EDI in the Automotive Sector: JIT and Lean Production

EDI in the Automotive Sector: JIT and Lean Production

Disruptive forces are currently impacting all areas of the automotive sector. While concepts for autonomous driving are now being developed and tested, automobile manufacturers are also broadening their focus on networked vehicles and digital services. To remain competitive, however, they still need to fundamentally ensure that production remains highly optimized. These factors come under the spotlight in Deloitte’s “The Future of the Automotive Value Chain: 2025 and beyond” study.

In this regard, the seamless collaboration between the OEM (original equipment manufacturer) and its suppliers along the supply chain plays a crucial role in ensuring efficient and lean production on the assembly line. To facilitate just-in-time (JIT) and just-in-sequence (JIS) processes, a large number of individual components need to be fitted correctly and punctually throughout the production chain. Crucially, these parts all need to be delivered on time and to the right location. The conventional warehousing of components must be avoided as far as possible to eliminate additional costs, capital lockup and storage risks. These highly optimized production processes (commonly known as lean production) tend to be extremely complex and in the automotive sector they are facilitated, or even made possible, through EDI integration. EDI is a high-performance, robust method of exchanging data, which has been tried and tested over many decades. It has become indispensable in the automotive business, where suppliers offering a professional EDI connection enjoy huge benefits.

The automotive sector exploits the substantial advantages offered by EDI integration on a large scale. There are also a wide range of other options for the automated interchange of documents and records, such as the utilization of standards between tier 1 and tier 2 suppliers, or the implementation of message types which enable the extensive automation of packaging management.

EDI-based processes in the automotive sector

EDI integration enables the standardized interchange of digital documents, e.g., shipping notifications, within processes all along the supply chain. In addition, it also facilitates the sharing of data which is essential for the logistics processes. To facilitate this communication, various EDI standards have been established especially for the automotive sector. Most commonly employed for exchanging data in the automotive sector are:

  • EDIFACT (international standard, commonly used in Europe)
  • ANSI X.12 (standard deployed across various sectors in North America)
  • ODETTE (standard for the European automotive sector)
  • VDA (standard used by the German Association of the Automotive Industry)
  • Galia (standard for the automotive sector in France, similar to the Odette standard)

Although various standards are in use, the underlying processes are actually very similar. Firstly, by way of a call-off purchase order, an OEM orders automotive components from one of its suppliers. The respective supplier picks and packs the components or parts specified in the order. In parallel, the shipping notification is sent out. The goods are then delivered to the OEM’s manufacturing facility. A shipping label affixed to the consignment enables the recipient to simply scan the goods upon arrival at the receiving area. This enables error-free identification of the delivered goods and speedy allocation to the respective production sites.

The message types used most often are:  

  • DELFOR (Delivery Forecast) This overview provides the supplier with a forecast of the long-term and medium-term material requirements (e.g., annual planning). Suppliers are thus able to plan their own production and procurement of materials accordingly.
  • DELJIT (Delivery Just-In-Time) In addition to the delivery forecast, concrete, short-term call-off orders are communicated by way of a DELJIT message. This occurs regularly and ensures that the delivery of goods can be aligned to meet current demand, making sure that the production processes are not disrupted.
  • DESADV (Despatch Advice) This message is sent to customers by their suppliers to provide them with details of an upcoming delivery (advanced shipping notice).
  • RECADV (Receiving Advice) A message sent to the supplier to confirm that the goods have arrived at the customer’s receiving area
  • INVOIC (Invoice) The supplier initiates the invoicing process with this message to the customer.

Wide-ranging benefits for the automotive industry

EDI represents a quick and efficient option for transferring business documents to support JIT/JIS and lean production in the automotive sector. High levels of transparency over goods on stock and the reliable notification about when deliveries are due to arrive at the production lines are both critical factors for success in modern production. With EDI, all of the data the companies require is transmitted in an automated and standardized manner. Through the use of EDI, it also becomes possible to monitor the transmitted data elements transparently within the production chain. All digital documents which have been transferred are trackable and traceable throughout the process and beyond, for instance using time stamps. Companies can generate the most benefit out of their EDI integration if the data interchange is established in both directions – to its customers and its suppliers.

This, of course, presupposes that those business partners also have EDI capabilities, both technically and organizationally.

Why you should opt for Retarus’ Managed EDI Services

Nowadays, digital transformation is already helping automotive companies and their suppliers to become more competitive and organize themselves perfectly for the future at the same time.

With Retarus Managed EDI Services you connect your business partners with your company – efficiently, transactionally and quickly. In this way, you not only streamline the sharing of data between the organizations, but also optimize your entire supply chain. Communicate with your business partners efficiently and directly, from virtually any ERP, SCM or backend systems. Retarus supports all the above-mentioned standards, protocols and processes. In addition, we comply with the ENX and TISAX security standards for the automotive sector because our professional, enterprise-level solutions ensure maximum levels of IT security and data protection.

Retarus rounds out its comprehensive portfolio of services with an array of other cloud services, such as WebConnect for SuppliersIntelligent CaptureE-InvoicingCloud Fax and Email Security and much more.

Whether you’re a tier 1 or tier 2 player in the automotive sector, the EDI experts at Retarus would be pleased to answer any questions you may have about using EDI in your specific situation. Please feel free to contact your local Retarus representative for more details.

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