5 Advantages of EDI in The Automotive Industry
The automotive industry is continuing to adapt and adjust to the new and improved technologies, environmental concerns, and regulatory and market changes. The pandemic-induced shortages lead to a 12.5% drop in vehicle production volumes.
Given the ever-changing landscape and the scalability of the automotive supply chain, companies also have to prioritize enhancing productivity, resilience, and collaboration.
The global nature of the automotive industry is to manufacture vehicles and be able to onboard them to their suppliers as quickly as possible, regardless of the location.
EDI has played a vital role in assisting these manufacturing companies to enable a free flow of information and documentation, improving accuracy and efficiency for decades.
The growing legacy solutions are another level of struggle for many automotive industries while coping with the demands of the modern and increasingly complex global supply chains.
In short, the automotive business needs a simple, modern, and flexible EDI solution capable of delivering the productivity and resilience needed in this highly competitive industry for scalability.
In order to understand how EDI services can help the automotive industry, let’s first identify the challenges faced by the industry.
Challenges of the Automotive Industry
Along with the need for flexibility and a global approach, there are other requirements that need to be overcome.
Pandemic Fallout – Did you know that automotive spending dropped out by 30-40% during the grave pandemic creating significant setbacks. Car manufacturers like Ford and Volvo excluded crucial safety features from new cars due to chip storage.
Global Supply Chains – Not just the pandemic and its restrictions, global trade’s complexities too have been posing difficulties to the manufacturers and suppliers operating in the supply chain.
Shift Towards Hybrid Vehicles – The government is on the verge of banning diesel by 2035 in the UK. They intend to accelerate the demand for a more eco-friendly EV supply. This will bring a new change where there will be no room for outdated approaches and the onboarding of the new suppliers will enhance.
This shows how significant EDI is across the industry and will continue to have a strong presence. EDI VAN and point-to-point integration are commonly used for distributing business-critical information.
The automotive industry is widespread with manufacturers across the globe. The suppliers are situated in countries where integration may not be up to the mark. Unlike the automotive industry, manufacturing and warehousing have globalized with the rising number of trading partners and a solution in place to ensure fast onboarding.
For connecting with suppliers, customers, 3PLS, or the competitors, inclusive of increased speed to information transfer, reduced errors, and improved quality you need to collaborate with the technology providers. Technology providers can supply a managed, scalable B2B system and data integration solution.
EDI in Role
Companies have started moving to EDI, enabling them to benefit from the seamless digital transfer of business documents to their trading partners across the globe. Some of the improved outcomes of the EDI system for the industry are –
It is observed that around 81% of the automotive industry is concerned about the visibility concerning more than 30,000 parts in a vehicle. Since there are no prominently visible processes, EDI integration services can enhance the levels of oversight. The standardized and digitized method becomes more valuable when paired with the ability to communicate relevant information in real-time.
The centralized view of all supplier’s processes enables effective tracking thereby improving the business operations and supplier management.
EDI is also a promising solution to enhance the level of accuracy an automotive supplier network needs. The digitized method eliminates the manual processes, reducing the risk of disruptions and having a potential impact on the production lines. With greater accuracy, EDI for automotive industry facilitates –
Cost-Effectiveness: EDI adoption was able to lower the operational costs significantly, much as 35%, allowing reinvestment in areas, like onboarding eco-conscious EV suppliers.
Enhanced Efficiency: EDI can significantly drive business efficiency across areas like delivery and communication, allowing businesses to direct their time more on critical areas.
Time-Effective: EDI also provides swift communication across expensive automotive supply networks. This agility saves a lot of time, especially during a shorter supply.
One of the major challenges for the automotive industry is to keep track and have a clear picture of where things are located. In order to have a clear picture, EDI allows the businesses to see where their shipment is and when they will arrive. This way, companies can prevent delays, hiccups, and flags thereby adjusting their valuable time.
JIT is a set of practices developed to ensure that the production lines run flawlessly across the globe. The method is widely used by the automotive industry where EDI can contribute to enhancing the transparency needed for JIT manufacturing. Companies will also know when a shipment is scheduled to hit the production line.
Tiered Supply Chain
Automobiles are usually formed after assembling thousands of parts delivered from suppliers through a tiered structure. Tier 1 is responsible for producing major modules & systems, Tier 2 is responsible for making components, and further, Tier 3 suppliers provide the raw material needed to create the components and modules. Integrating an EDI into the system can streamline the tiered structure and best comply with JIT manufacturing.
Quick & Accurate Synchronization
EDI can be useful in making all participants, within the chain, hit their deliveries right on time. EDI integrated into the internal management system helps in quick data translation – creating, sending, recording, and storing messages without the need for human intervention.
In the automotive sector, ASN (advanced ship notice) verifies the exchanging messages so that merchandise matches the purchase order. With EDI, any disagreement can be rectified allowing the production line to keep moving flawlessly.
The automotive industry also faces huge issues that result in chargebacks when delivery isn’t as expected. Even with EDI, when ASN does not receive alerts on time, manufacturers usually end up filling huge penalties for the missteps. A proper VAN system can help the manufacturers solve this issue. VAN can send alerts and notify of any slow-downs or troubles on time and are displayed on the JIT delivery window to deter hefty fees.
Automotive manufacturers have to deal with multiple suppliers located globally in order to receive components and modules of the vehicle. Integrating EDI can help companies onboard fabricators swiftly, provide robust information, and communicate seamlessly to trade documents with the suppliers.
Moving To Cloud EDI
As technology advances, EDI is graciously advancing trying to meet the modern and changing needs of the market and customers. Integration platforms have matured, providing a perfect tool for connecting any systems and applications, regardless of their type.
A modern-integrated system can transmit the information as well as orchestrate the processes, manage data integrity, and tackle complete integration challenges.
Harmonized Diversified Data
The automotive industry, like the retail and supply chain, have to manage growing heterogeneous data, including different standards and formats of EDI to communicate.
An iPaaS for EDI can be extremely useful for communicating with third parties using a variety of message formats. Harmonizing the data makes the stakeholder’s life easier as they can handle formats, such as ANSI X12, JSON, XML, EDIFACT, ODETTE, and others seamlessly.
IPaaS is designed to sync and work with all kinds of data formats. For instance, one of the suppliers uses JSON to communicate a message while the manufacturer uses XML. iPaaS EDI can convert the JSON messages into XML for the manufacturer’s computer to understand, and your message can be converted into JSON for the supplier’s computer to understand.
Outsourced EDI services are the most preferred solution as an expert and reliable solution provider takes care of the development, deployment, and maintenance of the EDI. Along with creating new connections, the vendor will handle the harmonization and validation of the data while ensuring that there are no downtimes or chargebacks.
In a Nutshell
Moving from the legacy system to cloud EDI can bring value to your operations. It can help you improve your relationship with the ecosystem, reduce the time to onboarding, and eliminate errors.
Cloud solution comes with data validation functionality and helps you improve efficiency, decision-making, planning, and forecasting. Certainly, all these characteristics can give you a competitive edge while improving operational efficiency, reducing cost, process orchestration, and optimizing processes and operations.
Scarlett works with the editorial team of A3logics, a leading company offering EDI Services. Exploring the latest technologies, reading about them, and writing her views have always been her passion. She seeks new opportunities to express her opinions, explore technological advancements, and document the details. You can always find her enjoying books or articles about varied topics or jotting down her ideas in a notebook.