two major sanctioned bodies for setting these standards.  In North America it’s ANSI (American National Standards Institute), specifically a sub-group knows as the ASC X12 committee.  Edifact is the United Nations’ sanctioned governing body for EDI standards, which creates the standards largely outside the U.S.  The two often co-develop to eliminate confusion and redundancy, not to mention, standards conflicts.

But a challenge inherent in XML is the fact that it is, by its very name, extensible.  “Standards often form only the base of a company’s or public entity’s usage,” notes Art Wittmann of Information Week magazine.  “Unique extensions are often developed for good reason, buy they require unique support.”

Other entities are emerging whose standards overlap the existing ones, such as GS1 (formerly, the UCC, of bar code fame), who specialize in supply chain management.  Worse, or better depending on your point of view, sub-groups are emerging for specific industries like the chemical, pharmaceutical and energy industries, specific to their sometimes unique needs or grammar.

The key is to understand the standards of your industry, customers and suppliers, and fall in line with their conventions.  Talk to your customers and suppliers about their needs and protocols.  From there, your software supplier should be able to move you into the actual execution of EDI document routing for your firm and your needs, through your suppliers and customers. 

It’s just one more cost-effective way of aligning technology with your business goals.

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Data sharing between companies is big and becoming bigger.  It starts with something called EDI – Electronic Data Interchange.  We’ll cover a few basics in our next couple of posts.

In a recent article in the June 21 issue of InfoWeek, author Michael Healey notes that… “If you talk with many companies they’ll say EDI and other standards don’t give them enough options and aren’t very deep.  They’re simply wrong.”

Truth is, EDI is a mainstay of mid-size to larger companies, and its benefits can have value to almost any organization.  EDI standards aren’t just for invoicing or manufacturing any more.  ANSI (the accrediting standards body for most things electronic) standards exist for more than 300 categories across finance, healthcare, retail, manufacturing and even professional services.

These standards describe a format for communicating data electronically from one entity to another – say from your supplier to you, or you to your customer.  Order flow is the common example, but stretch that a bit and you can have everything from student loan applications to personal credit reports, or from appointment confirmations to patient records.

Today’s EDI is evolving to standards like XML (eXtensible Markup Language) among others to spur more extensive use of electronic data exchange.  These are the logical evolution of earlier EDI standards updated to a more open world. 

Of course, that openness has led to some conflict.  When you compare prices using the web, you find that Amazon, Google and most government systems don’t follow anybody’s standards for product information.  That means you have to create feeds to those vendors separately, with different field requirements and rules often defined on a case-by-case basis. 

A vendor that’s big enough can make you adapt to the way they do business.  But then, we already knew that: Think WalMart.  IT departments are simply going to have to adapt.  As Healey points out “there’s no way Google’s going to make it easier for a company to publish prices on Google by pulling from a competitor’s search site.  It’s the No. 1 destination, and Google wants to keep it that way.”

Still, efficient data sharing is one of the single best things a company today can do – not just to cut costs, but to ensure growth.  IT simply has to plan for it.

Today’s biggest sources of data interchange are, not surprisingly (1) Initial orders (2) Shipment status, tracking and invoicing (3) Order status and (4) Quotes. 

We find these to be a natural in today’s automated and increasingly Internet-driven business environment. 

Are you planning for it?

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