EDI in the Automotive Industry

Many of the business processes used in the manufacturing of today’s cars were developed from a production system devised by Toyota in Japan. Best practices such as Just-In-Time (JIT) and Lean Manufacturing were developed around the ‘Toyota Production System.’ JIT and Lean Manufacturing processes are central to the smooth running of many production lines around the world and EDI provides a fast and efficient way to transfer business documents in order to support these types of manufacturing processes. Providing visibility of inventory levels and notification of when shipments are due to arrive at the production line are critical to making JIT and Lean manufacturing processes a success.

The global nature of the automotive industry means that it is important for car manufacturers to be able to onboard their suppliers as quickly as possible, no matter where they may be based around the World. Many car manufacturers have established a manufacturing presence in Eastern Europe, Brazil and China, for example. It is important to ensure that suppliers located in these regions are able to exchange EDI documents as smoothly as possible. ICT skills across low-cost or emerging markets are traditionally very scarce. Therefore, the car manufacturers must ensure that they can provide simple-to-use EDI tools that enable even the smallest suppliers to trade electronically.

Due to the global nature of the automotive industry, there are numerous communications and document standards in use today, along with a number of regional EDI networks. The structure of the automotive supply chain and a description of the communication protocols and document standards used are described below.

Supply Chain Structure

The automotive industry has a ‘tiered’ supply chain structure, which is best illustrated by way of the diagram shown below. Upstream from the car manufacturer or OEM are the Tier 1 suppliers. These companies will typically supply some of the largest components or sub-systems for the cars, such as a suspension assembly or gearbox. Moving upstream, the Tier 2 suppliers typically provide components to the Tier 1 suppliers and these could be pump units, electric motors or bearing assemblies. Then further upstream you have the Tier 3-x suppliers who will provide the Tier 2 suppliers with anything from brackets, seals through to machined components etc.

As the Tier1 suppliers are the most important to the car manufacturers they will typically have a plant close to the car manufacturers to support Just-In-Time type production processes. Tier2 – x suppliers could be based anywhere in the world and many companies in this particular sector have established a manufacturing presence in low cost countries around the world, for example China and India. In addition to the tiered suppliers, there are also raw material providers, such as the steel manufacturers who will provide sheet products directly to the car manufacturers.

Downstream from the OEMs the third party logistics (3PL) providers will distribute finished vehicles to storage compounds and vehicle distribution hubs located around the world. These will then get shipped to the dealer networks as and when required.

Communication Protocols Used

The automotive industry uses a number of standard communication protocols such as FTP, but in Europe the main communication protocol is use today is OFTP, Odette File Transfer Protocol. OFTP has been used across the European automotive industry since the mid 1980’s and most of the car manufacturers are using this protocol to communicate with their business partner community. With the introduction of the Internet many car manufacturers have been working with the Odette organization to try and bring the OFTP standard up to date and a new release called OFTP v2.0 was introduced to the automotive market in 2010. This new version of OFTP has been designed from the outset to be used across the Internet and it offers secure exchange of documents using encryption and the exchange of digital certificates. OFTP2 also allows large files such as Computer Aided Design (CAD) files to be exchanged with ease. Exchange of CAD files is a common problem within the automotive industry due to the sensitive nature and large size of the files being transferred.

Document Standards Used

In addition to the more traditional EDI documents such as ANSI X12 and EDIFACT, a number of regional standards have been used to support the car manufacturers in Europe. For example, in France the Odette standard is used quite widely among car manufacturers such as PSA Peugeot Citroen and in Germany the VDA organization has written a set of document standards to suit BMW, Daimler AG and VW Group. The use of Web EDI solutions is common across the automotive industry, as it allows small business partners to exchange business documents with the car manufacturers. To discourage the car manufacturers from establishing Web EDI portals, each having a different look and feel, the Odette organization in Europe has developed a standard for how the Web EDI forms should be laid out on a web page. Odette Forms Version 2 is the current standard is use today and Web EDI solution providers typically have to be certified against this forms standard before their solution is homologated by the Odette organization.

Industry Associations

The automotive industry is served by a number of industry associations. These associations are tasked with providing standards for how automotive companies exchange information electronically with each other. Due to global expansion in recent years, the industry associations around the world are starting to work more closely with each other to allow the automotive companies to set up new plants and onboard new business partners as quickly as possible.

The automotive industry associations are located in the main manufacturing hubs around the world, for example North America, Europe and Japan. They actively work to get the automotive companies in their respective regions to become members of their associations and to contribute to the various working groups and projects that are undertaken. Typical projects include Materials Management Operations Guideline and Logistics Evaluation (MMOG/LE), OFTP2, Materials Off-Shore Sourcing (MOSS) project. The work of the industry associations provides the ideal environment to beta test these projects before they are deployed in production across the automotive industry.

Some of the main industry associations include Odette which serves the European automotive industry. Within this group the VDA organization serves the requirements of the automotive companies based in Germany and Galia serves the automotive companies in France. The Automotive Industry Action group (AIAG) serves the North American automotive industry and the Japanese Automotive Manufacturers Association (JAMA) serves the Japanese automotive industry.

Industry-Specific Networks

In addition to the traditional EDI VAN providers, the automotive industry is served by a number of regional private networks. The most popular networks are the American Network eXchange (ANX), European Network eXchange (ENX) and the Japanese Network eXchange (JNX). These networks provide a very secure method of exchanging information across an automotive community. In Europe, for example, ENX is used to provide the quick exchange of engineering design or Computer Aided Design files. Even though the networks were originally developed to service the regional requirements of the automotive companies, their global expansion has meant that there has been a need to provide connectivity to these individual networks. OpenText Business Network provides interconnectivity between the various private networks allowing the automotive companies to exchange information seamlessly across the world.