Suppliers to the automotive industry are faced with a unique environment. To stay competitive, an automotive supplier must react to a complicated and ever-changing set of rules developed by the customer. These rules describe the exact methods that move product and order information through the supply chain. Automakers reach out and touch their suppliers at a moment’s notice to broadcast these mandates and changes in demand. Encompass EDI Consultants have deep experience with the unique set of Automotive EDI challenges faced by suppliers, including Regulatory, Logistics, and ‘Release Accounting’.
Unique Aspects of Automotive EDI
This concept is captured by the term ‘Release Accounting’ and is what sets the automotive industry apart from any other concerning EDI.
A supplier’s ability to manage the ‘Release Accounting’ process plays a key role in determining whether they can respond to customer changes rapidly and profitably. Those who have automated and integrated the ‘Release Accounting’ methods are well positioned for growth in the supplier community. They also report an increase in supplier ratings.
General Manufacturing rarely faces the same challenges.
Automotive EDI ‘Release Accounting’
Automotive EDI uses a radically different Order model compared to General Manufacturing (aka ‘Release Accounting’). The unique set of EDI transaction documents leveraged by this order model as well as associated activities include:
- Weekly 830/BELFOR Forecasts
- Daily 862/DELJIT Daily Ship Schedules
- No, or Infrequent, 850/Orders Discrete PO’s
- Order Releases managed using ACCUM-Shipped-to-Date totals
- ACCUMs reset to zero annually
- Releases frequently stated using ACCUM numbers, instead of Discrete QTYs
- Responsibility to maintain and reconcile ACCUMs is on the Supplier
- EDI 856/DESADV Advance Ship Notices (ASNs) are critical to the Supplier’s Monthly Performance Rating
- Accuracy mistakes cost several points for each instance
- Timing … typically the ASN must be sent and received within 20-30 minutes after the truck departs. If not, that’s also a mistake that costs points
- No EDI or Paper Invoices
- Instead, Invoicing is done using Pay-On-Receipt or ERS (Evaluated Receipt Settlement)
- Use of KanBan / Just-In-Time (JIT) Releases
- Kanban Numbers need to be received, stored, and returned on ASNs
- Kanban Numbers typically mean more frequent changes to individual Releases
- (similar to General Manufacturing) FIRM, UNFIRM, Planning Types
- Use of Authorization Limits for FAB, RAW limits
- This governs the reimbursement level for cancellations
The Role of ERP in Addressing Automotive EDI challenges
Electronic Data Interchange (EDI) and electronic commerce play an integral part in ‘Release Accounting’. Yet translating the EDI document into human-readable form is just the beginning. How the data is used and understanding how these unique requirements should be processed, is the essence of ‘Release Accounting’.
Every ERP System, which purports to accommodate ‘Release Accounting’ either has an internally-developed module (usually separate from the main system modules) or has developed a relationship with a 3rd-Party.
It is this 3rd-Party relationship where Encompass has a deep experience base and can help customers select the optimum methods, configurations, and integration to best align with a supplier’s business needs.
For more information on Encompass’ EDI services and Entrust EDI solution, 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.
- Addressing Automotive Supplier Pain Points | Automotive EDI - February 4, 2022
- Automotive EDI Challenges | Regulation, Logistics, and Release Accounting - January 25, 2022