by Matt Springfield | April 18, 2024

EDI Shipping: How It Works in Logistics & 3 Key Benefits

EDI shipping

Electronic Data Interchange (EDI) shipping has become a cornerstone of modern business practices, enabling companies to exchange documents and conduct transactions with remarkable speed and accuracy. This article explores the intricacies of EDI in the shipping industry, detailing how it functions and highlighting its significant benefits. 

What is EDI shipping?

What does EDI stand for?

EDI stands for Electronic Data Interchange, a computer-to-computer exchange of business documents in a standard electronic format between business partners. This technology replaces traditional forms of mail, fax, and email where documents are exchanged in various formats that often require manual handling.

The EDI standard established a shared language that enables seamless transfer of business data between computer systems.

What is EDI in shipping?

In the context of shipping, EDI is used to streamline the communication processes between trading partners in the supply chain. This involves exchanging documents such as bills of lading, purchase orders, invoices, and shipment statuses. The aim is to minimize or eliminate manual errors and delays, thereby enhancing the efficiency of shipping operations.

By replacing paper or ad-hoc approaches to communicating with business partners, EDI provides a backbone for automating and digitizing critical data transactions like orders, shipping notices, and load tenders.

How does EDI shipping work?

EDI in shipping automates and standardizes the data communication process, ensuring that information is consistent and readily processed by different systems. The typical flow involves several stages:

Order generation and confirmation

The process begins when the buyer generates an EDI order (EDI 850) and sends it to the supplier. The supplier receives the order and sends back an order confirmation. This ensures both parties agree on order details such as product type, quantity, and delivery schedule.

Shipment details and creation of electronic documents

Once an order is confirmed, shipment details are organized, and necessary shipping documents are created electronically. These include packing lists and bills of lading, which are essential for the physical shipping process.

Data exchange between trading partners

The shipping documents are exchanged in a digital conversation between the logistics partners, warehouses, and transportation providers. This exchange is facilitated by EDI, ensuring that all parties share the same language and can automate the process of integrating and transmitting information.

Shipment tracking in real-time

EDI also enables real-time tracking of shipments. EDI documents like the Advance Shipment Notice (EDI 856) provide detailed information about the shipment's contents and its estimated delivery time, allowing all parties to prepare for receipt or further transportation.

5 key EDI shipping documents

  • EDI 850 Purchase Order: The EDI 850 document acts as a purchase order typically issued by a buyer to a seller, detailing the specific products, quantities, and agreed prices for products or services.
  • EDI 810 Invoice: The EDI 810 Invoice is sent by the supplier to the buyer to request payment for goods or services provided under the terms of an EDI 850 purchase order.
  • EDI 856 Advance Shipment Notice: The EDI 856 or Advance Shipment Notice provides detailed information about the shipping contents and their packaging. This document is crucial for preparing receiving operations to accept a shipment.
  • EDI 204 Load Tender: The EDI 204 is used by shippers to communicate the details of a shipment to a carrier, including pick-up, delivery, and handling instructions.
  • EDI 210 Motor Freight Invoice: The EDI 210 document is used by carriers to provide an itemized bill for services provided to a shipper, corresponding to the transportation of goods.

3 benefits of EDI shipping in logistics

  • Increased efficiency: By automating the data exchange and document processing, EDI significantly reduces the cycle time of document processing and minimizes the errors associated with manual processes. This efficiency contributes to faster order processing, quicker delivery times, and improved overall operational workflow.
  • Reduced risk: The standardized format of EDI reduces the risks of errors in data transcription, lost paperwork, and misinterpretations caused by human error. This risk reduction is crucial for maintaining compliance with regulatory standards and achieving a smooth operational flow.
  • Enhanced visibility and tracking: EDI provides real-time or near-real-time data transmission, which enhances the visibility of the shipment process across the supply chain. This increased transparency helps with better tracking and management of the inventory, ensuring that all parties are well-informed about the shipment statuses and schedules.

EDI integration with EDI integration platforms like CData Arc dramatically simplify the process of adopting EDI shipping for logistics and leveraging its myriad benefits. By automating the exchange of key shipping information, your business can eliminate manual data entry errors, reduce processing times, and maximize efficiency and speed.

Arc provides no-code EDI translation and mapping into other data formats like files, databases, ERP systems, and more – all without needing a dedicated EDI team or specialized knowledge. Whether it's converting EDI formats to match in-house database schemas or aggregating inventory data from multiple sources, the intuitive interface and extensive customization options in CData Arc empower businesses to tailor their EDI processes to their specific needs.

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