Introduction to supply chain management (SCM) EDI

Manufacturers can use supply chain electronic data interchange (EDI) to control processes such as purchase orders, shipment notices and invoices. SCM EDI speeds the transfer of electronic business processes.

The primary application of electronic data interchange (EDI) within supply chain management (SCM) business process

focuses on the electronic exchange of business transactions. Examples include purchase orders, shipment authorizations, shipment acknowledgements, advanced shipment notices, or invoices.

SCM EDI transactions must adhere to standardized document formats that are outlined in international standards. The decision about which standard to adopt is determined by factors of global business, industry, or by mutual agreement with a trading partner. There are four main technical standards:

  • UN/EDIFACT -- the main standard supported by the United Nations
  • ANSI X12 -- common standard adopted in the US, Canada and Australia
  • TRADACOMS -- predominantly used in the United Kingdom
  • ODETTE -- developed in the United Kingdom for the motor industry.

The first two on the list are the most widely adopted within SCM. The content and sequence of data incorporated in an EDI message is defined within each of the above international standards.

Benefits of supply chain EDI

The benefits of utilizing EDI in SCM business transactions have been proven for quite some time. The most obvious is the reduction in large volumes of paperwork. But even more important is the enhanced speed of transactional and information flow among various SCM processes and supporting software applications. The elimination of paper-based purchasing and receipt transactions alone has saved companies significant amounts of money.

EDI-enabled processes are implemented either internally with resident technical teams or with the assistance of a specialized vendor. EDI software can either be incorporated in a standard "behind the firewall" implementation or be contracted with an outsourced EDI or B2B electronic message broker which hosts the software and messaging infrastructure in a third-party arrangement.

The criteria in selecting which option to utilize depends on a company's in-house technical expertise, the geographic and business scope of the implementation, or the cost and timing parameters associated with the implementation.

Selecting a vendor or service provider to support an EDI implementation should be determined by the vendor's knowledge and expertise within your industry, the track record of successful and cost-effective implementations demonstrated by that vendor, as well and the vendor's knowledge of integration needs with the various upstream and downstream processes incorporated within SCM.

Of late, an alternative to EDI has been the use of XML (Extensible Markup Language) messaging to facilitate electronic messaging among various SCM or ERP applications. XML tags adhere to the same EDI transactional standards and allow for more seamless application to application integration of data.

About the author: Bob Ferrari is the Managing Director of the Ferrari Consulting and Research Group LLC, a supply chain business process and technology consultant firm, and is the creator and Executive Editor of the Supply Chain Matters internet blog.

This was first published in December 2009

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