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Electronic Data Interchange or EDI in Transportation: Breaking Down What it is and How It Works

edi in transportation

Today begins our series about electronic data interchange or EDI in transportation. We take pride at Cerasis, as a third party logistics company who has developed a proprietary web-based transportation management system, to offer technology solutions to our shippers so they may remain as efficient as possible and have access to information at their fingertips.

Furthermore, we also want to educate those in the industry on such available technologies such as EDI in transportation so that they may make sure when they are either choosing a new transportation management system or are using one already, that the user demands that EDI is a part of the TMS.

In this series, we will first talk about how EDI in transportation works and what it is, covering the history of EDI in transportation, the definition, how it works technically, and then some common EDI codes used within the transportation industry. Then we will cover in subsequent posts what are the benefits of using EDI in transportation along with a transportation management system, we will debunk a few myths, and then we will end the series by highlighting how a shipper at Cerasis used EDI to reduce freight expenditures and resources.

What is Electronic Data Interchange?

Let’s back up a bit before we specifically address EDI in transportation. First we must understand and get on the same page of what is Electronic Data Interchange, or EDI, as it is not only used in the transportation industry.

According to Wikipedia and EDI Basics, Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format between business partners.

EDI was first developed in the 1960s with the objective of speeding the movement of shipping and transportation documents. Its application has expanded from enabling the electronic exchange of purchase orders, acknowledgments and invoices to include global procurement and sourcing.T

History of EDI and EDI In Transportation and Logistics

Being the force that facilitates the movement of goods across our planet, the transportation industry is perhaps the most important to our economies.  Not surprising, the first industry to get involved with EDI was the transportation industry.

Edward A. Guilbert was serving as a logistics officer for the US Army in the mid 1940s.  During this time period, air was the only way to get supplies to certain areas of Berlin due to Russian blockades. Major General William H. Tunner tasked Major Guilbert with the the job of developing standardized manifests during the Berlin Airlift. This was desperately needed in order to facilitate the sheer number of deliveries, in the end amounting to almost 280,000 flights.  Later, while working for DuPont, he developed the first standardized electronic messages in the early 1960s to be sent between DuPont and Chemical Leaman Tank Lines.  The transportation industry, with its mountains of paper, needed this automation perhaps more than any other.

In 1965, the Holland-America steam ship line started sending the very first EDI messages, although still not called EDI.  But this set in motion the technology that would become known as EDI.  By 1968, many transportation companies...everything from railroads to trucking companies...were using electronic messaging.  The problem was that the difference in formats between trading partners was creating too much confusion.  Enter the Transportation Data Coordinating Committee (TDCC).  Mr. Guilbert served as President of the committee, and worked alongside Joseph Carley, Earl Bass and Ralph Notto.  Their job was to develop standards to be adopted between the various trading partners.  Those standards eventually gave way to Ansi X12 and modern EDI.

How does Electronic Data Interchange (EDI) Work?

Each term in the definition is significant to the understanding of how EDI works:

Computer-to-computer– EDI replaces postal mail, fax and email. While email is also an electronic approach, the documents exchanged via email must still be handled by people rather than computers. Having people involved slows down the processing of the documents and also introduces errors. Instead, EDI documents can flow straight through to the appropriate application on the receiver’s computer (e.g., the Order Management System) and processing can begin immediately.

A typical manual process looks like this, with lots of paper and people involvement:

EDI in transportation how it works

The EDI process looks like this — no paper, no people involved:

EDI in transportation how it works process

Business documents – These are any of the documents that are typically exchanged between businesses. The most common documents exchanged via EDI are purchase orders, invoices and advance ship notices. But there are many, many others such as bill of lading, customs documents, inventory documents, shipping status documents and payment documents.

Standard format – Because EDI documents must be processed by computers rather than humans, a standard format must be used so that the computer will be able to read and understand the documents. A standard format describes what each piece of information is and in what format (e.g., integer, decimal, mmddyy). Without a standard format, each company would send documents using its company-specific format and, much as an English-speaking person probably doesn’t understand Japanese, the receiver’s computer system doesn’t understand the company-specific format of the sender’s format. The American National Standards Institute (ANSI X12) and the United Nations (EDI for Administration, Commerce and Trade, EDIFACT) maintain the most widely used standards.

Business partners – The exchange of EDI documents is typically between two different companies, referred to as business partners or trading partners. For example, Company A may buy goods from Company B. Company A sends orders to Company B. Company A and Company B are business partners.

EDI In Transportation

EDI has become very popular in the haulage and transportation industry as transportation companies and load brokers are adapting their systems to cater for EDI document exchange.

The advantages for those working in the transportation industry is that routine high volume communications can be automated allowing dispatchers and accounts receivables staff more time to focus on more productive/profitable tasks and provide clients with better customer service. One of the main advantages of EDI is that it eliminates a dispatcher from having to manually key information into the dispatch operational and billing system. This results in saving time and money while eliminating any costly data entry mistakes. The other advantage is that transportation companies who are EDI compliant can communicate seamlessly and electronically with all parties in the supply chain process.

Common Transaction Codes for EDI in Transportation

All data is communicated between the carrier, shipper, and the consignee in electronic EDI documents known as ANSI X12 "Transaction Sets". The most commonly used EDI Transaction Sets in the Transportation Industry are:

  • 204 - Motor Carrier Load Tender: The shipper or 3PL via a TMS sends this transaction set to YRC the carrier to request a shipment pickup.
  • 990 - Response to the Load Tender: Used by motor carriers to indicate whether it will pick up a particular shipment previously offered by the shipper. This transaction is generated in response to a 204 transaction. This is used by the shipper or third party to make – or “tender” – the offer of the shipment. The 990 is used to respond to that offer. It may also be used to accept or reject a Spot Bid Request from a shipper.
  • 211 - Bill of Lading: The shipper or 3PL via a TMS sends this transaction set to the carrier to provide us detailed Bill of Lading information pertinent to a shipment.
  • 212 - Delivery Trailer Manifest: The Carrier sends this transaction set to the consignee or other interested parties, listing the contents of a trailer that contains multiple shipments that have been tendered for delivery.
  • 214 - Shipment Status Message: The carrier sends this transaction set to the shipper and/or consignee to provide up-to-date information on your shipments. Data includes dates, times, locations, route and reference numbers.
  • 210 - Freight Details and Invoice: The carrier sends this transaction set to the customer or third party as an invoice to request payment for services rendered. It provides detailed information of charges.
  • 820 - Payment Order/Remittance Advice: The payer (shipper or your third-party payer) sends this transaction set to the carrier to provide the carrier remittance/payment information.
  • 997 - Functional Acknowledgement: This transaction set is sent in response to each transaction set received to indicate acceptance by shipper, carrier or payee. It is an acknowledgement by any party to another party of data received.

Tomorrow we will continue our series on EDI in transportation covering the benefits of EDI when used in conjunction with a TMS. Are you currently using EDI as a shipper? Would love your thoughts in the comments below.

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Adam Robinson
Adam Robinson oversees the overall marketing strategy for Cerasis including website development, social media and content marketing, trade show marketing, email campaigns, and webinar marketing. Mr. Robinson works with the business development department to create messaging that attracts the right decision makers, gaining inbound leads and increasing brand awareness all while shortening sales cycles, the time it takes to gain sales appointments and set proper sales and execution expectations.
Adam Robinson
Adam Robinson
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  • John Hammond

    You might give the EDIFACT equivalent to the ANSI X12 Transaction sets and explain the necessary mapping process for interoperability?
    Maybe mention the trend towards data capture and entry “at source” and the re-use throughout the supply chain.

    • John, I’ll have to get this to our technology team. I’m not familiar with EDIFACT. I’ll be researching. Thank you.

  • Nathan

    I used EDI in airline industry for years in areas like PODs proof of deliveries, pre-advice messaging, pre-advice manifest, stock of ULDs at station, stock of ULDs on board etc but not knowing its widely used in transport sector as a whole. As mentioned EDI reduces human error problems and it saves time by just retrieving data from the system that has been enter once at first point of entry of a consignment etc. It reduce head-counts hence cost. The most reliable and favoured by airlines due to data security though expensive and some struggling airlines are now resorting to their own internet tailored systems though not secure as EDI.

  • Hi all

    Interactive Freight Systems Pty Ltd is the organisation I represent and we specialise in predominantly domestic EDI solutions that integrate to our Transport Management Software designed here in Australia.

    Following on from the dialogue already being discussed, we have seen a marked change in integration requirements of customers over the last 2 years across all 10 countrys we operate in. Specifically, 2 years ago 27% of our clients integrated to our software from either their ERP, WMS or CRM backend systems. 2 years later, Circa 79 % of customers integrate to our final mile despatch software as a means of increasing productivity, reducing costs and most importantly, eliminating the need to integrate directly to the carriers partner we engage with every day. (over 2,000 in the countrys we operate in) Carriers too are moving away from dated paper systems to EDI. Paper systems are still endemic here in Australia, this mainly being driven by a market serviced by about 68,000 carriers who have 5 or less in their fleets and specialise in niche geographical service provision which is necessary to service large, remote, sparsely populated area that is much of the Australian land mass make up.

    Airlines here in AU seldom integrate and I was intrigued to read the commentary in earlier comments that they do freely in the USA. You are very lucky as little appetite to do that here.

    Have enjoyed this forum – thanks for sharing

    regards

    Kerry

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