automotive supplier pain points automotive edi

Addressing Automotive Supplier Pain Points | Automotive EDI

Automotive Suppliers face a bewildering array of frequently-changing Customer Requirements, Regulations, and Procedures, all intended to place the

Automotive Suppliers face a bewildering array of frequently-changing Customer Requirements, Regulations, and Procedures, all intended to place the burden of managing the flow of goods squarely upon their shoulders.  Keeping a close watch on Forecasts, Daily Ship Schedules, Advance Ship Notices, and Pay on Receipt can strain Supplier staff. While there is a wealth of Automotive Supplier pain points to navigate daily, we’ll address the most common and cantankerous in the following article, which includes:

  • Keeping track of Accum-Shipped-to-Date per Part
  • Inaccurate Trading Partner data
  • Rapidly-Changing Daily Ship Schedules
  • Advance Shipping Notification (ASN) mistakes
  • Pay on Receipt tracking
  • Regulatory procedures and requirements

Automotive Supplier Pain Points in Detail

In this section, we’ll break down Automotive Supplier Pain Points in more detail. If you’re an automotive supplier facing these constraints and could use some guidance, it might make sense to reach out to Encompass for the best means to ensure they don’t continue to disrupt your business.

Keeping track of Accum Shipped to Date per Part

Discrete PO’s and Change Orders are mostly NOT used, except for emergency or repair parts. So, Trading Partners/Customers express their Release requirements in terms of Accum totals.  This imposes a major burden on the Supplier to ensure both their and their Customer’s totals always agree. Additionally:

    • Suppliers keep track of Accum shipped to Date per Part
    • Customers keep track of Accum received to Date per Part

Reconciliation of differences between Accum Shipped and Accum Received is solely up to the Supplier to resolve….at times, changes are hourly…….or worse.

Annual reset to ‘zero’ (or close) means major effort depending on how many Parts are sold to Customers.

Inaccurate Trading Partner Data

This area of issue is characterized by Questionable Forecasts (some Trading Partners are better at Forecasting than others) and Delayed Goods receipt at the Trading Partner/Customer.

Trading Partners can take considerable time to actually ‘receive’ goods and materials into their system. Until this takes place, the reported ‘Accum Received’ values that are sent back to Suppliers on the next Daily Ship Schedule can be out of date and thereby misleading.  Trying to reconcile using outdated Accum data makes the task even harder.

An additional ‘side-effect’ of this ‘delayed receipt’ is the Trading Partner may continue to send the Supplier Requirements to ship that has already been shipped….and physically received…just not yet ‘received into the Trading Partner’s business system. This results in an inflated Order book for the Supplier unless extraordinary measures are taken to ‘filter’ these ‘duplicate requirements’ out of the inbound EDI.

Rapidly-Changing Daily Ship Schedules

Sometimes, Ship Schedules can change hourly. Some Trading Partners in Automotive may require all Suppliers to not only process EDI to manage Requirements but also have someone sit at a computer and log into a separate system at the Trading Partner to find what has just changed within the last hour or more recently, and then manually adjust accordingly.

If the order volume is significantly high, this ‘two-system’ method can severely tax a Supplier’s staff and systems.

Advance Shipping Notification (ASN) Mistakes

An ASN mistake can be catastrophic to a Supplier’s Monthly Performance Rating. For some Trading Partners, each such mistake can cost 5 points out of 100 points on that rating.  If a Supplier’s rating dips below 80 points, the Trading Partner may place the Supplier on a ‘Probation’ list, and if the rating is in that state for 3 months in a row, the Trading Partner may have the contractual right to Suspend all business with the Supplier pending a documented Process Improvement document being agreed to by both parties.

Because of this, most Automotive Suppliers’ EDI/IT staff tend to keep longer working hours and be ‘on call’ to immediately find and rectify any mistakes within a very short time (sometimes within 30 minutes or less).

Pay on Receipt (aka ‘ERS’ evaluated-receipt-settlement) Tracking

Typical Automotive Trading Partners may refuse to use either EDI- or Paper-based Invoices. They consider them unnecessary.  Instead, they will insist on an agreement with all approved Suppliers wherein the Supplier makes the required Shipments, sends the required ASNs, the goods are physically received at the Trading Partner, and then the shipment is cross-checked with the received ASN. The Trading Partner will then issue payment periodically that accounts for the Received Shipments.

The Supplier is then responsible to ensure that all Shipments have been balanced on the General Ledger’s Accounts Receivable with payments received.

Regulatory Procedures and Requirements

This is a very broad category of pain points. So, for the sake of simplicity, I’ve broken it down into three main areas of focus:

  • Domestic regulations
  • Export and international regulations
  • Future pain points

Domestic Regulations

Typically imposed by specific Automotive Trading Partners, to enable tight controls on product quality. Some Trading Partners will, for instance, insist that a Supplier completely re-submit Part  Approval paperwork if even the slightest change is made in the manufacturing process.  For example…a machine tool that is wearing out is replaced with a newer model…the PPAP documentation must all be re-done before shipping ANY product created by the new machine tool.

In today’s litigious environment, any manufactured Part that ultimately flies travels the roads or the rails or is involved in anything that the Public uses, could be called into question in the unfortunate case if someone gets hurt in any way.  Therefore, EDI gets included in the efforts to literally ‘keep track of everything in perpetuity.’

Export / International Regulations

Dual-Use Goods. If a given manufactured/purchased Part Number could be used in both a civilian as well as a military setting, then just about every country worldwide is going to want some measure of control over shipping that Part to certain other areas of the world.

Export Licensing then becomes the method by which permission is requested and granted for said shipments of that Part. Keeping track of all such Export licenses on all paperwork and EDI becomes a significant task.

Automotive is a worldwide market. All major Automotive companies have operations around the world or are trying to set those up.  EDI in this environment gains more attention with the wide variety of Governmental agencies, even to the extent of mandating how long all Trading Partners might need to keep archival copies for future legal proceedings.

Future Pain Points

If one uses the time over the last 50-70 years as a guide, then we would fully expect EDI to gain prominence in aiding, documenting, and alleviating future difficult circumstances (i.e…’ pain’), just like it has ever since being developed back around 1945 by the Automotive companies as a way to streamline the processes and lower everyone’s costs and errors.

Automotive Supplier Pain Points Resolved

These issues don’t have to be the bane of doing business in the automotive market. Encompass is equipped with the tools and staff to ensure you can accommodate these activities and deliver on your trading partner’s expectations.

For more information on Encompass and our EDI services, reach out using the contact us button below.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, or renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of the Industry.