EDI in Automotive

  June 22, 2012       By Ray Atia
In the first period of the 1980s, the AIAG, which is short for Automotive Industry Action Group, was created, and they were put together to lay out EDI standards for the entire industry and to help advertise EDIs with their manufacturers. Car companies and their suppliers now understand that EDI was absolutely necessary for conducting business. EDI has aided car companies in cutting down their expenses and staying cutthroat in a global international marketplace. The car companies have a JIT environment, and the delivery of parts to help create a car must be rapid and concurrent. The builder has to rely a lot on efficient and error-free delivery of parts to reduce disruption to the manufacturing process. The manufacturer has to send in an ASN for all the parts that are shipped out to the manufacturer. The car company has to quickly review all the documents, and they have to rapidly look over documents and react about any problems or inefficiencies. Since EDI is generally a batch-oriented process of exchanging information, there is no room for a slow time. Manufacturers have to talk directly with the car companys computer, and they should expect a response time within a few minutes. This objective enables the supplier to fix any errors in the shipment prior to delivery. Car companies should take this process a lot further and stop invoicing. When components arrive and are scanned in, the information is paired with the information that was previously sent in that was connected to an ASN. The records that are matched are sent back to the accounts payable system, and this starts off the payment cycle. This objective is called the ERS, which is an acronym that stands for evaluated-receipt settlement. It gets rid of invoices, makes business procedures more efficient, and is better overall. Once ERS is set up in place, all the trading partners need to have a better idea of cash forecasting, and they can often get better payment terms. The car industrys next step forward is the idea of pay on production. The parts are paid for when they are sent in or received. The large car companies are developing big extranets to get EDI exchange in a more real-time and cheap fashion.