EDI Made Simple for the Automotive Industry

Turbulence is nothing new to automotive supply chains. The industry is already adjusting to new technologies, environmental concerns, globalisation, and regulatory changes. These existing disruptions have only worsened as a result of pandemic-induced shortages and Brexit-based delays, leading to a predicted 12.5% drop in vehicle production volumes.¹

Given these challenges and an ever-changing landscape, the future of automotive supply chains will need to be one that prioritises productivity, resilience and collaboration.

By enabling the free flow of information and documentation across supply chains, electronic data interchange (EDI) has played a crucial role in improving accuracy and efficiency in the automotive industry for decades. Here at Data Interchange, we have over 35 years of experience in developing and implementing EDI solutions for the industry. In fact, our founder Phillip Friend was at the forefront of developing OFTP, the industry’s first EDI protocol.

Despite the tremendous benefits EDI has brought to the automotive industry, there is growing recognition that legacy solutions will struggle to cope with the demands of modern and increasingly complex global supply chains. As a result, automotive businesses now require simple, modern, and flexible EDI solutions, capable of delivering the productive and resilient supply chains needed for success in a highly competitive industry.

Here, we’re going to examine some of the challenges the industry faces and how EDI has already helped deliver improved outcomes, before looking at the simple, modern EDI solutions that will be required moving forward.

The challenges facing the automotive industry

Increasing requirements for a flexible and global approach have left the automotive sector at a crossroads. New challenges have left OEMs, retailers, and their suppliers seriously reconsidering their processes.

As a result, there are some significant areas of concern for the industry, the most obviously pressing of which include:

Continued fallout from the pandemic: Automotive spending dropped by as much as 30-40% during the pandemic² and, even as appetites for personal vehicle ownership rise, ongoing parts shortages³ are creating significant setbacks. With car manufacturers including Ford and Volvo excluding crucial safety features from new cars due to chip shortages, the pandemic is still taking a significant toll on operations and profits.⁴
Increased bureaucracy as a result of Brexit: Brexit shake-ups that have significantly hindered the supply of parts across a European market have left Britain, in particular, less appealing for global trade. Increasingly convoluted border controls are causing significant delays, price increases, and longer journey times.
Global supply chains: Global trade has been increasing complexity within automotive supply chains for a number of years. The restrictions put in place due to COVID-19 have further highlighted the difficulties that can arise for suppliers and manufacturers operating in global supply chains.
Shifts towards hybrid vehicles/EVs: As the government plans to ban diesel sales across the UK by 2035, accelerating demand for EV supply means that current business processes require major overhauls.⁵ The onboarding of new suppliers is set to skyrocket, creating an increase in demand that leaves no room for outdated approaches.

EDI’s role in the industry

EDI has been a key component of smooth automotive supply chains for over 40 years, enabling global operations to benefit from the seamless digital transfer of business documents to trading partners around the world.

Legacy EDI systems have provided solutions and improved outcomes for the industry, perhaps most significantly:

1. Increased visibility

With the average vehicle consisting of as many as 30,000 parts,⁶ it’s hardly surprising that as much as 81% of the automotive industry⁷ is concerned about visibility. Unfortunately, truly visible processes can be difficult to obtain.

By standardising and digitising information exchanges across supply chains, EDI solutions provide enhanced levels of oversight. Central views of all supplier processes are especially valuable when paired with the ability to communicate all relevant information in real-time. This enables effective tracking of parts, and can help improve business operations and supplier management.

2. Greater accuracy

EDI services provide the enhanced levels of accuracy that extensive automotive supplier networks need, particularly in light of supply shortages. The digitisation of supply documents removes manual processes, thereby greatly reducing the risk of disruptions that could potentially impact production lines.

This improved accuracy that EDI solutions can facilitate within automotive supply chains unlocks a whole range of additional benefits for businesses, including:

Time-saving: The ability to seamlessly communicate across often expansive automotive supply networks in seconds saves significant amounts of time when it’s in shorter supply than ever before.
Cost savings: After significant financial losses throughout 2020, in particular, lowered operational costs thanks to EDI adoption (as much as 35%) enable reinvestment in struggling areas, such as the onboarding of eco-conscious EV suppliers.⁸
Generally increased efficiency: With the help of EDI, businesses can drive improvements in efficiency across a number of areas, including delivery and communication. This subsequently allows businesses to direct more time and resources into other critical areas of their operation.

Further reading: If you want to understand how EDI can be utilised to create a competitive advantage for businesses, check out our free eBook — The Supply Chain Centred Business

There’s still room for improvement

EDI’s value within modern automotive supply chains is undeniable, but there are challenges that come with legacy solutions that significantly hinder the benefits EDI has to offer, such as:

Slow and complex onboarding: EDI onboarding can be a time-consuming process that ultimately hampers supply chain flexibility.
Numerous standards and protocols: A range of EDI standards and protocols can make efficient supply chain management a challenge, thereby limiting the ability of a single EDI solution to function across one supply chain.
Lingering manual processes: The need to accommodate a range of EDI protocols and standards can lead to the creation of semi-automated processes in legacy EDI solutions, resulting in manual processes that cost time and money.

EDI-as-a-service: A simple solution

Despite the benefits EDI has already provided to the automotive industry, the deficiencies of legacy solutions are difficult to ignore in the face of increasingly complex supply chains. As a result, the future of EDI will require a simple solution. This solution will need to be able to handle the complexities that come with global trade, and provide resilience in the face of disruptions like COVID-19 and Brexit.

Here at Data Interchange, we believe the adoption of an auto supply chain strategy that uses a combination of cloud-based tools and managed services is that solution. We call this EDI-as-a-Service.

The integration of EDI-as-a-Service into automotive supply stands to offer a number of competitive benefits, such as:

Single source of truth: Single source access to all EDI documents across a supply network simplifies planning and communication, especially across just-in-time (JIT) automotive processes that rely on fast turnovers and real-time demand.
Simplified onboarding: By accommodating a wide range of EDI standards and effectively onboarding suppliers with little-to-no EDI experience, EDI-as-a-Service can help offset delays and prevent further complications regarding EV-oriented parts suppliers.
Managed support: On-going managed support from experienced professionals ensures an adaptable solution that meets the EDI requirements of business partners across the supply chain.

Our team at Data Interchange is on hand to help you get your automotive supply back into the fast lane. Book a demo today and see for yourself the impact EDI-as-a-Service can have on your business.

¹COVID-19 and the future of the automotive supply chain
² Global Auto Production in 2020 Severely Hit By COVID-19 Crisis With a 16% Drop in World Auto Production
³Chip shortage: Toyota to cut global production by 40%
⁴Chip shortage: Ford, Volvo exclude safety features from new cars
⁵Electric dream: Britain to ban new petrol and hybrid cars from 2035
⁶Top 4 Automotive Supply Chain Challenges and Solutions
⁷Smart Solution for Supply Chain Challenges in Automotive Industry
⁸Understanding the benefits of EDI (Electronic Data Interchange)