It is not sufficient to implement EDI on
its own. To realize its benefits, EDI needs to be seamlessly integrated with the software
solution used by a supplier. This can be termed a ‘whole solution’ and requires messages
to be received into the component supplier’s database automatically. For example, merely
printing the message from the data received does not constitute a satisfactory solution
for Volvo’s suppliers. Like many other OEM’s, Volvo has space constraints in its plants.
The key to the management of resources is better process control.

Why EDI?
EDI alone is not a solution. Instead, it is a means to a complete solution and a
facilitator for improvements in process efficiency. An example of the success of EDI at
Volvo is the goods receiving process. Before EDI was introduced, goods receiving took five
days. Parts were offloaded, registered, inputted into the system and inspected. The pallet
was located and stored, or dispensed to another warehouse location.

By re-engineering the process using
conveyors, smaller packages are now delivered directly to the assembly line, the goods
receiving process at Volvo, therefore, has been reduced from five days to 15 minutes! This
would have been impossible without the use of EDI. One could say that Volvo not only had
to re-engineer processes, but that it had to IT-engineer this process using EDI as well.

By suppliers pre-advising the dispatch of
goods, in an EDI message (AVIEXP or 856) at the time they dispatch from their factory,
Volvo knows what goods are to be received with details on packaging, destination, content
and a dispatch reference number. From this, Volvo can hold the details electronically,
pending the material receipt. At the supplier, the goods would be labelled with
information that was included in the dispatch advice message (AVIEXP or 856). As the
container is removed from the truck a scanner matches the bar-coded label with the message
already held. EDI is an integral part of the supplier/OEM relationship, that mutually
benefits both.

Better preparation
Traditionally Volvo used the ‘DELINS’ (830) message to suppliers as an initial
introduction to EDI. Historically, truck schedules and forecasts would be sent to the
suppliers quarterly. These forecasts were always prone to error. To overcome this problem,
Volvo now make trucks to order. This is facilitated by more frequent and responsive daily
planning. For example, the suppliers must be informed about the ordered version of truck
variant and its influence on the forecasts. This information would be impossible to
mediate to suppliers without the use of EDI as Volvo Trucks releases schedules daily. At
Volvo it is quite clear that without EDI, this could not have happened. It is fair to say
that Market forces for delivery on time and for what the customer requires, are driving
the use of EDI as one aspect of process re-engineering initiatives.

With space constraints, our truck
operations would have received huge batches of parts that could support many weeks of
production. Smaller batches (lots) have enabled Volvo trucks to reduce inventory by 70
percent. Again, without the use of EDI, this would not have been possible as the volumes
of information and timeliness of delivery make fax or mail impractical. The increases in
volume of data, resulting from smaller batches and more frequent deliveries, have been
managed at Volvo without any increase in staff.

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Despite this tremendous opportunity, Volvo
still has to convince its suppliers of the benefits. Naturally, the company wants to work
with suppliers who have integrated EDI capabilities. This will help it to maximize the
benefits in dealing only with suppliers who can send and receive EDI messages using an
integrated business system solution. Those who cannot will cause Volvo additional effort
it cannot afford. Hence, the company would like to move these suppliers to interface below
its better Tier One suppliers. However, this would cause further concern, as Volvo still
has a supply chain that can be improved. This may mean however, that it loses the direct
contact with those Tier Two suppliers who represent the biggest opportunity for

It is not surprising that Volvo wants all
suppliers to be EDI partners in the long run. Presently, Volvo are aiming to have 98
percent of suppliers receiving deliver forecasts (DELINS – 830) and 97 percent to transmit
dispatch advises (AVIEXP – 856). This is the key to Volvo’s future. To manage its supply
chain the company has considered helping to create a supplier network that meets three or
four times a year to find ways of improving the integration it needs. Volvo also select
parts to be supplied in synchronization with our production line. These suppliers will be
informed about our requirements via a specific message (syncho – 866).

A global perspective
Volvo uses EDI throughout the world in the manufacture of its trucks.

Fig.1 World Manufacturing of Volvo Trucks
Peru CKD
Malaysia CKD
Pakistan CKD
India CKD
China CKD
CKD = Completely
knock down kits of parts for local assembly.

Figure 1 shows the various countries in
which Volvo manufactures trucks. In Sweden, Volvo’s operations manufacture engines,
gearboxes, rear axles and castings and cabs. Volvo is managing this global production with
a unified approach, to realize the benefits already obtained in Europe. Volvo is in
contact with other global companies to ensure that common approaches to EDI are promoted.

While Volvo produces globally, all plants
are locally controlled. These plants may be CKD operations now, however, in the future
they may source parts locally and globally themselves. This is made possible with EDI.
Trucks are made at the plant closest to the customer. In Europe, the orders are processed
centrally. The scheduled requirements for these trucks are consolidated with orders for
spares and for build programs in, for example, Australia and Brazil. These schedules are
transmitted to Volvo suppliers who then have to dispatch the parts to the global
destinations. Volvo’s truck operation is much more global than it’s cars. It uses the same
concepts for EDI, with some 700 suppliers using EDI on trucks and 700 on cars.

Administration costs
Volvo has clear objectives in mind. Invoicing represents a huge transactional
volume for the company. Currently, Volvo want 85 percent of its invoice-lines to be
invoiced via EDI. More frequent deliveries in smaller batches (lots) again impact on its
administrative costs. EDI is seen as a means of the volumetric efficiency of Volvo’s
financial administration. A large part of Volvo’s opportunities lie in this area. The
company will be introducing EDI messages that enable it to monitor transport more
effectively. For example, the operation of ‘milk runs’ that collect various parts from
suppliers. It is envisioned that at each stop in the run the transporter will notify Volvo
of what goods have been collected along with the advisory note, that provides the arrival
time and date.

What about the future?
All transaction intensive activities lend themselves to EDI. Volvo is considering
the processes by which it procures ‘non automotive’ products. (The factory supplies and
services essential to its operation). Volvo buys many items in high volumes that would
benefit from the advantages of EDI, such as fuel, paper, and oil. In the area of finance,
more message standards are available to us for implementation. Other messages for spare
price lists and information about transport companies will also be tackled.

Product development time
As with other OEM’s, Volvo must reduce the time to market for new vehicle
development. The company wants to be able to send a drawing from its Computer Aided Design
(CAD) station to the supplier in one hour. Volvo is actively helping the Automotive
Network eXchange (ANX) initiative. This will facilitate the transfer of larger files
needed for engineering data. This is called ‘instantaneous engineering’ rather than
‘simultaneous engineering’.

For Volvo, EDI has been a critical factor in our survival as an independent OEM.
Recently, the company had a new supplier who said they wanted to do business using EDI.
The supplier would offer a four percent discount – but only if Volvo traded with this
supplier using EDI. Volvo sees this as a great step forward. This also indicates that EDI
has become a mature technology. Hopefully, suppliers around the world will come to
believe, as Volvo does, that factories which run with integrated EDI solutions are the
natural way forward for the Automotive Industry.

Ulf Nilsson is EDI manager for Volvo Trucks
worldwide. His responsibilities at Volvo include the maintenance and development of EDI
capabilities within Volvo Trucks. Ulf has held numerous roles in Volvo throughout his