7 Advantages of EDI in The Automotive Industry
Already complicated and increasingly global automotive supply chain processes have long had to contend with disruptive forces, including electric mobility and increasing CO2 concerns. Both the COVID-19 pandemic and the disruption resulting from Brexit have put further pressure on the industry, leading to as many as 1.7 million missing parts and even industry frontrunners struggling to meet demand.1
In large part due to these and other automotive supply chain challenges, gaining a competitive advantage within the industry has continued to require supply chain optimisation and the ability to adapt to evolving industry trends. Having already served the automotive industry for forty years, Electronic Data Interchange (EDI) can help to make that possible.
The digital exchange of documents across entire automotive supply networks enables the up-to-date, flexible responses necessary for both recovery and survival. In this article, we consider the advantages of implementing EDI in the automotive industry at a time when process improvements have arguably never been more important. Let’s get started.
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#1: Reduce errors
EDI’s ability to digitise and automate the exchange of documents significantly reduces the risk of human error that comes with paper-based processes. Even across extensive automotive supply networks, this can result in increased accuracy that leads to faster customer-facing deliveries, despite ongoing delays in other areas.
Just-in-time (JIT) inventories that rely on the punctual coming together of roughly 30,000 vehicle components are especially reliant on last-minute processes that, should errors arise, can prove catastrophic for suppliers and trade relationships.2 EDI is therefore fundamental for delivery, reliability, and efficiency.
#2: Enhanced visibility
By standardising and digitising the exchange of information, EDI can enhance the visibility that was so severely lacking for many automotive traders during the height of the pandemic, thus enabling the JIT processes and competitive timeframes that are making transparency a priority for 81% of the automotive industry.3
Central views of all supplier processes could have prevented production losses of around 12.5% throughout the pandemic, with the simplified tracking of all parts offering operational benefits that include:4
- Increased speed
- Agile processes
- Data-driven decisions
#3: Improved supply chain communication and relationships
EDI’s ability to streamline two-way communication anywhere in the world enables the optimisation and simplification of transparent, mutually beneficial trade partnerships. Particularly in the face of ongoing Brexit delays, direct communications in real-time enable suppliers to continue meeting each other’s expectations through a flexible approach that addresses issues as they arise.
Furthermore, the ability to perfect existing processes, and thus provide undeniable appeal to new trade prospects, stands to prove beneficial during the inevitable onboarding of highly sought after electric vehicle (EV) suppliers in coming years.
#4: Cut costs
Cost savings that emerge from a reduction in spending on materials associated with paper-based documents (e.g. paper, ink, storage, etc.) by as much as one third is another enormous benefit of using EDI.5 This is especially pertinent in the wake of automotive spending that dropped by as much as 30-40% in recent times.6
The removal of costly manual errors through complete digitisation furthers these profitability advantages, not only providing traders with a more viable chance at financial recovery, but also increasing the potential for spending in other increasingly costly areas, such as:
- Online capabilities
- EV manufacturing
- CO2 improvements
- Brexit compliance
#5: Better stock management
The tracking of inventory numbers and general order processing figures makes EDI a key component in effective stock management processes, and therefore has the potential to prevent future parts shortages.
These management improvements can also simplify lean inventories by enabling suppliers to handle fewer parts while still achieving the same output. Given that most parts in JIT business cycles arrive just hours or days before they’re needed, easily manageable and transparent stock processes play a crucial role in the fundamental foundations of positive supplier relationships, and their inherent benefits.
#6: Operational efficiency
Automating the transfer of business documents is central to EDI, and can remove the need for lingering manual processes that not only cost in work hours, but that also pose significant risks of delays. This can transform operational efficiency, helping to achieve the visibility we’ve already touched on and contribute to the revitalisation of in-house processes.
This business efficiency provides the opportunity to redistribute time, money, and resources to the areas of automotive supply that need it the most. Opportunities to increase spending on upcoming priorities such as EVs, as well as the resources necessary to overcome existing industry challenges like strict CO2 regulations, can help suppliers to remain compliant, productive, and appealing as trade prospects overall.
#7: Return on investment (ROI)
The simplified, efficient business processes that EDI can facilitate enable companies to both better meet trading partner demands and redistribute workforce efficiency. That’s why, when properly implemented and deployed, EDI solutions provide the opportunity for significant returns on investment.
Moving forward, the ability to exceed partner and consumer expectations through efficient, visible EDI processes will help to maintain and increase profitability. This, in return, can enable increased spending on EV-specific onboarding, providing a much-needed headstart on production that can ultimately translate into a competitive advantage for businesses.
EDI-as-a-Service: A modern solution for the automotive industry
EDI has long been a central aspect of automotive success, but, as suppliers who struggled through the pandemic learnt the hard way, legacy limitations, such as convoluted onboarding, are at risk of worsening global supply chain complexities.
Modern challenges need a modern EDI solution, and at Data Interchange, we offer precisely that in the form of what we call EDI-as-a-Service. This new approach to EDI utilises both on-demand managed services and cloud-based tools to ensure the flexible approach needed in the modern automotive landscape.
EDI-as-a-Service serves to enhance the advantages already discussed thanks to benefits that include:
- Removing barriers to EDI adoption: EDI-as-a-Service enables the seamless accommodation of wide-ranging standards and protocols that cuts traditional adoption times significantly. The ability to onboard even unversed business partners quickly provides a competitive advantage at a time when the speedy application of EV compliant suppliers is of particular importance.
- Enhancing visibility: Single source, immediate access to all supply documents significantly enhances visibility across entire supply networks, which, as discussed, stands to enhance both JIT processes and efficiency drives in the face of global trade.
- Enabling flexibility: Managed support ensures the flexibility necessary to keep solutions adaptable to ever-changing automotive landscapes, thereby ensuring ongoing efficiency despite delays, as well as enabling the real-time implementation of cutting-edge solutions before competitors can get to them.
Gaining a competitive advantage in the automotive industry
The demand for personal car ownership is already increasing in the wake of some of the worst disruptions the automotive industry has ever seen. That’s why the ability to get back on their feet as quickly as possible is set to increasingly differentiate viable competitors, particularly as delays continue to have an impact on industry frontrunners.
By enhancing visibility, efficiency, and investment opportunities, EDI can make this happen, and Data Interchange’s future-proof solution EDI-as-a-Service particularly stands to enhance the benefits of using EDI with modern requirements in mind. Get in touch today and find out how this updated solution can help your business obtain a competitive advantage in 2022 and beyond.
1 Coronavirus damages China’s auto industry as outbreak worsens
2 Top 4 Automotive Supply Chain Challenges and Solutions
3 Smart Solution for Supply Chain Challenges in Automotive Industry
4 COVID-19 and the future of the automotive supply chain
5 The Benefits of EDI (Electronic Data Interchange)
6 Global Auto Production in 2020 Severely Hit By COVID-19 Crisis With a 16% Drop In World Auto Production