EDI for Logistics: Everything You Need to Know

In today's fast-paced world, efficient logistics are essential for a successful business. Whether it's an online retailer or a physical store, delivering products to customers quickly and reliably is crucial. Unfortunately, traditional paper-based methods in logistics can be slow, error-prone, and inefficient. That's where Electronic Data Interchange (EDI) comes in as a revolutionary solution.

What is EDI in logistics?

Electronic Data Interchange (EDI) in logistics changes the way companies handle business documents. Instead of using paper, EDI allows businesses to share standard documents electronically, making things faster and easier. EDI cuts down on the time and money spent on manual entry and helps to reduce mistakes, ensuring information is shared accurately. With EDI, businesses get real-time updates and better visibility of the supply chain, which helps with tracking shipments, managing inventory, and processing orders more smoothly.

How Does EDI Work in Logistics?

An EDI system can help you streamline and speed up tedious processes such as data entry, issuing paper purchase orders, and communication via PDF and fax. This enables your business to gain important efficiency needed to compete with the ever-growing online market. Once a customer places an order, the business can extract the order details and EDI system products to construct EDI940 or Warehouse Shipping orders. This document is sent to the warehouse so they can prepare the items for shipment as soon as they are ready.

The logistics provider’s EDI system would then initiate an automatic process in response to the received document. The provider's system would combine data available in the existing order with EDI 940 information and data in the logistics provider’s ERP system to create a shipment order EDI 945 confirming the order’s shipment. The order is then fulfilled by the supplier or retailer’s EDI system that inputs the order details in the ERP system.

When it comes to orders, tracking information can be transmitted to the client that tells them when a package will be delivered. As a product passes through the supply chain, companies continuously exchange EDI transaction sets with the client, vendors and other business partners to gather and share relevant information throughout the order fulfillment cycle. By using logistic EDI, the integration of sales avenues and supply chain partners is simplified and the entire data transfer is modernized by getting rid of outdated business methods, such as formatting and documentation which reduces costs for your business clients.

EDI and Vendor Compliance in Logistics

EDI is key when it comes to upholding vendor compliance in logistics. EDI automation simplifies and organizes communication and business document flow, reinforcing supplier adherence to stringent and detailed demands to retailers or buying entities. By allowing the real-time, accurate and consistent exchange of data, EDI helps vendors ensure deliveries are on-time, packages are properly configured, and products are labeled without additional manual intervention.

Automatic EDI integration with vendors’ back-office systems (i.e. ERP systems) make sure orders, shipping notices and invoices are created and transmitted much quicker, all while reducing expensive errors and compliance infractions. EDI creates a clear audit trail, providing greater traceability and accountability, both critical to preventing costly compliance fines and reducing merchant-vendor friction. Ultimately, EDI allows for improved performance from vendors, greater administrative efficiency, avoidance of penalties’ risk all while contributing to a more efficient and reliable supply chain.

Common EDI Logistics Transaction Sets

EDI in logistics uses standardized transaction set to move data effortlessly between manufacturers, suppliers, 3rd party logistics (3PLs) providers and retailers. Here are some of the most widely used EDI logistics transaction sets.

1. EDI 940 (Warehouse Shipping Order): For directing a warehouse or 3PL service to select, package, and ship merchandise.

2. EDI 945 (Warehouse Shipping Advice): Sent from the warehouse or 3PL provider to notify that the shipment has been completed and sent out.

3. EDI 856 (Advance Shipping Notice): Gives detailed shipment information such as tracking details, expected delivery time, and packaging structure.

4. EDI 850 (Purchase Order): Used by buyers to place orders with suppliers and start the order procurement process.

5. EDI 855 (Purchase Order Acknowledgment): Sent by the supplier to acknowledge receipt of a purchase order and acceptance or change of order terms.

6. EDI 810 (Invoice): Along with being the most commonly used EDI document, EDI 810 is a digital version of an invoice that the supplier sends directly to a buyer to request payment.

7. EDI 210 (Freight Invoice): Sent by freight carriers to request payment from freight shippers for transportation services rendered.

8. EDI 204(Motor Carrier Load Tender): Used to tender a shipment to a carrier, including details such as shipment pickup and delivery location, weight, and freight class.

9. EDI 211 (Bill of Lading): It is the legally binding contract between the shipper and carrier that includes, among other things, a list of goods being shipped.

Benefits of EDI logistics

Regardless of the size of your business whether large, medium, or small EDI in logistics is a necessary solution for every entity participating in the supply chain. Here’s a rundown on some of the major benefits:

• Reduced Errors: Manual data entry in outdated logistics workflows creates an environment where mistakes are inevitable. EDI removes this challenge by automating exchange of data. That means less errors in purchase orders, invoices and shipping details, resulting in more efficient processes and more satisfied customers.
• Faster Processing Times: EDI improves the entire transaction processing cycle by ensuring the electronic exchange of data between trading partners is automated. Order processing times speed up with information moving electronically, removing cumbersome lag from manual processes such as faxing or emailing paperwork. This means both more timely fulfillment and faster response times to customer service questions.
• Lower Costs: Fewer mistakes and more efficient processing times result in a major reduction in operational costs. Companies see a significant reduction on re-work from errors, lost time from manual labor spent on data entry and gain better control of their inventory by having increased visibility.
• Increased Visibility: Real-time visibility through two-way data exchange is key feature of EDI. Businesses receive end-to-end visibility into thick inventory volumes, shipment addresses and order progress throughout the distribution chain. This increased transparency leads to smarter planning, better decisions on how much stock to keep on hand, and more proactive efforts to respond to expected interruptions.
• Good Customer Satisfaction: Greater Customer Satisfaction Increased processing times and decreased errors and greater visibility into shipments equals happier customers all around. Increasingly, customers are getting their orders delivered sooner and facing fewer problems caused by wayward data.
• Scalability: EDI solutions can be easily scaled to accommodate the growth of the business. This can be especially advantageous to businesses that are facing growing volumes of orders, or venturing into additional markets.
• Competitive Advantage: In a world moving at lightning speed, time is everything. Businesses that take advantage of EDI are able to expand their competitive moat by providing shorter order fulfillment cycles, greater order accuracy and enhanced communication to EDI-enabled business partners.

To learn more about how Infocon Systems can take care of your EDI needs, please don’t hesitate to give us a call at +1 888-339-0722 or email sales@infoconn.com. We’d love to hear from you.

FAQs

What is EDI in logistics?

EDI stands for Electronic Data Interchange. It's a system that lets companies send and receive business documents digitally, so they don't have to use paper anymore. This method uses a standard format for all the documents, which helps businesses communicate faster and more efficiently.

How does EDI improve logistics operations?

By using EDI, companies can improve their transaction processes, save time, and reduce errors that often come with handling paper documents.

What types of companies use EDI in logistics?

Freight carriers, third-party logistics (3PL) providers, warehouses, retailers, and manufacturers use EDI to streamline transactions.

Which EDI standards are used in logistics?

The most commonly used standards are ANSI X12 (North America) and EDIFACT (Europe & global trade).

What are the methods of EDI transmission?

EDI data can be transmitted via VAN (Value Added Network), AS2 (Applicability Statement 2), FTP/SFTP, or APIs/Web Services.