Electronic data interchange or EDI has transformed how businesses communicate and share information by automating the exchange of routine documents between organizations. The Electronic data interchange (EDI) market is expected to grow at a CAGR of 9.5% from 2020 to 2027.

A brief history of EDI implementation in the manufacturing sector

Electronic data interchange or EDI was first adopted by the manufacturing sector in the late 1970s and early 1980s. Large automakers like General Motors, Ford, and Chrysler started using EDI with their key suppliers to exchange order information and transaction documents electronically.

Importance of EDI in modern manufacturing processes

Electronic data interchange or EDI plays a vital role in enabling the efficient flow of information across modern manufacturing supply chains. EDI solutions automate the exchange of routine transaction documents like purchase orders, invoices, shipping notices, payment status, and product specifications between businesses.

This helps reduce paperwork, delays and manual errors commonly associated with paper-based communication. EDI ensures that all parties involved in the manufacturing process have quick access to accurate and up-to-date information. This helps synchronize activities across the supply chain from procurement to production to distribution.

The Need for EDI in Manufacturing

Manufacturing organizations rely on a complicated global delivery chain concerning heaps of suppliers, top EDI providers, vendors, and clients. Timely verbal exchange and change of information are vital to ensure efficient operations and on-time deliveries. However, conventional paper-primarily based communique thru fax, mail, and call is gradual, mistakes-inclined, and high-priced.

Electronic information interchange or EDI emerged as an answer using allowing agencies to soundly trade information electronically in a standardized layout.

Advantages of EDI in Manufacturing

Electronic data interchange offers numerous benefits for manufacturing businesses by automating the exchange of routine documents between suppliers, vendors, and customers. Some of the key advantages of EDI in manufacturing include:

• Faster transaction times
• Higher data accuracy 
• Lower communication costs
• Real-time visibility
• Better collaboration
• Streamlined processes
• Higher fulfillment rates

Key Components of an EDI System for Manufacturing

A basic EDI system for manufacturing consists of the following key components:

• EDI software solutions
• EDI translator
• EDI server 
• EDI database
• EDI standards
• Trading partner agreements

Together, these components enable manufacturing companies to automate the exchange of routine business documents with their suppliers and customers through EDI.

EDI Standards in the Manufacturing Industry

For electronic data interchange to work seamlessly between companies in the manufacturing industry, they must agree on a common set of EDI standards. These standards define the format and structure of electronic business documents that are exchanged. The most widely used EDI standards in manufacturing are:

ANSI X12:- Developed by the Accredited Standards Committee X12, ANSI X12 defines various EDI transaction sets for documents like purchase orders, invoices, shipping notices, inventory reports, etc. It is the dominant EDI standard used in North America.

EDIFACT:- Developed by the United Nations, EDIFACT (Electronic Data Interchange For Administration, Commerce, and Transport) is an international EDI standard. It defines messages for applications spanning multiple industries.

ASC X12/EDIFACT Hybrid:- Some organizations use a combination of both ANSI X12 and EDIFACT standards to meet the needs of a global supply chain.

Industry-specific Standards:- Some industries have developed their own EDI standards to meet their unique requirements. For example, the automotive industry uses standards like AIS (Automotive Industry Standard), ODETTE, and BAI2.

EDI and Just-in-Time (JIT) Manufacturing

Just-in-time or JIT manufacturing focuses on producing and delivering goods only as they are needed, in the required quantities, and at the precise time they are needed. 

1. Real-time visibility
2. Fast response
3. Lean operations
4. Accurate forecasting
5. Collaboration

In summary, EDI enables the digital connectivity and data flow required to support the lean and agile production processes at the heart of just-in-time manufacturing.

Future Trends of EDI in Manufacturing

As manufacturing processes become more advanced, distributed, and data-driven, EDI will continue to evolve and transform. Some future trends of EDI in manufacturing include:

• Cloud computing
• Integration with IoT
• Blockchain EDI
• Artificial intelligence
• Standardization
• Industry-specific EDI

Conclusion

Electronic data interchange has become an essential part of modern manufacturing processes. EDI solutions automate the exchange of business documents to provide benefits like faster transactions, higher data accuracy, lower costs, and real-time visibility.

These advantages, in turn, help manufacturers acquire supply chain efficiencies, value savings, and performance enhancements. While challenges remain, the want for EDI in production will only continue to grow as organizations look to digitize their operations and supply chains for competitive advantage.

Original Source: https://www.a3logics.com/blog/edi-in-manufacturing-need-benefits-and-importance