EDI Freight & Shipping Guide: How it All Works

To keep the freight industry running smoothly, it's essential to maintain and update specific data regularly. Fortunately, the EDI freight system offers a solution to automate the entire process, eliminating the need for manual intervention. By collecting the necessary data, this system not only saves valuable time but also conserves resources. Continue reading to gain a deeper understanding of EDI and its potential to enhance your freight and shipping business.

Imagine the ease of having your business's shipping-related data digitally managed and stored, eliminating the need to carry important documents and the constant fear of losing them. You've come to the right place, because while many companies dream of such a solution, Cleo brings it to reality.

In today's digital era, paper-based documents have been replaced by electronic formats, and the shipping industry is no exception. Enter the hero: the EDI shipping system. It grants you instant access to all the documents you need for your shipping processes, right at your fingertips. But what exactly is EDI and how does it work? Let's find out.

What is EDI freight & shipping?

Simply put, EDI (also known as Electronic Data Interchange), is the exchange of vital business documents between two parties (company systems). In the freight and shipping industry, it mandates a standard electronic format that enables freight forwarders and shippers to effortlessly secure and manage EDI documents, including:

• Purchase orders
• Bill of lading
• Shipping status updates
• Warehouse details
• Shipping specifics and notices
• Inventory records
• Customs documents
• Payment information
• Invoices

This innovative EDI system swiftly generates and transfers the necessary documents directly to the recipient's system, eliminating the need for manual involvement. As a result, the data transfer process becomes faster, easier, more efficient, and completely error-free.

How does EDI work?

EDI, short for Electronic Data Interchange, operates through specialized software designed to gather the necessary data. It employs text files for data exchange and has become one of the most widely used technologies for communication and data transfer. By utilizing standardized electronic formats, computer systems effortlessly process the information. To grasp a visual understanding of the EDI system, let's consider an example.

Instead of printing business documents and then mailing, emailing, or faxing them to trading partners, you'll create and send this information via EDI. Generally speaking, sending EDI documents involves three steps: document preparation, document translation, and document transmission.

Imagine you're purchasing bulk fabric from a vendor. To initiate the process, you need to submit a purchase order. Here's a breakdown of the steps involved:

Step 1: Entering

Initially, you manually input the data through a series of screens for the given EDI message. Some typical data sources to export for the EDI document may include:

• Computer network information
• Electronic reports reformatted into data files
• Enhance an existing application that automates file creation, making the information promptly available for EDI transfer
• Employ an application equipped with built-in EDI interfaces for EDI files

Step 2: Sending

Next, your EDI translation software will transform the data. This is preceded by EDI mapping to define how your internal data correlates to the EDI data.

• Send the data through translator software, which converts the information into a standard EDI format
• Alternatively, outsource the data translation to an EDI provider

Step 3: Connecting

These are the most common options to set up a reliable connection to the trading partner.

• Establish a direct AS2 connection through a secure Internet protocol
• Connect via an EDI VAN or network provider who uses an agreed-upon protocol to link you and your vendor
• Utilize a combination of the above two methods

Seems like a lot to manage, right? We understand, but fortunately, you don't have to handle it all on your own. With Cleo, you can consolidate all your container and shipment documents in one convenient location. Digitizing your logistics not only saves you time but also alleviates concerns. Curious about how Cleo can help you streamline your freight and shipping processes, saving you both time and money?

Example of EDI in the shipping industry

EDI solutions ensure access is limited to pre-defined authorized users, making it the safest method for data transmission. In the shipping industry, businesses can efficiently send vast quantities of documents with a single transfer using EDI software.

In the maritime industry, numerous parties are involved, such as shippers, shipping lines, consignees, port authorities, customs, and more. Regardless of your position in the supply chain, you engage in communication with multiple companies, each serving a specific purpose. Throughout an operation, a multitude of messages, documents, and data are shared.

Let's go into an example to comprehend the utilization of EDI in the shipping industry.

Company A sends a purchase order (PO) to Company B. Upon receiving the PO, Company B's system automatically generates a sales order through the integrated EDI software. This seamless process digitally acknowledges the buyer's requirements in a timely manner, thanks to the EDI integration. The communication between the two companies becomes near instantaneous, showcasing the responsiveness of Company B and ultimately enhancing their trading relationship.

Curious about the benefits of integrating your freight and shipping EDI with Cleo? You can explore it further by jumping right into it now.

Automate any type of EDI freight document

Your trading partners use different chain visibility software platforms and have unique format requirements for EDI documents like the EDI 210 freight invoice. That's not a problem for modern automated EDI solutions. Here are some common EDI freight order codes that freight and shipping industries can't live without:

• EDI 107: Request for Motor Carrier Rate Proposal
• EDI 110: Air Freight Details and Invoice
• EDI 163: Transportation Appointment Schedule Information
• EDI 211: Motor Carrier Bill of Lading
• EDI 215: Motor Carrier Pick-up Manifest
• EDI 219: Logistics Service Request

Explore more EDI freight order codes.

The advantages of using EDI shipping

There are numerous benefits associated with implementing Electronic Data Interchange (EDI) in logistics. It plays a crucial role in optimizing workflows and ensuring swift response times. Furthermore, adopting EDI technology enables businesses to handle increased operational activities with fewer human resources.

Let's delve into the advantages to gain a better understanding of how EDI can enhance your business.

Faster and error-free processing:

By replacing manual data entry and traditional paperwork, EDI significantly reduces the chances of errors. Integrating EDI into your operations leads to faster and more efficient documentation and data processing. In addition, EDI standards ensure information is correctly formatted before it's transferred.

Automated data entry:

Digitization brings automation to various processes, and the same applies to EDI. EDI data (i.e., names, addresses, part numbers, and quantities) into backend applications is tediously time-consuming. Utilizing EDI software allows for automatic data entry, encompassing data validation and receipt verification. This automation includes EDI mapping procedures and minimizes errors to ensure reliable digital communication.

Real-time information:

EDI has revolutionized the shipping industry by providing access to real-time EDI visibility. This feature helps eliminate delays in transmitting data and documents. Thereby being able to handle all EDI SLAs with care for your trading relationships. As an inherently technology-driven process, EDI facilitates seamless tracking of important documents, streamlines data management, and keeps information up to date.

Integrated communications system:

EDI enables the establishment of an integrated communication system for all shipping operations. This unified backbone ensures traceability and facilitates integrated transactions, including purchase orders, order receipts, invoices, pending payments, and more. EDI integration allows for the processing of large transaction volumes between companies without requiring human intervention or necessitating internal process changes.

Resources & Environmental friendliness:

One of the notable advantages of EDI is its positive impact on the environment. By significantly reducing the need for paper, EDI eliminates approximately 99.99% of the paperwork traditionally involved in business operations. This environmentally conscious approach saves costs associated with:

• Purchasing paper
• Postal services
• Document storage
• Document loss-proofs

Additionally, it contributes to improved customer service.

Improved customer service:

Implementing a systematic process like EDI enhances efficiency and accuracy, resulting in improved customer service. When customers observe businesses utilizing EDI, they gain confidence in the reliability and quality of service. Enhanced customer satisfaction can expand the customer base.

Strengthened trading partner relations:

EDI enables instant communication with trading partners. Unlike paper-based documentation, which often involves time-consuming processes, the digital format of EDI fosters swift and efficient communication. This, in turn, boosts overall business efficiency.

Are you interested in learning more about how EDI integration with Cleo can benefit your business? Click on the banner below, and our experts will guide you through the process.

The disadvantages of using EDI shipping

Efficient supply chains depend on EDI solutions to streamline complicated processes and make it easier to manage voluminous transactions within the trading partner ecosystem. However, implementing and getting the most out of freight EDI can be challenging, especially if you're increasing your capabilities or going through a period of fast growth. 

Here are five challenges you'll have to overcome for success.

Selective EDI can be constraining

Many traditional EDI systems limit the integration ability of a business, constraining them to rigid processes, and slower growth. While internal EDI systems can be perfect for certain organizations with fewer partners and channels, successful businesses need to explore more robust solutions that offer the EDI tools for any integration endeavor, on any business level.

EDI can be time-consuming

It can be both time-consuming to build and use an EDI-capable system.

Firstly, setting up an internal EDI solution is often either expensive, time-consuming, or both. It often requires a dedicated internal team to effectively manage EDI capabilities, which may operate independently from IT departments. While EDI experts ensure the smooth functioning of your EDI system, many businesses lack the necessary budget or resources to train individuals for specific roles. As a result, it becomes challenging for companies to fully utilize the benefits of EDI.

Secondly, EDI systems do not provide a guaranteed timeframe for transmissions. Despite streamlining information exchange between companies, it can still be time-consuming. Transmissions may typically take 15 to 240 minutes, which can be a significant drawback, for fast, agile businesses, particularly when immediate access to information is crucial.

EDI scalability

Your trading partners may have different EDI transaction sets despite sharing a standard protocol. For instance, an EDI purchase order will vary by industry and trading partner. You'll need to be able to accommodate these variations when you add new partners to your ecosystem. Here's how to ensure you're prepared to scale:

• Implement EDI software that supports unlimited business rules and document types
• Use a modern EDI integration software that integrates EDI transactions with your ERP system

EDI network complexity

As your supply chain grows, so does your EDI partner network. That means more stakeholders, more data, more formats and standards to consider, and a greater need for security. Automated EDI solutions can manage this complexity by connecting seamlessly with new partners, fostering strong relationships, limiting errors, and speeding the delivery of goods and services.

Transparency

It's important to keep your finger on the operational pulse of the supply chain to succeed in modern logistics. But differing data standards, applications, and systems are becoming increasingly complex. Which makes it very difficult to create accurate data visibility. Lack of EDI visibility threatens strategic efficiency, productivity, cost containment, and partner satisfaction.

A modern EDI monitoring platform can provide end-to-end integration, business process automation, and real-time operational transparency, allowing you to drive impactful outcomes and respond quickly to challenges across the trading ecosystem.

Bad data

Inaccurate, non-conforming, and duplicative data costs the average organization $15 million per year, wreaking havoc on every aspect of a business. Those who make enterprise data management a strategic priority can make business decisions confidently.    

Still, bad data can sneak its way into the supply chain and cause erroneous transactions. While earlier EDI formats such as IMP and EDIFACT couldn't proactively identify bad data, modern EDI solutions can. As the first line of defense, they provide an encrypted environment with restricted access to support the secure data exchange between partners. In addition, their audit trail capabilities inform stakeholders and partners about faulty data before it impacts the ERP system or supply chain.

Rising costs

Conventional EDI implementations have high upfront and ongoing maintenance costs. In addition, special IT expertise is needed to handle business transactions, which increases the load on teams that are already notoriously spread thin. 

Modern EDI solutions require less overhead because supply chain ecosystem transactions are processed in the cloud. And because they streamline the documentation process, it's easier for partners to comply with EDI standards and avoid fines due to SLA violations and other performance gaps. 

Without EDI freight, the logistics industry would still use antiquated or paper-based processes to manage operations, from product warehousing and distribution to billing. 

We're going to explore the role of EDI in freight and why a modern EDI freight solution is crucial for keeping and staying ahead. 

But before we do that, let's do a quick review:

EDI freight dates back to the early '60s when DuPont and Chemical Leaman Tank Lines first used it to exchange cargo information. Since then, between 59 and 85% of logistic companies have adopted the technology, cementing EDI's crucial role in the supply chain.

Here's a high-level example of EDI today. 

Imagine a hotel chain intends to purchase 1000 new mattresses. The process begins with sending a Purchase Order to the wholesale supplier:

• The wholesale supplier sends an inventory inquiry to their warehouse or manufacturer.
• The wholesale supplier generates an EDI freight invoice.
• The wholesale supplier engages its third-party logistics partner to fill, ship, and deliver the order.
• The third-party logistics partner sends a quote request to multiple carriers to get the best rate.
• Multiple carriers submit delivery quotes to the third-party logistics partner.
• The third-party logistics partner accepts one quote.

Unfortunately, there's a complication. There isn't enough product on hand at the US warehouse. And since the manufacturer is overseas, there are additional steps related to customs and international shipping (i.e., EDI freight forwarding) to facilitate the order.  

Without an advanced EDI freight solution, each step of this process would be manual, complicated, slow, and susceptible to errors. With a modern EDI system, these steps occur automatically, and often simultaneously. It's even simpler if you insist your trading partners adhere to EDI certification guidelines. 

What is EDI in Freight?

Freight plays a crucial role in the supply chain, ensuring goods get from point A to point B intact and as quickly as possible. EDI allows freight businesses to easily manage all aspects of the warehousing, distribution, and billing processes while avoiding the pitfalls of manual processes and human error.

How EDI Freight Works

Here are a couple of examples demonstrating how EDI has transformed freight.

In the past, a warehouse manager would have to review a printed bill of lading containing information that may have been entered manually. Any number of things could happen, data was inaccurate.

Using EDI, a warehouse manager can scan a single bar code to generate the necessary shipping requirements for 50 pallets of frozen vegetables as well as information for invoicing the recipient. This automatic, electronic process streamlines communication, conserves employee resources, protects the goods being shipped, and speeds delivery.  

Another example involves the scheduling of pickups. Before EDI, shippers exchanged pertinent information with a carrier over the phone, email, or fax, which could lead to mistakes. For instance, the shipper could make a transposition error when relaying the pickup address (i.e., 2455 Main St. instead of 4255 Main St.). While the delivery driver could resolve the issue by calling their dispatcher, they may have to reschedule the pickup, costing both parties time, money, and reputational damage. 

An EDI 317 Delivery/Pickup Order eliminates the potential for these mistakes, providing pickup information automatically in a standardized format. 

Explore more ways EDI supports Logistics.

Automate Your EDI Freight & Shipping with Fully Integrated EDI

The graphic below demonstrates how the Cleo Integration Cloud blends disparate systems and requirements, seamlessly blending into your shipping and logistics environment. 

Your EDI freight management software directs a JSON file of real-time shipment updates to Cleo, which transforms the file into your required format. Cleo then directs that data to your backend application (TMS, ERP, etc.), where necessary data gets added to the file. Finally, Cleo will automatically convert that internal file into the relevant EDI file to send to the shipper, in this case, an EDI 214 Transportation Carrier Shipment Status Message.

Choosing the Right EDI Freight Solution

Seamless integration with your trading partners is a key component of being an agile organization. Read more about how to choose the right edi platform.

If your freight and shipping EDI doesn't provide fluid integration with your trading partners, we'd like to introduce you to the Cleo Integration Cloud interface, which fully connects your freight and shipping ecosystem.

        
Too Good To Be True?

Don't listen to us; hear what successful EDI freight and shipping customers have achieved since partnering with Cleo. 

• Allen Lund Scored a 20X Connection Increase in 5 Years
• CTIS Global can process over 5 Million Transactions Every Day
• Mohawk Global Logistics Cut EDI Costs by $60K a Year
• Savage connects effortlessly with its 300-Plus Locations