Using EDI in Supply Chain Management

Electronic Data Interchange (EDI) is arguably the most disruptive technology in global supply chains. Since its advent in supply chains, EDI has significantly accelerated business growth and improved customer experience by delivering a quick, accurate, and uninterrupted flow of information between trading partners.

Today, with the COVID-19 pandemic severely disrupting business landscapes, supply chain EDI integration is more critical than ever. Companies must leverage advanced EDI solutions to enhance communication and respond effectively to supply chain upheavals.

Successful supply chain EDI integration starts with a comprehensive understanding of EDI's role in supply chain management. In this article, we discuss EDI-SCM at length, detailing its past and present, its benefits to enterprises, and the trends shaping its future.

Defining EDI in Supply Chain

EDI enables the system-to-system exchange of enterprise documents between trading partners. It allows a company to send and receive data electronically in a standardized format. That way, trading businesses can avoid manual, paper-based, and error-prone transactions and instead transact in an entirely digitized ecosystem.

In today's increasingly digitized business world, all supply-chain-centric enterprises, even those that do not primarily rely on EDI data exchange, encounter EDI in one way or the other.

EDI is the language that unites all participants in supply chains and enables businesses to provide better, more transparent services.

So, the supply chain system comprises a small number of SMEs or a large pool of regional and global players, EDI can give an organisation the capabilities needed to create a well-integrated ecosystem. With EDI, an organisation can streamline the supply chain by automating processes, eliminating inefficiencies, and collaborating more effectively with partners.

How Does Modern EDI Integration Support Supply Chain Management?

EDI's primary contribution to B2B integration is automation through standardized digital data transfer. Because EDI transactions are created using standard formats, a business does not need to translate any received documents before processing them.

By automating B2B transactions, EDI standards refine supply chain operations in several remarkable ways. Some of these improvements include: 1. Faster Document Processing

When used to facilitate B2B integration, EDI eliminates manual documentation and unnecessary translations. As a result, transactions are completed faster and at greater volumes, speeding up payments and improving cash flow.

2. Fewer Errors

EDI automates and standardizes transactions along the supply chain, reducing the risk of human error and miscommunication. As a result, enterprises can save huge sums of money in avoided damage control measures.

3. Time And Monetary Savings

Automating supply chain data transfer helps trading partners avoid tedious, resource-heavy processes and lower operational costs. Switching to EDI speeds up supply chain processes like ordering and purchasing, leaving personnel free to handle more business-critical tasks. Adopting EDI-based paperless transactions also eliminates the costs of storage, securing, and manually verifying documents.

4. Enhanced Inventory Management

By standardizing transactions, EDI integration improves transparency throughout the supply chain. Consequently, enterprises can quickly know their partners' inventory status and proactively respond to shortages. Moreover, quicker document processing through EDI enables suppliers to restock faster, minimizing the probability of stock-outs.

5. Reinforced Partner Relations

EDI streamlines not just transactions but all forms of B2B communications. Seamless interaction results in higher efficiency and better responses to supply chain disruptions. As a result, sales cycles are shortened, orders are quickly confirmed, and payments are made without delay, benefiting all the trading partners involved.

Furthermore, EDI's global connectivity capabilities open an enterprise to a broader network of trading partners, providing more supplier alternatives and strengthening supply chain resilience.

6. Better Customer Experience

Streamlining partner interaction with EDI translates to faster product fulfillment, enhanced order accuracy, and fewer out-of-stock occurrences. These impacts all contribute to a better end-customer experience and higher retention rates.

7. Sustainable Practices

Supply chain EDI integration eliminates paper documents in numerous B2B data transfer processes. Therefore, trading partners can contribute to saving trees and reducing the waste generated by paper manufacturing.

8. Competitive Advantage

Collectively, faster, error-free, and cost-effective transactions, enhanced inventory management, reinforced partner relations, better customer experience, and sustainable practices make EDI a solid strategy for gaining a competitive edge in today's cut-throat markets.

EDI Trends in Supply Chain Management

From outdated IT systems to data silos, many obstacles undermine the modern-day enterprise's potential to operate at its maximum capacity. Fortunately, businesses are turning their fortunes around by using EDI integration to realize more value from their supply chains.

By considering current technologies and trends driving EDI advancements, these forward-looking enterprises are:

Improving order-to-cash and procure-to-pay operations

Hitting critical supply chain KPIs

Enhancing visibility in fulfillment and delivery processes

Improving application connectivity for end-to-end data management

Reliably meeting partners and customers' SLAs

Reducing chargebacks and data non-compliance fines

Here are three key trends permeating EDI integration in supply chain management workflows and how enterprises are addressing them to realize the benefits above.

Trend 1 EDI and API are Coming Together

Application Programming Interfaces (APIs) are considered prime adversaries of EDI solutions for good reason. When used in business settings, APIs offer communication flexibility, enabling teams and departments to exchange data with on-premises and cloud-based apps seamlessly.

However, standalone API implementations have notable shortcomings when deployed for B2B integration. For starters, while API and web services work with familiar protocols, they are not standardized at an industry level. APIs also have limited compatibility with legacy technologies, which are still widely used today. An enterprise looking to implement API for supply chain data exchange would have to overhaul its existing infrastructure and convince its trading partners to do the same.

Nevertheless, when introduced to an EDI framework, APIs can be beneficial to supply chains. API solutions can be effective additional channels for B2B information exchange between trading partners with compatible systems.

As APIs continue taking hold in business settings, it makes sense to invest in supporting both EDI and API-based processes. With this approach, your integration platform can accommodate everything from legacy EDI transactions to SaaS applications and cloud-based platforms.

Trend 2 IT Skills are Evolving

Recent digital advancements have led to a spike in demand for highly skilled professionals. Today, people who are adequately trained and capable of handling end-to-end EDI integration are exceedingly rare and valuable.

29% of businesses lack the skills they need to deploy and manage systems, applications, and partner integrations.- Business Wire Press.

Complicating things even further is the rapidly evolving EDI ecosystem, which requires that professionals continuously update their skills to remain relevant. For instance, traditional EDI analyst roles are transforming into business analyst roles, which entail working less on technical EDI data mapping and configuring requirements and more on analyzing overall business trends and developing strategies for enhanced business outcomes. Outsourcing has emerged as a viable alternative to the increasingly acute EDI skill shortage. By partnering with external solution providers and consultants, you can reduce costs and benefit from a coverage level beyond what you can achieve in-house.

Trend 3 E-Commerce is Redefining Trading Partner Expectations

The growth of e-commerce has led to some noteworthy changes in global supply chain processes. While e-commerce initially gained momentum as the ideal channel for retailers looking to expand their customer base, today's leading platforms widely accommodate B2B transactions.

Consequently, some of the rules that apply to online B2C selling are increasingly finding their way into B2B interactions. For example, like e-commerce customers, many businesses demand that their online partners provide more choices, competitive pricing, fast shipping, real-time tracking, mobile support, and personalized shopping experiences.

Therefore, as enterprises in B2B segments venture into e-commerce platforms, they need systems that can enhance integration with their online trading partners. With EDI, you can maintain a wellintegrated supply chain and give your partners the full benefits of shopping online.

Current Challenges for Supply Chain EDI Integration

EDI is a critical enabler of B2B data transfer and transactions and will remain in this role for years to come. However, implementing, using, and maintaining EDI technologies continues to be a challenge for businesses, particularly small and medium-sized enterprises, whose resources are limited, and focus is higher on short-term growth than long-term ROI.

A recent CGS survey highlighted the hurdles below as the most significant challenges for EDI integration.

1. Difficulties Finding Skilled, Qualified EDI Personnel

According to the CGS survey, the lack of skilled, qualified IT professionals is one of the most significant reasons many businesses do not succeed in EDI integration. More often than not, companies with inadequate in-house skills do not have ownership of the integration project.

Therefore, if an issue arises, such as an incorrect field value, teams are left without a clear path forward, resulting in costly delays.

This challenge can be complicated to address, but the best move is to consult an EDI specialist and leverage their expertise to deploy your system and recruit and train the personnel to manage it. You can also opt to fully outsource EDI implementation and management and free up your internal team for more strategic tasks.

2. High EDI Integration Costs

Getting your enterprise EDI ready requires considerable financial resources. Even after the platform is up and running, businesses typically need to invest in a dedicated, EDI-capable team to manage and update it continuously. Growing data volumes and increasingly sophisticated security requirements also result in additional costs.

To manage EDI costs, you may want to consider alternative options for handling EDI transactions. For instance, outsourcing to a vendor that can manage the transactions in the cloud can be more cost-effective than investing in full-fledged on-premises infrastructure.

3. Varying Partner Formats and Asynchronous updates

Although EDI's key purpose is to standardize transactions, EDI formats usually vary from one industry to another. EDIFACT, TRADACOMS, ANSI ASC X12, VDA, and UBL are the most prevalent, but other forms also exist to fulfill the needs of various sectors.

Businesses with a widely-spread supply chain occasionally encounter partners using formats their systems cannot understand. In this case, a data integration solution is needed to map information from sent documents and translate it into a compatible format.

a) With reference to the article examine the role of EDI in supply chain management.. (6)

b) Examine how EDI benefits supply chain management. (8)

c) Elaborate on the future developments of EDI and how this will benefit the SCM function. (10)

d) Determine the challenges with supply chain integration. (16)