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
- Benefits of EDI for Manufacturers
- Four EDI Documents Typically Used in Manufacturing
- The Fresh Approach to EDI Manufacturing
- Maintaining Manufacturing Business Continuity
- Manufacturers Need Modern EDI
- How to Get Started
How EDI Helps Manufacturers
As a manufacturer, what if you could:
- Reduce the time it takes to connect to suppliers, logistics partners, and distributors?
- Reduce chargebacks for data exchange errors?
- Increase monitoring and visibility across your global ecosystem?
- Reduce costs for operational maintenance and annual support of legacy and end-of-life solutions?
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,.
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:
- Increased business efficiency through automated transaction workflows
- Reduced dependence on manual data entry and a reduced number of data errors
- Cost savings through reduced EDI chargebacks and SLA violations
- Expedited order-to-cash, procure-to-pay, and load-tender-to-invoice processes
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.
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.
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.
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.
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:
- Your retail, wholesale, or manufacturing partner begins an EDI process by sending an EDI 850 purchase order.
- Cleo Integration Cloud automatically checks that order for accuracy via EDI process automation
- Cleo Integration Cloud converts the EDI 850 into the necessary internal format your organization uses within your back-end ERP sytem.
- Cleo Integration Cloud ingests the internal format into your manufacturing ERP using an API connection.
- The process is reversed for outgoing EDI documents: EDI 855, EDI 856, and the EDI 810. Each of these transactions are sent in required order to the trading partner as the good purchased becomes a good invoiced.
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:
- Partner onboarding
- Data orchestration
- SLA management
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 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 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.
Discover the benefits of using Cleo Integration Cloud for EDI integration by watching this short demo video:
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