The vast majority of respondents in Supply Chain Insights’ recent study “EDI: Workhorse of the Value Chain” said that the most important EDI documents for improving supply chain performance are the Advance Ship Notice (85%) and the Purchase Order Acknowledgment (84%).
Why would that be? Well, these two documents provide buyers and suppliers with visibility into order status without having to pick up the phone or send an email, and this improves efficiency in their supply chain. Now, here’s how these two documents fit into the EDI ordering process and why they provide major benefits in the supply chain process.
The buyer sends an EDI Purchase Order to the supplier. The supplier can then send a Purchase Order Acknowledgment back to the buyer, in which the supplier agrees to fulfill the order according to the terms of the purchase order. If the supplier is unable to meet all the purchase order requirements, the Purchase Order Acknowledgment can provide information as to which portions of the order can be fulfilled.
The buyer can then transmit a Purchase Order Change document when there is a need to change the original purchase order, due to a change in the buyer’s needs or because the supplier cannot meet all the requirements in the original purchase order. The supplier then sends a Purchase Order Change Acknowledgment back to the buyer. Use of the Purchase Order Change and Purchase Order Change Acknowledgement documents simplifies a process that otherwise, when handled manually, is very complex. In fact, in some industry sectors, like general merchandising, a purchase order is often changed four or more times.
Automating the exchange of purchase order-related documents provides numerous benefits to companies:
- Faster, more accurate order-to-receipt process due to the elimination of slow, error-prone manual ordering;
- Reduction or elimination of resource-intensive and time-consuming order status inquiries by both buyer and seller due to the use of EDI status documents that provide you with new visibility into your supply chain;
- Increased buyer flexibility due to the speed and accuracy of the EDI process. For example, the buyer can quickly seek alternative suppliers when a purchase order cannot be fulfilled;
- Higher levels of satisfaction by the seller, the buyer, and the buyer’s customers resulting from the benefits above.
The critical document in support of all shipping processes is the Advance Ship Notice (ASN), which lists the details of a shipment of goods due to arrive from a supplier, a third party logistics provider (3PL), or a fulfillment agent. Typically, the ASN includes much of the information that was included on the buyer’s original purchase order. It also includes carton identifications, content descriptions, and transportation details. New uses are continually found for the ASN. For example, some companies use data in the ASN to help them generate the Customs 10+2 Importer Security Filing for international shipments entering the United States.
The ASN often works together with the barcoded shipping label that suppliers affix to the carton/pallet/boxes being shipped. The identifying numeric characters of the barcode are also included in the ASN document, which can be read into the buyer’s warehouse management system (WMS). When a shipment arrives, receiving personnel scan the barcode affixed to the pallet of goods. The barcode is then automatically matched against the records in the warehouse management system to verify shipment accuracy. As a result, inventory levels are updated and warehouse personnel are notified where to forward the received goods.
The ASN document is at the core of many automated business processes, such as Evaluated Receipt Settlement; Drop-Shipping, and Cross-Docking.
Using EDI in the shipping and receiving processes enables both the supplying and receiving companies to compete in a business environment in which efficient delivery of goods to the right place at the right time, all of which is critical for success.
This is my last blog on the findings from Supply Chain Insights’ report.