EDI Shipping

What is EDI Shipping?

EDI is the abbreviation of electronic data interchange. This term explains the system used to communicate data transfer so that everyone in the loop is connected and up-to-date.

This technologically driven computer-to-computer communication system replaces the usage of fax and postal mail to respond to customer transactions.  

EDI Shipping is the process of responding to customer transactions through electronic media rather than manually responding to them through facts and mails in a traditional way.

A standard format for EDI Shipping allows businesses to exchange business information electronically rather than by hand.

How Does EDI Work?

EDI Shipping majorly works in a series of three steps. As already conveyed, EDI works in a standard format, resulting in a series of actions such as:

Step 1- Entering

The first step is to enter into the process of EDI shipping. It involves the collection and organization of data. The system prepares an electronic order consisting of the relevant information to build a meaningful and necessary EDI document by ditching the traditional method of a printing order.

The sources of data required to generate the electronic document may include the following:

• Manual data entry on electronic devices,
• Exporting databases on spreadsheets,
• Data files that have been retrieved from reformatted electronic reports,
• Purchasing application software that has built-in support for EDI files.

Step 2- Sending

The next step is to send or transform the documents into EDI format. The electronic data is transformed through translator software using appropriate segments and data elements in this step. This software converts the internal data format to the EDI standard format. It is convenient to buy EDI translator software to carry out this step.

This step requires accurate mapping and reading of the internal data to be converted into an EDI standard format. Companies can also hire an EDI service provider if they do not want to buy EDI translator software.

Step 3- Connecting

Once the business documents are transferred to the standard EDI format, it becomes easy for the firms to interchange the required data. The business has to decide how it will connect to each transmission partner. 

Again, the connection can build in two ways. One is by hiring an EDI service provider, and the other is by purchasing connection-building software to transmit the data and build connections between the partners with whom the data needs to be exchanged. There is another way out – a combination of both these options. Depending upon the transmission partners, an EDI application is purchased and installed to share the information among them.

Therefore, these steps comprise the process of EDI shipping.

Example of EDI in the shipping industry

Let us understand the concept of EDI shipping in the shipping industry with the help of an example. Company 1 has sent a purchase order to Company 2. When Company 2 receives the purchase order, it will automatically generate a sales order and send it to Company 1. Both transaction entries will be made in the books of the respective companies. This automatic generation of a purchase order and sales order is done with the help of EDI shipping software.

Advantages of Using EDI Shipping

EDI Shipping benefits your business and improves many areas, but logistics is of prime importance. It saves the business time and money and makes them more competitive in the marketplace.

The various advantages of using EDI shipping can be stated as follows:

• Faster and error-free processing

Technological advancement and globalization have changed the business world so much that in recent times speed is of prime importance than it has ever been. The logistics department is under extra pressure to ship and deliver the products in a short period.

Not only the B2B interactions but now customers have also become used to fast product delivery free of cost. Companies like Lazada have raised customer expectations in this area.

EDI has made the process of shipping significantly faster and easier to manage. A noticeable change has occurred where EDI can shorten the order to cash cycle time by 20% and speed the business cycle by 60%.

With the emergence of EDI shipping, not only speed but accuracy in the business cycle has also been achieved. After all, electronic documents are far more accurate than the manual paper pen system for recording data. The software installed on the electronic devices can alert you when incorrect data is put in, which was not available in the traditional system of recording data. Organizations implementing EDI shipping have seen a significant error reduction in their processing.

• Automated data entry

EDI shipping is all about the electronic mode of data entry and managing data. Organizations using EDI shipping have installed the required software on their devices that provides the advantage of automated data entry. Automation has eliminated the traditional system of manual data entry.

The result of this reduction in errors is an evident conclusion. It drastically improves a company’s form and data entry process and eliminates the need to realize the orders. Automated data entry on electronic devices has resulted in recording the data shortly and crisply with minimum errors. 

• Real-time information

Real-time information is that piece of information delivered to the necessary people at the very moment it is received. It means there is no delay in communicating the information to be delivered to others. Hence the timeline for information delivery is enhanced, and the delays are eliminated.

EDI Shipping offers real-time information as it communicates the data immediately after receiving it. Real-time information is mostly used for navigation and tracking. Thus, it increases the organization’s efficiency and helps decision-making.

• Integrated communication system

Originally, an integrated communication system in a set of software installed on hardware that offers seamless communication in an organization. As EDI shipping is fully electronic-based, it provides the advantage of an integrated communication system to the organization that incorporates EDI shipping.

The interfaces and protocols of the integrated communication systems allow communication to occur in the organization, no matter how conventional and diverse it is. Thus, it helps to eliminate any delay or fabrication of facts when communication occurs through an organization’s chain of employees.

• Environment friendly

The shift from paper pen systems of data entry to automatic data entry on electronic devices has also led to an environment-friendly path. This sudden migration from using papers to record data to not using any kind of manual system has resulted in lesser carbon dioxide emissions.

EDI shipping promotes social and environmental responsibility through corporate culture as CO2 emissions are at their very least in this field.

Besides reducing carbon dioxide emissions, less cutting of trees is another positive impact of EDI shipping. As the data entry is entirely done on electronic devices, there is less or no need for paper and diaries. As the need for paper is less, the practice of cutting trees also reduces.

• Increase trading partner relations

A trading partner agreement defines trading partner relations. The trading partner agreement lays down each partner’s duties and responsibilities to successfully run the firm’s operations. A trading partner agreement is drawn to avoid disputes.

Trading partner itself means that the business customarily carries out operations with a particular entity. . It can be a person, organization as well as an entire country. As EDI shipping lays down all the terms of the agreements on an electronic basis, the scope of fabrication of facts is eliminated, and the partners agree upon the terms and conditions that they have decided and think fit. Thus, trading partner relations are greatly impacted by the inclusion of EDI shipping.

Disadvantages of using an EDI Shipping

While countless organizations enjoy the advantages of EDI shipping, some companies are hesitant to implement EDI shipping because of certain drawbacks. The disadvantages are listed below:

• EDI is time-consuming

One of the major drawbacks of using EDI shipping is that it is very time-consuming. It can take a lot of time, especially at the initial stage of setting up the EDI shipping system. Setting up essential parts in this shipping process is very important, which is the primary time taken to factor in the process. 

It is a major drawback as this system does not meet the services needed for orders that require fast tracking. Hence, many business organizations are reluctant to use EDI shipping because of its time-consuming factor.

• Too many standard bodies

The organizations trying to implement the EDI shipping system in their operations also consider its numerous standards. There are a lot of criteria that EDI shipping has to fulfill. 

These standards are a hindrance when small businesses try to share data with large business establishments. This is because large enterprises use the latest edition of a standard document. It requires that a provider is chosen who offers a wide range of standards that supports the organization’s functioning and policies.

• EDI systems are expensive to set up and maintain

In the long run, it has been seen that EDI shipping provides benefits that involve cost savings as well. But the initial cost of setting up the EDI system is enormous. So, implementing an EDI system into any organization can be an expensive affair. 

Big business establishments can afford to incur the implementation cost of EDI shipping. The problem lies with small businesses. Small businesses do not have much money or capital to incur the cost of settling an EDI shipping system. This is another limitation that makes small businesses refrain from setting up an EDI system.

• EDI is not easy to learn, use and implement

As EDI Shipping is entirely technical, it is not easy to learn, use and implement it in any organization. As this process is completely electronic-based, it will never be as easy as recording data on a piece of paper. Thus, it is an additional responsibility to make the employees aware of EDI technology and teach them about it. 

Apart from learning EDI shipping, it is also essential to know its usage and implementation. EDI is not at all easy to implement. Shipping has to deal with two technologies: EDI and the EDI application. EDI is technical and complex to understand, whereas EDI applications add to the complexities and make the whole process even more difficult to understand and implement.

• Additional cost for staff training to use EDI

As mentioned earlier, EDI is not easy to learn and implement. Anything that is not easy requires proper training and staff to understand the concept. EDI is no different. Thus, except for the setting up cost for EDI shipping, it also involves other costs like the cost of training the staff on how to use EDI.

EDI is a technologically driven electronic-based system of recording and managing data that requires trained staff who know how to use and implement EDI in an organization’s operations. To train such people or employees, the organization has to conduct workshops or training programs to educate their employees about EDI shipping which involves additional costs.

Therefore, apart from all the advantages of EDI shipping, this system has a few drawbacks that must also be kept in mind. These limitations play a huge role in deciding whether an organization should implement EDI shipping in its operations or not.

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