Electronic Data Interchange in Transportation and Logistics

In a global scenario, export and import volume continues to grow in all sectors. In the world market, products find buyers by being sent to different places from where they are produced. Through the development of communication and logistics, a product manufactured thousands of kilometers away can be competitive compared to other products in the country.  Therefore, companies need a comprehensive plan that includes the supply chain and logistics phase in order to operate in the international market.

Companies with a structured and complex logistics strategy need to improve operational efficiency, increase visibility of their supply chains and strengthen customer relationships. To achieve this, companies must first have the appropriate EDI software. To achieve this, companies need to have the appropriate EDI software. Simple tasks such as stock management, transportation management, invoice payments or order processing have suddenly become easier tasks thanks to EDI in logistics. The logistics industry is no exception when it comes to using EDI as a standard for electronic transactions between businesses.

What is EDI?

Electronic data interchange (EDI) is the transmission of business documents between companies in a standardized format. In other words, EDI enables business-to-business (b2b) data transfer. From load tendering to advanced shipment notifications, EDI facilitates the seamless exchange of information between suppliers, shippers, and carriers, ensuring timely and accurate delivery of goods.

EDI (Electronic Data Interchange) can be said to be a standardized electronic form used to replace manual, paper-based documents such as purchase orders or invoices. By automating paper-based processes, organizations can save time and eliminate errors from manual processes that are costly to correct. With EDI transactions, information is transferred directly from a computer application in one organization to a computer application in another organization. The location and order of information in the document form is determined by EDI standards. This automated capability allows for rapid data sharing that would take hours, days or weeks using paper documents or other methods.

To learn more about EDI and the differences between EDI and API, consider reading our blog post “Knowing the Differences Between EDI and API

EDI for Logistics Operations

EDI technology is indispensable in the logistics industry and supply chain today. This is because it can help transform a logistics business from complex and disorganized to modern and efficient. It allows sending companies to systematically manage their warehouses, shipments, financial data and business processes. The use of EDI in logistics automatically invoices without the need to manually enter data. Use of EDI reduces the cost for users to create and send payment notes and shipping information.

It is necessary to ensure the perfect harmony of all connections in order to establish a strong communication between the parties in the supply chain. It is important to establish immediate, secure and efficient communication regarding information and data as well as physical communication between the sender and the recipient when importing and exporting a product. EDI makes more efficient relationships between actors in the chain. It facilitates the sending and receiving of any business or administrative document securely, quickly and fluently, and with full integration into trading partners’ internal management systems.

As members of the logistics chain use EDI technology, they will take control of the entire process. An export company should work with EDI solutions and it is appropriate that their partners do the same as this will increase the benefits of the system. EDI technology is especially necessary for overseas exports for logistics operators who have to manage their shipping ports and customs etc.

Prebuilt SAP EDI Integrations

How does EDI Work in Transport and Logistics?

A typical shipping EDI process steps are as follows:

  • The supplier sends a request for quotation via EDI to the shipping company when a retailer submits a purchase order to the supplier.
  • The shipper sends a quote response with a quote to the supplier.
  • Suppliers confirm the shipping details after they accept the purchase order and send a “freight tender” to the shipper providing detailed collection and delivery information for the freight.
  • The shipper enters the freight tender in the system and responds to the supplier with the approval or rejection of the delivery and delivery date information.
  • The shippers send a shipping company status message that allows them to deliver advanced shipment notification to the customer after they receives the shipment from the suppliers.
  • The carrier’s system generates a “shipping details note” and “invoice” when delivery is complete and sends it to the supplier when everything is checked. The EDI system matches this information with the information conveyed in the purchase order and the offer, and automatically pays the invoice.

As can be seen in the example above, there are many moving parts in a single logistics process and a huge amount of data must be transmitted at each stage. The need for data re-keying is completely eliminated with EDI and the probability of errors in data is reduced. In addition, most of the processes can be automated by integrating EDI with all relevant business systems, significantly reducing reporting time and increasing overall supply chain visibility.

Thus, EDI is not only facilitates the electronic transmission of business documents, but also reduces costs, eliminates manual errors and increases productivity. In addition, there are frequent changes in import regulations at the local and international levels. These kinds of changes require processing and reporting of large amounts of data made much faster and more securely with EDI.

Uninterrupted communication electronically established between all trading partners in the network minimizes the risk of human error to transport brokers and increases the efficiency of their operations. Thus, the service quality increases.

Why Should You Use EDI in Logistic and Transportation Industry?

EDI replaces mail, fax and e-mail, allowing data to be processed electronically. It can transfer the document directly to the appropriate application on the recipient’s computer and begin processing immediately. The exchange of EDI documents is usually between two different companies, referred to as business partners or trading partners. As documents are processed electronically, a standard format must be used so that the computer can read and understand the transmitted documents. A standard format defines what each piece of information in its content is and in what format.

As we mentioned earlier, logistics organizations rely on EDI to get things done simply. Scaling up quickly is what every logistics company in the world wants to do. Modernized EDI systems give organizations the control they need to run business with customers and trading partners. These critical data exchanges between businesses must be standardized and automated. It is extremely important to contact and integrate EDI transmission data in a multi-enterprise supply chain. Streamlined technology allows a company to expand its presence through seamless commerce and integration.

Why Using EDI is Critical in Logistics and Transportation?

EDI implementation provides substantial tangible benefits for every user in the logistics chain:

  • EDI solutions provides automation of internal management processes such as creating, sending, recording electronic transactions and interacting with ERP systems for the processing of orders, delivery notes and electronic invoices without human intervention.
  • It minimizes errors in management by automating the creation and sending of commercial messages.
  • Electronic information interchange through EDI uses a standardized language that is structured and shared by senders and recipients.
  • Through the using of a common language, different information systems can interact with each other without technical problems.
  • EDI systems improve product traceability so the responsible person always knows the condition of the item. Users can verify incoming information and quickly resolve potential incidents.
  • It provides real-time information that can prevent delays in the processes related to shipment and receipt of products and ensures their transport to the warehouse.
  • It integrates all operations in the same communication flow by sea, land or air for the logistics operator.
  • It makes it easy to ensure safe administrative procedures in customs administration.
  • It helps to plan the transportation chain. It ensures that stocks are well controlled when it comes to perishable products for the distributors.

After this information, you may want to learn about integration in businesses. At this point, MIP comes to play as an IPaaS tool to help you build your integration in simple and efficient ways.

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