Understanding EDI: The Common Language for Supply Chain Communication
Understanding EDI: The Common Language for Supply Chain Communication
If you work in transportation and logistics, you know effective communication is the backbone of operational success. Companies rely on the seamless exchange of data between systems to ensure freight moves efficiently and customers remain satisfied. At the heart of this process lies Electronic Data Interchange (EDI), a standardized method for exchanging information electronically in a structured format. But how does EDI work, and what technologies facilitate its connection to various Transportation Management Systems (TMS)? Let’s explore.
What Is EDI?
Electronic Data Interchange, or EDI, is like a universal language that enables businesses to exchange critical supply chain information such as purchase orders, shipment updates, invoices, and load tenders. This "language" relies on agreed-upon constructs—structured message formats—to ensure clarity and consistency. Common EDI document types include:
204 (Load Tender): Details about a shipment request from a shipper to a carrier.
214 (Shipment Status): Provides real-time updates on a shipment’s status.
210 (Invoice): A digital invoice for billing purposes.
These structured documents eliminate the need for manual data entry and minimize errors, making them indispensable for modern logistics.
How EDI Connects to TMS Platforms
EDI doesn’t exist in a vacuum. It must connect to TMS platforms, which are the central hubs that manage freight operations. Three primary methods facilitate these connections: SFTP, AS2, and API (HTTP). Each serves a specific purpose in enabling secure and reliable communication between systems.
1. SFTP (Secure File Transfer Protocol)
SFTP is a method for transferring files over a secure connection. It’s widely used for EDI because it offers encryption to protect sensitive data during transmission. Here’s how it works:
The EDI file is generated in the agreed-upon format.
The file is transferred securely to the recipient’s server using an SFTP connection.
The TMS ingests the file and processes the data.
SFTP is favored for its simplicity, security, and ability to handle large file transfers.
2. AS2 (Applicability Statement 2)
AS2 is another popular protocol for EDI file exchange. It provides a direct, point-to-point connection between trading partners, ensuring data integrity and security. Key features of AS2 include:
Encryption and digital signatures: Protect the data and verify sender authenticity.
Real-time acknowledgment: Confirms that the recipient has received and processed the file.
AS2 is especially common in retail and automotive supply chains where data security and speed are critical.
3. API (Application Programming Interface)
APIs, particularly those using HTTP, are becoming increasingly popular in modern logistics due to their real-time capabilities and flexibility. While EDI traditionally relies on batch processing, APIs enable instantaneous data exchange. For example:
A TMS can send an API request to a carrier’s system to retrieve real-time shipment tracking information.
The carrier’s system responds with the latest updates, which are displayed in the TMS.
APIs complement traditional EDI by enabling faster communication and more dynamic workflows, making them ideal for businesses looking to enhance visibility and agility.
Why EDI Matters for Supply Chain Professionals
Understanding how EDI works and connects to TMS platforms is crucial for transportation professionals. Here’s why:
Improved Efficiency: Automating data exchange reduces manual entry and the risk of errors.
Scalability: As your business grows, EDI can handle increasing transaction volumes without adding complexity.
Compliance: Many large shippers and retailers require their partners to support EDI to ensure consistent communication.
Cost Savings: Streamlined processes save time and money, allowing teams to focus on higher-value activities.
EDI at Bitfreighter
At Bitfreighter, we specialize in making EDI connections simple and efficient. Whether it’s through SFTP, AS2, or APIs, our platform enables seamless integration with various TMS platforms, allowing you to supercharge your logistics operations. With thousands of integrations and unlimited transactions, we help transportation companies scale their operations without breaking the bank.
By understanding the technologies that power EDI and their role in connecting supply chain systems, you’ll be better equipped to navigate the complex world of logistics communication and deliver exceptional value to your customers.
