Electronic data interchange (EDI) has been used for many years in business, automating the exchange of business messages to improve efficiency and reduce errors, but what exactly does the future hold for EDI?
What is EDI?
Electronic Data Interchange (EDI) is the exchange of data electronically, without manual intervention. From one computer system to the other, data is exchanged using approved business language standards such as GS1. This ensures that the data that is sent is in the right formats to be understood by the receiver.
The basic benefits are accuracy – through the removal of such manual intervention with the inherent errors, and speed – making communication between trading partners more efficient. The results ultimately can lead to reduced stockholdings and administration, and can even improve sales and speed of payment from customers.
Where did EDI come from, isn’t it old fashioned?
EDI has been around since the 80’s, starting in Japan for enabling just-in-time (JIT) practises. It then became a retail initiative called Quick Response and was widely adopted in the industry, with the UK leading Europe in this area. It is old in design, it’s fair to say, but still extremely effective. It is in use by various industries today, as there is still no better solution available for enabling supply chain effectiveness. The “wheel” has been around for a long time, but still in use.
Who is using it and what does it look like in practice?
All the major UK retailers use it (also widely used between insurance companies and brokers) and they do so with most of their suppliers, large and small. Mostly it is a condition of trade, as it is the glue that enables supply chain management to come into effect. It is normally used for orders, invoices, credits, order response/acknowledgements, ASNs and delivery notes – sometimes remittance advices and forecasting too.
What is EDI to AdvanceFirst?
EDI is the prime method used by AdvanceFirst for business integration and underpins most of our technical solutions.
Are “most” companies today using EDI for all their business transactions?
No, it is still mostly the first tier of suppliers just doing it with the major retailers (their customers). It’s these suppliers that are taking advantage of EDI and the GS1 standards/barcodes, benefiting from the efficiency, safety and commonality of practice when doing EDI. The issue is that in general these first-tier suppliers are not doing it with their own suppliers!
That’s surprising, why is that the case, do you think?
Whilst the major retailers have all effectively implemented it with their first-tier suppliers, the purpose was to push costs out of the supply chain. The actual original message from retailers to their suppliers has been forgotten (see our article, The Forgotten Message) the message being about extending it back to their own suppliers through to the raw material providers. As such, costs in many instances, are just pushed back and not out of the supply chain!
Surely, given the benefits to be gained by adopting EDI with suppliers, and the fact that standards (as per GS1 standards) make it easy, why don’t they do it anyway?
That’s a good question! As correctly implied by yourselves, standards provide a common way for businesses to uniquely identify, accurately capture and automatically share information about their products, locations, assets and more.
However, unlike specific IT solutions that lend themselves to definitive areas of a business and therefore have a definite owner, the benefits of EDI are spread across the various departments of a company, such as finance, logistics, supply chain management and sales. As such, there is often no absolute owner, and it is left to the IT department to effectively make commercial decisions about it (see our article, Baffled - EDI Solution Provider).
Generally, AdvanceFirst remain agnostic to the preferred use of data formats, standards and back-end IT systems. Our powerful managed EDI service has the capability and in-built intelligence to deal with data disparity issues between trading partners, however we do promote the adoption of mutual standards and particularly GS1 GTIN codes wherever possible to make the message exchange as robust and efficient as possible. In an ideal world, everyone would, or rather should, adopt the same standards. Whilst this is not always possible, we recognise the great work GS1 are doing to drive the use of standards throughout the supply chain.
Are there benefits to the IT department?
Yes, for sure, but they are operational in the main and do require some work to set up. This competes with commercially identified projects and is often repeatedly delayed.
What is the answer then to getting EDI throughout the supply chain?
That’s the 64,000-dollar question and has many levels. It starts with education. I know of people who have studied supply chain management at university and have only “heard of EDI”! EDI is the glue for supply chain enablement and is therefore essential in the process. If, for example, a builder hasn’t really got a good grasp of the tools he has at his disposal, he cannot do the best possible job.
We would recommend a project group which represents the key operational departments to review the benefits as also the ROI and the phasing of the supplier roll out. This is where experts like AdvanceFirst can support and act as facilitators.
The problem is how to make that happen. “Leading a horse to water is easy BUT…”.
What emerging requirements or trends are you starting to see from your customers?
A good example for this is Drop Ship, which is now driven by the retailers to meet the needs of their customers, and as such, a requirement on some of their suppliers (who are our customers). Linked to this are demands by Amazon on their suppliers.
AdvanceFirst has invested considerably in both solutions, gaining PII (Personal Identifiable Information) approval from Amazon in the process – something easily missed by service providers that would prevent essential secure data from being successfully transferred between trading parties.
Where do you see EDI in the next five years?
We see it continuing for bulk orders, and becoming more interactive and real-time for urgent and smaller or high-value items. We are already doing this for the aftermarket in the motor trade, and AdvanceFirst are leaders in such advancement. This goes hand in hand with GS1 and its paperless trading initiatives.
About the author
Tony Engleman
Director of sales at AdvanceFirst Technologies (email: tengleman@advancefirst.com)
Tony has been with AdvanceFirst Technologies for 14 years and was very much involved in selling the concept of EDI (Electronic Data Interchange) in the early 80’s to major retailers who were early adopters and their trading partners.
Tony has also been instrumental in setting up successful EDI businesses in South Africa, Turkey and Belgium. During that time he has focused on a competing supply chain approach to add value to businesses. His industry knowledge has included DIY, Food, FMCG, Automotive, Pharmaceuticals, Clothing and Insurance to name just a few. Tony gets a lot of satisfaction from seeing the results of his experience coming to fruition for his customers and long-standing clients with whom he regularly keeps in touch.
About AdvanceFirst Technologies
AdvanceFirst Technologies Limited is a leading e-business enabler, systems integration and EDI Managed Services company that brings maximum business process automation to its clients. AdvanceFirst provide first class EDI hosted services, in-house EDI software, including that for the IBM iSeries and full support to around 300 clients in 20 countries.