Customers of contract manufacturers want to know the exact location and condition of their products at all times. This has led to increased customer expectation for reporting, which in turn has made electronic data interchange (EDI) a necessity for new companies hoping to make an impact in contract manufacturing.

In addition to its reporting capabilities, EDI also presents some subtle opportunities for savvy manufacturers. When companies pair EDI with a robust enterprise resource planning (ERP) solution, there exists an excellent opportunity to achieve true lean operations, while paving the way to integrate value-added activities into the manufacturer’s portfolio.

ERP, EDI and Automation

Everything in EDI requires double communications - if the customer sends an Advanced Shipping Notice, the manufacturer must reply with an acknowledgement. This double-entry dynamic, combined with the high volume of EDI transactions, represents the point at which doing business with larger companies begins to take its toll. Without a comprehensive ERP solution in place, a manufacturer will struggle to organize the volume of EDI messages, not to mention the task of manually creating documents for invoices, production, etc.

A robust ERP system, on the other hand, differentiates between EDI messages. When receiving an advance notice of an inbound shipment of product from the customer, the ERP system will recognize the message type and, in response, automatically generate the appropriate billing, purchasing, and manufacturing documents. Every individual EDI message triggers a different response on the back end of the ERP system, creating an integrated and seamless, automated process.

The manufacturer does not have to do anything on the technical side within the ERP solution to “link” these business transactions or to make them run.

Contract manufacturers should make sure that their prospective ERP solution delivers these agreement types out of the box.

Scheduling Agreements

A state-of-the-art ERP solution will group related documents together in a centralized location via functionality, known as the scheduling agreement. Purchase orders are connected to production and advance shipping notices, for example, and all documents are connected to an overall customer forecast. Within scheduling agreements, information remains centralized, rather than scattered on disparate business documents isolated inside different functional modules, or outside the ERP via spreadsheets. Scheduling agreements are the one place where manufacturers can go to understand their exact progress with any given order.

This centralized location proves especially useful when a discrepancy arises between customer and manufacturer inventory levels.

Without a robust ERP solution, contract manufacturers cannot incorporate forecast schedules with ASN’s to automatically create production orders and line-item purchases. With a cutting-edge ERP environment, however, all these functionalities are handled within a self-contained, centrally located system of documentation. All data related to forecasts, inbound materials, production and packaging will reside within the scheduling agreement.



Sean Molloy is an industry solution principal for discrete and automotive industries at itelligence, Inc. Malloy is responsible for sales, development, quality and accreditation of vertical industry solutions.