EDI for Manufacturing: Simplify Your Processes

EDI for Manufacturing Guide

Electronic data interchange is a critical component of today's manufacturing business process. EDI can accelerate production, reduce high labor and storage costs, and bring efficiency to all manufacturing business processes.

  1. How EDI Helps Manufacturers
  2. Benefits of EDI for Manufacturers
  3. Four EDI Documents Typically Used in Manufacturing
  4. The Fresh Approach to EDI Manufacturing
  5. Maintaining Manufacturing Business Continuity
  6. Manufacturers Need Modern EDI
  7. How to Get Started

EDI (Electronic Data Interchange) remains instrumental for exchanging documents within the manufacturing industry. Across a company’s digital ecosystem, from trading partners to customers, EDI is the de facto standard when it comes to purchase orders, invoices, shipment notices, and other common documents.

While manufacturers are far from the only industry to rely on EDI systems, it is fundamental for the manufacturing industry when communicating with trading partners. EDI software can enhance and streamline effective communication through automation, which frees up manufacturers to focus on more important tasks like product innovation, quality control, and customer service.

Here is everything you need to know about EDI in Manufacturing:

How EDI Helps Manufacturers

As a manufacturer, what if you could:

Because EDI transactions drive the supply chain forward across multiple industries, EDI for manufacturing is an essential tool for interacting with a complex ecosystem. Manufacturing companies must have the ability to perform modern EDI in order to effectively work with the various trading partners, including suppliers and vendors, customers, distributors, fulfillment organizations, and retailers,.

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Benefits of EDI for Manufacturers

EDI provides the reliable communications that manufacturers require. In fact, there are numerous benefits the manufacturing industry can gain from embracing and optimizing their EDI order processing. These include:

Additionally, legacy EDI systems and services, including EDI through a VAN, can get expensive due to transaction fees and leave numerous. Taking control of your EDI directly – and even outsourcing EDI as a managed service with a trusted vendor – allows manufacturing companies to regain control of their critical data exchanges, gain visibility into the processes, and stop worrying about the cost of fluctuating transaction volumes.

Four EDI Documents Typically Used in Manufacturing

So, what are some of the most common EDI transactions used within the manufacturing industry? Obviously, each company is going to have its own set of needs based on its ecosystem, but there are some recurring documents that will likely be used by most manufacturers. Here are four.

1. EDI 850 - Purchase Order

A purchase order (PO) is the most common EDI transaction set because it’s used when a customer buys something from a manufacturing company. Within the EDI purchase order, it contains information including which specific items were ordered as well as the quantity of the item to be manufactured. It also includes pricing information as well as shipping details.

2. EDI 997 - Functional Acknowledgment

An EDI functional acknowledgment (FA) is the document used when a vendor notifies a customer acknowledging that it successfully received a purchase order. It is a receipt that the EDI document was either received or rejected. This allows for customers to resubmit the document quickly if it was rejected, and it helps avoids any potential costly delay in processing.

3. EDI 855 - Purchase Order Acknowledgment

The Purchase Order Acknowledgement (POA) is an outbound EDI document that essentially confirms what was included within the purchase order. The manufacturing company is telling the customer that they received the PO, and they will in fact take the job. The POA confirms the order electronically and indicates whether it was rejected. Customers also can update their systems in order to make any changes to the document as needed.

4. EDI 856 - Advanced Shipping Notice

An EDI advanced shipping notice (ASN) alerts a customer when a manufacturer is shipping an order. Inside the advanced shipping, notice are details of the contents and packaging of a shipment, which includes carrier elements, quantity and item information, and tracking numbers for the package. This allows customers to more easily schedule inbound deliveries and reduce the time to receive shipments into inventory.

In the diagram below, you can see how Cleo Integration Cloud works in sending, receiving and transforming EDI documents for both front-end and back-end processes: 

From left to right, comprehensive and automated EDI order processing should look something like this: 

EDI Manufacturing Transaction Processes


The Fresh Approach to EDI Manufacturing

Modern EDI, however, is more than a document standard or format; it’s a B2B data exchange mechanism that also includes the processes surrounding:

EDI integration, then, is essential for manufacturing companies looking to streamline how they communicate with customers, trading partners, and other members of their digital ecosystem. The ability to submit and receive purchase orders, invoices, and other EDI transaction sets aren’t enough. Companies stand out when they bring on new business faster, embrace responsiveness and agility, and proactively troubleshoot errors.


Maintaining Manufacturing Business Continuity

As enterprises grow and expand their customer base, while that is certainly encouraging, the reality is you must now handle all this added stress on existing systems and processes. Organizations can have an endless amount of customers, but if they are unequipped to deliver the experience those customers expect, quite frankly, they won’t be customers for very long.

Companies that maintain a legacy environment will soon find that the rapid growth that they’ve been waiting for has actually put a strain on their business processes and systems. Legacy EDI tools simply cannot scale to onboard new trading partners and accommodate new data loads. This can increasingly lead to outages and downtime. When competitors are offering 99.99%, being able to offer 100% business continuity builds much more trust with your customers and trading partners.

Additionally, legacy EDI tools just do not allow you to do business as quickly as you need. In fact, 64% of supply chain organizations say that it typically takes two to four weeks to onboard just one new trading partner. Imagine if you continue to rely on those legacy EDI tools instead of modernizing your EDI solution, and all of a sudden tomorrow you’ve got to sign 100 new customers?


Manufacturers Need Modern EDI

Manufacturers often have two primary parts to their EDI business – direct transactions with wholesalers, which often integrate with their ERP system, as well as an e-commerce platform for end consumers. But those companies often rely on their tired (very tired) and true legacy EDI gateway and translator, but those have become cumbersome and do not offer the flexibility for integration with other systems and applications that are required today.

A modern EDI solution offers manufacturers the EDI, flat file, protocol, and information integration support that it needs. Additionally, modern EDI offers manufacturers the ability to reduce the time it takes to connect to customers, reduces chargebacks for EDI errors, and increases monitoring and visibility throughout its global ecosystem.


How to Get Started

Modern EDI is core to a successful digital transformation strategy, one that gives companies the flexibility to reshape how they use technology to interact with customers, trading partners, suppliers, and applications. A modern integration platform, then, supports the manufacturing industry through a combination of elegant B2B integration capabilities, including data transformation and data movement solutions that support formats beyond EDI as well, including XML, flat file, and JSON, and all the secure protocols and communication channels – AS2, SFTP, HTTPS, and APIs – that drive today’s EDI manufacturing processes.

Cleo Integration Cloud enhances end-to-end manufacturing processes, including order-to-cash, procure-to-pay, and load-tender-to-invoice, by creating one-to-many ecosystem data exchanges between any internal system, cloud, and trading partner application.

Modern EDI for manufacturing doesn’t have to be a pipedream. Learn how to leverage hybrid cloud integration to speedily onboard new partners and applications, reduce integration bottlenecks, and strengthen connections with suppliers, logistics partners, and retailers.

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