Revving Up the Supply Chain: Exploring the Future of Automotive EDI

[Transcript]

Jan Griffiths: 00:03

Welcome to the Auto Supply Chain Prophets podcast where we help you prepare for the future in the auto supply chain. I'm Jan Griffiths, your co-host and producer.

Cathy Fisher: 00:12

I'm Cathy Fisher, your podcast host. Our mission is to help automotive manufacturers recognize, prepare for, and profit from whatever comes next in the auto supply chain.

Terry Onica: 00:12

I'm Terry Onica. Your podcast host will be giving you best practices and key supply chain insights from industry leaders.

Jan Griffiths: 00:29

Because the auto supply chain is where the money is. Let's dive in.

Jan Griffiths: 00:37

Hello and welcome to another episode of the Auto Supply Chain Prophets podcast. Cathy Fisher, what do you think about this landmark decision, the Michigan Supreme Court case MSSC vs Airboss? Regarding contracting, what do you think about that?

Cathy Fisher: 00:56

Oh, my goodness, I read that ruling. Who in their right mind issues a blanket purchase order without dollar value or a duration? I mean, that's like purchasing 101. I would never issue a blanket purchase order without that key information.

Jan Griffiths: 01:13

Stranger things have happened. Terry, what do you think about it?

Terry Onica: 01:16

And it's so amazing, because a lot of the industry when you get down to suppliers, they just copy what their customers do. So, you can imagine how prevalent that might be and how many companies are going to have to go back and take a look at what they're doing today.

Jan Griffiths: 01:31

Yeah, well, all of this too made me think about releases. You know, I went right back to my supply chain days, thinking about releases and blanket order setups, and then my mind went to EDI. And I was thinking, you know what, this is a term you still hear. But is that a term that's going to stay with us? Is that a term that's going to go away? Is the technology going to go away? What's happening with that? And so today, we have with us Fred Coe. Now, Fred is very much a thought leader on EDI. He has over 25 years in the B2B space. He has held positions in just about every associated discipline. His team manages one of the largest and most complex B2B ecosystems in the world. Now, do you know a bit about EDI?

Fred Coe: 02:26

I have an outstanding team Jan and thank you to yourself and Terry and Cathy for having us today. But yes, I've got a team that does an outstanding job with EDI in the supply chain.

Cathy Fisher: 02:36

Could you give us like a very brief tutorial about what is EDI? And why is the automotive supply chain even using it?

Fred Coe: 02:44

Oh, that's a great question. So, EDI, Electronic Data Interchange, is a standard communication method of data between two systems at its most basic. And if you think about the complexity of the supply chain today, particularly in the automotive industry, every vehicle has 30,000 parts on average. And your OEM is ordering 4,000 parts, on average, from their tier ones. And it goes down from there to the different tiers to get to that 30,000 number. EDI is imperative from the order to cash lifecycle in the supply chain, managing those parts coming from all over the world, with all different types of materials. Virtually every mode coming into the plants to get to a finished assembled vehicle is staggering. And without EDI, it doesn't happen in the landscape that we have today.

Terry Onica: 03:33

Fred, you are the chair of the AIAG EDI advisory group. So, what are some of the things that industry is looking at right now? What are some of the projects going on in that advisory group?

Fred Coe: 03:44

So, great question. And I guess I would be remiss if I didn't mention that I'm here today and I'm standing on the shoulders of a lot of the individuals that standardized EDI in the automotive industry through AIAG. Many of my mentors coming into the field worked on all of the standards that we use today. And it was an honor when AIAG decided to bring the EDI committee back together to be a part of that. What's nice about AIAG is we can come together: different OEMs, different tier ones, software providers, logistics providers—right, all of the stakeholders in the automotive industry can come together and talk about what is it that's ailing them? What are the best ways to increase adoption with EDI? Other shared pain points that we have. And so, we've done that in the last few months. We've gotten together. And if you look at the last 10 to 15 years, there's been no shortage of opportunities for improvement. We've had wars and pandemics and natural disasters and all of which have disrupted the supply chain. One of the things that really stood out to us was the labor shortage. We're not seeing a number of young people coming into EDI at this point. I think much of it is awareness and training. But it answers your question, Terry. Well, we're going to focus right now on education. And we've just decided on kicking off a project to create a number of short videos that will be available through AIAG that will describe what EDI is, give some EDI one-on-one lessons, and get more advanced as time goes on. So, that's really where our focus is at this point.

Terry Onica: 05:17

And I know, Fred, both you and I have a big background in EDI and I can say to anybody out there listening that's considering EDI, they should look at it. Because for me, that's how I started my whole career in EDI, because when it doesn't go right, you start to learn the whole impact to the whole plant, to the customer. Think it's just a great start to a supply chain career.

Cathy Fisher: 05:41

I'd like to understand, Fred, what are some common applications of EDI in the automotive supply chain?

Fred Coe: 05:47

In terms of, so when you say applications,

Cathy Fisher: 05:49

So what processes does EDI support relative to the automotive supply chain?

Fred Coe: 05:55

We can start with ordering. Whether it's an OEM that's ordering from the suppliers when we talked about those 30,000 parts or the 4000 parts to the tier ones. Those orders go to the tier ones. Ideally, our tier ones to tier twos, if they've got that technology and the capabilities enabled, they'll go down the chain from there. And if you look at the rest of the cycle, it's when they ship the materials, they're sending an advanced ship notice into the plants. So that we've got traceability and trackability for the data. Right, plants know what's coming. So, when it shows up to the dock door, it's not a surprise. And it goes into payment. EDI actually transverses to swift transactions and other financial remittance advices. So, it's a full order to cash lifecycle. And if you turn it off, Terry, to your point, that 30,000 parts that we're talking about aren't showing up on time to make the vehicles.

Cathy Fisher: 06:46

Wow. So it sounds like it's really essential for a functioning supply chain.

Fred Coe: 06:51

Absolutely. And you don't realize that until it doesn't work, right? I often compare EDI to electricity. You take it for granted. It runs every day, it turns on. But when it's off, things just grind to a halt. There was a recent event that was termed the lifeblood of the EDI industry. And I think that's a very good analogy.

Jan Griffiths: 07:10

Can I just say, I just have to say this. I just learned more about EDI from what Fred said than I did in 36 years in supply chain in the auto industry. Fred, I've never heard anybody just put it together just so clearly and so succinctly as you just did. Thank you.

Fred Coe: 07:30

Oh, thank you.

Terry Onica: 07:31

You know, I was going to add on to what Fred said. When I was at Ford in 1989—gosh, it sounds like a long time ago—but helping them to launch all their EDI. And I remember when it first came out that we had, I think, something like 45 parts follow-up people. And by the end of the project, we just hit two. And that's because of the ASN, because when the ASN comes in, I know when the shipment's coming. And a lot of people fear that all jobs are going to be lost. No, that was meaningless work they were doing, answering the call all day saying, "Where's my parts at?" Right? That just streamlined the process. You're just working by exception management and moving on. I think it's just amazing all the efficiencies it's done. But you know, since 1989, it really hasn't changed at all. So, Fred, what are some of the things that you think the industry is looking at the advisory group? Is it going to be replaced? Are there new technologies that might come up in the near future? What are your thoughts on that?

Fred Coe: 08:26

I'll be honest with you, the reason that question is—well, I'm still with EDI. When I started EDI just a little over 25 years ago, I could not wait to get out. I was like, there's got to be something else, right? I didn't understand it. I wasn't as technical. And it really took me a year or two to really sink in and go, "Oh, this is a lot of fun," right? I really enjoyed the puzzles. You touch every single part of the business, whether that's purchasing, the supply chain, into receiving and the financials. You know, and so as we look forward, right, and that's really why I'm still here, is there's a lot of people that were foundational in bringing EDI to where it's at. And I'm hoping that I can help contribute with yourselves and with others to take it to the next level as we hand it off to the next generation of people that take that too. So, to that end, there's a number of opportunities that I see right now in terms of technology. I think artificial intelligence tools that are coming up are outstanding. The number of roles that the EDI analysts have played or EDI support has played in the past. I think AI is going to play a big part in that EDI mapping that has been done in the past that might take a day or two. If you train an artificial intelligence tool on the rules of EDI, the syntax rules, the structure rules, and you apply it to a translator or to integration maps, it's just really a series of if-then statements once you understand the business, and that is something that AI is ripe to do. And I think that's one of the keys to bringing in younger people into EDI, right? It's because it is agnostic to EDI. If you can do that with EDI, you can use that artificial intelligence to automate and do other things. So, I think AI has got a big part to play in the EDI mapping support. I think every one of us has called into a help desk or chatted with the help desk with an AI back end. I think AI is ripe to take on a lot of those functions. If a supplier says, "I didn't get a schedule," an AI engine could do a call to whatever your contracting application is to say, "Does a contract exist?" They can do a call to the ERP system, say, "Was there a forecast generator? Is there demand?" And it can go through that process and do all that troubleshooting for you and instantly bring back an answer to a user that might take somebody at the help desk or an agent, you know, 30 minutes to do. So, I think that's one of the biggest areas of opportunity that I'm really excited to see what can happen there.

Cathy Fisher: 10:51

So, along those lines, Fred, what about blockchain? Is that an option that could be supportive of EDI or replace EDI?

Fred Coe: 11:00

I think there's a complement to EDI with Blockchain. I've seen a few POCs with blockchain. I've read about it, particularly in the movement of material. But I haven't seen it yet where it's really proven itself as a replacement to EDI at this point. It's had some success in the banking industry. I've seen some in the shipping industry. But in terms of the high-volume transactional data, I've just not seen approval yet.

Terry Onica: 11:27

What about use of APIs?

Fred Coe: 11:29

I think those are a great complement to EDI. I've not seen APIs yet that can handle the same amount of rich data that the EDI transactions have. But I think that they're a good complement for the smaller, maybe higher volume transactions. I think there's probably a good case for those in the ASNs at some point. You know, we have to think about what the API is you have to expose an application right to the web, and then there are some cybersecurity concerns in that regard. I think we've got to overcome some of those challenges first, but I certainly think that there's a standard play for APIs, particularly with those types of messages. And the APIs, for the people that may not understand, it's really a direct interface to an application to call data up or to push data through. So, it's a direct interface into an application that bypasses your FTP scripts and the general or normal communication channels as they stand today.

Cathy Fisher: 12:23

So, Fred, when you were mentioning about ASNs and EDI, I was having a flashback to my days with QS-9000. I don't know if you remember the QS-9000, standard automotive quality management system standard. And interestingly, those two references, they were actually requirements in the QS-9000. Back in the day, as we moved to ISO/TS 16949, those requirements dropped out because ISO doesn't want specific technology or how being defined yet. With our current IATF 16949 standard, which is specifically for the automotive industry, standard for quality management, we need to put those references and those requirements back in.

Fred Coe: 13:05

I couldn't agree with that more. I think that EDI has got to be or has to be a condition to do business with any organization. It's no longer an order qualifier. It's no longer a nice-to-have. If you are unable to do EDI, then yeah, I'm sorry, we've got to move on to the next vendor. So, I absolutely think it needs to be a condition to do business.

Cathy Fisher: 13:25

EDI powers the automotive supply chain.

Fred Coe: 13:29

That's right.

Jan Griffiths: 13:31

Okay, all right. I got to give you another point of view here. Until you're the head of purchasing and supply chain of a tier one company who has to use a certain number of tier two suppliers. And a good portion of them say EDI, yeah, now, you're already source, you're already down the path. And it's of course, it's a widget that nobody else in the world can make. And you're stuck. And EDI does depend on the success-- true success of EDI depends on getting everybody on board, right? There's always one that gets stuck in the middle and snarls everything up any advice for those supply chain leaders who might be dealing with something like that, Fred?

Fred Coe: 14:11

I do. I think what we need to look at is we need to meet the suppliers where they're at. We just talked about the shortage of EDI specialists in the field. And that's compounded as you go down the tiers. So I do think that we need to meet the suppliers where they're at in terms of their abilities, whether that's helping them with a subscription, maybe to a web form based EDI solution. But there are options there for suppliers who don't have the ability to do a fully integrated system. And so as you go through and you're mandating those things, I think you just need to be creative in terms of finding a path for those one or two or a dozen suppliers that don't have the ability to do a fully integrated EDI system.

Terry Onica: 14:54

I'd like to add to that too with MMOG/LE there is a requirement that you must do strive to do EDI or web EDI with 100% of your suppliers. So, that's now in the standards. So, as that standard gets passed down the supply chain, I think that's one way we can start to inform people that you're going to have to do this. I am seeing tier ones getting a lot more success to your point jam with the tier twos by just simply saying you got to do it. There's portals now where the tier one can pass it through a portal to the tier two, and they don't even have to pay for anything. So, I think that's working well too, the only thing that I see there is if the tier one sends to the tier two, if they're not automatically processing it and sending it to tier three, now it gets stuck, unless the tier two requires an MMOG/LE of the tier three. So, I do see where we got to figure out a way to more seamlessly get it down the supply chain or mandate MMOG/LE throughout the whole industry to make sure that everybody's looking at that to make that happen. I don't know, Fred, if you have any other thoughts about just driving it down the whole supply chain, but that's the only way today I can see unless we do make advances in technology, which makes it much easier for these little suppliers that often say, I don't have the money to do it. I'm not going to do it.

Cathy Fisher: 16:16

I would like to ask Fred, how do we convince these tier twos, tier threes, etc., of the value that having EDI will bring to their organization not just meet a requirement that the industry, but to benefit them and their operations?

Fred Coe: 16:31

Sure, I think we just have to really give them more of a history lesson. I wasn't in EDI in the 1970s, and EDI really wasn't widely adopted then. But back then there were floors and floors of people. And there all it was were individuals that were manually faxing. You're writing out and faxing schedules to suppliers because it did not have EDI. And that still is impacting the tier twos and beyond today is the, oh, they're doing all of this manual work and it can go away with very little investment, and some of these newer software as a service-based solutions that they can get access to. So, I go back to I think it's just an education for the suppliers.

Cathy Fisher: 17:11

It sounds like accuracy of information, responsiveness to changes that may be taking place, just operating more efficiently. And of course, that's going to benefit. It sounds like how they're even managing internally, their scheduling and their production and inventory as well.

Terry Onica: 17:27

I know back in the days when I worked at Johnson Controls and I talked to some of our suppliers about EDI because I had to convince them to get on board. And I think for them, they used to tell me, well I like EDI because it used to take me hours to input all your releases from all your plants, and now it's just a hit of a button and they go in. It eliminated all of our parts follow people like I'd mentioned before, they weren't calling "Where's my parts," "Where's my parts?" And then just the reduction in inventory in the chain because they're getting communicated those requirements so much faster. I was involved in a project with AIAG many years ago, and the tier twos and threes were screaming, like I need visibility into that OEM release. Because what happens is they carry just in case inventory. I think oftentimes, it's the tier one that thinks the tier two won't want it. But with a little education and showing them how easy some of these portals are, it really eliminates that issue. And they do enjoy getting the data faster to their plants. So I see those just from my past experience. And I doubt they've probably changed that much in the years.

Fred Coe: 18:31

And I think that there's a really big opportunity. One of the great things in working in EDI, though there's an OEM or supplier is you generally are partnering with an ERP system and your partner or ETF provider. And there's opportunity right now for all of those providers to step up and do more with the data that they're receiving in EDI. And the more that they bring in that data; and they can display that data in a way that you don't have to be an EDI expert to read, whether it's dashboards or different reports. There's an opportunity there to get away from the transactional type and go to more like what we have with our phones today. You know, there's not too many people I know anymore that pay for bands of data. Most of it is unlimited, but you're paying for subscriptions to other things. And I think, I think there's a big play there for those providers to do more with that data and provide apps, things that make it easier on your phones and your tablets that are still integrated, but just makes doing EDI easier. I think that's a big push that we need to make to the tier twos as well.

Jan Griffiths: 19:38

Yeah, and if we learned nothing over the last year or so, from the chip crisis, well, that was all about transparency and being able to see into the OEM build schedule and be able to forecast and deal with this chip. I mean, the chip suppliers was screaming for transparency. And as I understand it, the capability is there right? It's already in EDI, you just got to decide how much you want the supplier to see, or did I oversimplify that?

Fred Coe: 20:05

No, no, I think you hit it on the head, right?

Jan Griffiths: 20:08

Okay.

Fred Coe: 20:09

But if you look at the chip crisis, there's over a dozen parts that go into that chip each one is a different tier to pulling the material out of the ground. And it's providing that visibility all the way down right for the wafers, and the raw materials, and getting that common forecast out across all of those part numbers down to the TRN.

Terry Onica: 20:28

And getting it down the chain quickly.

Cathy Fisher: 20:30

So, clearly, EDI is a very important driver across the automotive supply chain. Where should the function of EDI or let's say the responsibilities associated with EDI sit inside of an organization structure? Should it be in IT? Should it be in the supply chain? Should it be someplace else? What are your thoughts?

Fred Coe: 20:53

So, I could make an argument for any one of those. That goes back to one of the great things about EDI and careers in EDI, is you touch everything. And so, a bulk of the work is definitely in the supply chain space, in the forecasting, in the ASNs. And if I'm a tier one supplier, and I'm doing business with GM and Ford, and Toyota, and Nissan, and Paccar. I need to be familiar not only with the EDI structure for each one of those but the business: How do they order? What are their forecast times? What's the lead time? How does it interact with my business? And what does my business do with that data? And further, how do I push that down to my other tiers? So from that perspective, I would say purchasing and supply chain is a perfect fit. Some of that also depends on that function, because that function might also cover finance, right? Am I responsible for the swift transactions in the banking transactions? Is there an after sales component that falls into something different? We see a lot of the OEMs, a lot of the tier ones have separate groups. So I think supply chain is a natural fit for that function, certainly. And when it's with IT, and you're working with your IT colleagues on the ERP side, or your purchasing side, or your quality side, it really does sit in the middle of everything. So, it's kind of a non-answer, Cathy, being a little ambiguous. But I think supply chain is a good fit. But you could make an argument for a number of different areas in the business, which again, is what makes doing the EDI and working in the department so great.

Cathy Fisher: 22:25

It just shows how integral EDI is to a functioning supply chain.

Jan Griffiths: 22:31

I want to take this back to the beginning again and this goes right back to our 24 essential supply chain processes. It's about setting up the supply chain right. We just talked about lead times, I had all these horror stories that were going on in my head, I can't tell you how many times I've worked for companies where we didn't put the right level of attention and detail upfront to setting the part number up properly in the beginning-- so the lead times were wrong. You just said, oh yeah, you know, set this up in the ERP system. And they didn't know what they were doing. So sometimes they would make up a lead time. If they didn't have it right. Of course, EDI can only run and can only be successful if everything is set up properly. So, that goes right back to our 24 essential supply chain processes, 14 and 15. We got to get in there, we got to set up these parts properly, technology cannot run without the basic process of discipline. Is that right?

Fred Coe: 23:25

That's absolutely right. And this is where I hope that AI can start coming in and augment and plan some of that right, is a double checking those processes, making sure things are set up right; and if they're not, detecting it upfront before the first schedule goes out the door.

Terry Onica: 23:39

When I worked at Johnson controls, I would always say that EDI is like the IV into the plant. If they don't get those releases, it's like the patient starts dying, you know, you got to get in there quickly and revive the patient and figure out why the data's not getting there. It's just amazing at how critical that function is of EDI until you're in it. And you realize just how critical it is to the industry.

Fred Coe: 24:05

I've had the opportunity to work at an OEM level at the supplier level. And I've worked for the software provider, a couple of software providers and seeing all those different angles. And you couldn't be more right, Terry, because they're depending on those schedules coming in every week, every day, in some cases every hour, you know in terms of sequencing right? or VAAs, right? And so, when that doesn't work, and you don't know what to ship, you've got people on the phone, straight away, or going back to paper, and fax and that's where mistakes happen. When you start breaking down and not using EDI, that's when accuracy goes out the door. And you really get in trouble in terms of keeping your supply chain on track.

Jan Griffiths: 24:43

Fred, you've seen it all. You've seen it from a number of different perspectives to deal with supply chain problems every single day. What one piece of advice would you have for supply chain leaders in automotive right now? What do they need to do to prepare for the future? As it relates to EDI, what's one thing they should be doing right now?

Fred Coe: 25:09

It's innovation. It's getting new blood, new people exposed to EDI. Making sure they're trained, making sure they have backups, and innovate, make it attractive so that you can bring new people in and have fresh eyes, fresh ideas, and really help number one: maintain operational stability. Beyond anything else, operational stability; but then you know, as a next step; getting those people that come in that want to be there, that want to learn, and they realize that you're never going to know it all. You're going to learn something new every day and to keep that open mind and keep learning.

Jan Griffiths: 25:49

It's time to innovate EDI, Fred Coe, thank you so much for joining us today.

Fred Coe: 25:56

This has been outstanding. Thank you for having me.

Jan Griffiths: 26:02

Are you ready to find the money in your supply chain? Visit www.autosupplychainprophets.com to learn how or click the link in the show notes below.