Logistics Management 

The first step in getting started with EDI is to choose your first trading partner. Start with only one trading partner, since there is a learning curve with EDI. Which customers or suppliers do you do the most business with, and with which of them have you entered into partner relationships? Do you have certified suppliers, or are you a certified supplier to some of your customers? Choose one that is critical to your business and with whom you already have a good relationship. If this partner is already trading EDI data with other partners, so much the better. For example, a major electronics manufacturer looking at a freight payment application decided to start with their largest provider of freight service, representing more than 70% of their freight transactions each year. The freight supplier was already actively exchanging EDI data with many other partners and had already standardized on the types and formats of the transaction sets that would be used.

You and your partner will need to decide what types of documents you will exchange. It is best to start with only one type of document and add others as you go through the learning process.

Decide which EDI transaction set or sets best suit your mutual purposes, and decide which version of which EDI specification you will use. You will then need to determine the exact format of each of these transactions. Although standards are published by organizations such as ANSI and EDIFACT, there are different revision levels of each of these specifications, and there is a great deal of latitude given for representing the same information many different ways within a transaction set. For example, one freight vendor may choose to show the date the shipment was picked up in the B3 segment, another in a PI segment and still another in a DTM segment; even two freight companies that show the pickup date in a DTM segment may use different codes to show that this DTM segment represents the pickup date, as opposed to the delivery date or the date that the freight movement was arranged.

Decide with your partner how you will transmit documents to each other (direct file transfer? value-added network?) and how often these documents will be transmitted, and what forms of acknowledgment you each require when functional groups are received. Your Information Systems departments will need to be involved in these negotiations to ensure that the transactions reach their destination intact, secure, and in a timely manner.

Even if you're starting with only one type of transaction set, think ahead to what other transactions will be traded in the future. You and your trading partner will need to decide what transactions will make up a functional group; will you send purchase order acknowledgments and invoices in the same or separate envelopes?

Get your accounting and legal departments involved in the negotiations as soon as possible. You may find that your firm has policies and procedures firmly rooted in days of green eyeshades, sleeve garters and quill pens. Can these policies and procedures be divorced from paper? If you stop trading paper with your partners, what company policies and legal requirements govern how long you must save the electronic documents, and how will they be retained to meet these requirements?

You also need to decide exactly what you want to do with the information you will trade with your partners. Do you just want to mimic your existing paperwork process, or are there gains to be made by changing some of your business processes? For example, a major car importer in the United States decided to use EDI to contract with car carriers to deliver their carsrfb" dealers from their points of entry into the U.S. They found Vat they could eliminate several manual steps in their accounting process by authorizing payment to the car carriers on receipt of an EDI proof of delivery that the cars were delivered to the appropriate dealers, and negotiate better freight prices with the car carriers since the carriers no longer needed to invoice their freight charges. Both partners saved money in this process. In addition, daily EDI status information on the movement of the cars to the dealers provided better visibility to the dealers of when the cars would reach their showrooms and their customers.

To be Continued

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Lean Manufacturing Implementation  Lean Manufacturing Principles