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EDI Maturity and the Supply Chain

By Rutul Thakkar October 8, 2017 by Rutul Thakkar

By Rutul Thakkar

What is EDI Maturity?  How does EDI capability relate to the Supply Chain?

Before we get into those questions, let me tell you a story.  I have a three, soon to be four year old daughter.  Like any other kid, she loves her sugar – chocolates, ice cream, cake etc.  When she was young she would ask for an ice cream and I would say ‘not today’ and she would be sad and walk away.  As she grew up, one day she asked if she can have an ice cream and as usual I said, ‘not today’.  What surprised me was her follow-up statement, “OK, then when can I have it, dad?”  She was growing up and it made me think for a bit and I said tomorrow.  Now, she did not understand the concept of tomorrow at that time.  She never asked the next day.    A few weeks later she figured out what  ‘tomorrow’ meant and she asked for ice cream the next day.  I tried to say no but this time her reply was ”but you said I can have it today.”  Well, believe it or not  this a supply chain at a personal level.

If you think about it, I was a supplier providing a product in the form of ice cream with my daughter being a customer.  She went from not knowing when she will get her ice cream, to holding me accountable for giving her ice cream on the day I told her she would get it.  If we scale this to a supply chain of an organization, shouldn’t we ask our suppliers, “when will I get my product”, shouldn’t we let our customers know when we will deliver the product to them?  Shouldn’t we hold our suppliers accountable for the delivery commitments and measure their performance?  EDI is a great way to do just that.  Often, when we mention EDI, people think that it is all about ANSI X12, EDIFACT, or IDOCs but it is not.  It is all about getting answers to questions like, “when are we getting the materials  we need?”, ‘”Did we actually get the materials when we were supposed to?”, “How many suppliers are sending us accurate data?, and who are our top performing suppliers?”.

Here’s how it should look:

Phase 1: We need Qty N of Product A on Date X, what can supplier provide?

EDI 850 – Order sent to supplier

EDI 855 – Order acknowledgement received from vendor with date commitments

EDI 810 – Invoice received from vendor for products delivered

Phase 2: When did supplier ship the product?  Were there any delays from carriers?

EDI 856 – Advanced ship notice

SAP Event Management

EDI 214 – Shipment Status notification from Carriers (resides in SAP Event Management system)

EDI 315 – Shipment status for Ocean carriers (resides in SAP Event Management system)

The reason for combining 856, 214, and 315 in a separate phase is because of the data.  The supplier should communicate to the chosen carrier the corresponding packing and tracking number information via 856 and that directly ties to EDI 214 and 315 to receive tracking data against.  EDI 856 also informs us that the product has left the supplier facility and is now in carriers’ possession.

Phase 3: Analytics

The data collected in Phase 1 and 2 should help the organization to determine a process to evaluate its vendors and carriers.

If you want to learn more about building better business networks and the smart use of EDI, click here.  Business Networks

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