Understanding the Difference Between EDI and API
Companies have been using Electronic Data Interchange (EDI) to share purchase orders, invoices and ASNs since the 70s. It’s pretty rusty technology, but everyone trusts it.
Application Programming Interfaces (API) are a more flexible way to connect systems from different companies together. Silicon valley lives off them. APIs can use EDI, or do without it. And unlike traditional EDI, they let different systems talk to each other in real time.
As businesses digitize their operations, they’re adopting more API-based services. One question that comes up is: do we need to replace EDI? There are advantages to doing so, but some companies prefer to keep their old systems running alongside the new, or even reimplement EDI via API.
There is a lingering perception that EDI is a kind of universal standard. But in real life, every interpretation of EDI is a little different.
It’s true that some industries, like finance and healthcare, find it harder to change from the long-established way of doing things. But in physical supply chains, continued reliance on EDI ends up being a bottleneck to continuous improvement. The benefits of real-time data exchange can be felt in everything from tracking shipments to knowing the availability of goods from different suppliers.
API technology isn’t perfect but it’s less error-prone and requires little maintenance compared to legacy systems. Not every company has the opportunity to replace EDI entirely, but those that can stand to benefit from doing it.
API as a Replacement or Alternative to EDI: What’s Behind the Shift?
The move from EDI to API across various industries is driven by practical factors:
- Unlike EDI, which is largely constrained to batch processing, APIs enable immediate data transfer. This real-time exchange is vital in industries where timely information is crucial for decision-making and operational efficiency.
- APIs provide the flexibility to rapidly adapt to new business processes or technological advancements. This adaptability is essential in an environment characterized by constant change.
- There’s significantly less chance of human error with APIs, and if an error is identified it can be corrected immediately and conclusively.
- APIs are at home in modern, cloud-based technology frameworks. This compatibility is a critical factor for companies undergoing digital transformation.
- Implementing and maintaining API-based systems tends to be more economical in the long term, avoiding the costs associated with the constant maintenance of EDI systems. Moreover, APIs offer better scalability, accommodating growing data needs without extensive reconfiguration.
This evolution from EDI to API doesn’t imply the immediate redundancy of EDI but rather signals a shift towards more versatile, cost-effective, and advanced technology. It's a response to the demands of modern business operations that require not just the exchange of data but the ability to do so swiftly, securely, and in a manner that supports ongoing innovation and growth.
The Resilience of EDI and Resistance to Change
The benefits of APIs are well-known. So why is EDI so sticky?
Part of it is practical (cost and risk of change), but most of it is perception. People have the idea that EDI is a universal standard, or at most a family of standards. If you and your supplier both use EDIFACT or both use X12, in theory all your data should match up.
Not so. There’s a good reason EDI experts were some of the best-paid IT professionals in the 90s and 00s, and to some extent still are. There’s almost always something that doesn’t quite fit, and customization that needs to be done to translate between two subtly different interpretations of a given EDI standard.
The chaos under the hood makes it hard to scale, but it can also make it hard to get rid of. Replacing legacy systems involves both financial investment and a reconfiguration of established business processes and perhaps even the training of personnel in new technologies.
For industries that have long relied on EDI and have a workforce skilled in its nuances, this shift comes with a substantial learning curve and demands a reallocation of resources. EDI systems have often been customized to meet the specific needs of industries or even specific companies, adding another layer of complexity.
The transition to APIs, while offering advantages of flexibility and real-time data processing, is weighed against the familiarity of EDI. For decision-makers in logistics and beyond, understanding these dynamics is crucial as they navigate the balance between innovation and operational stability in their digital transformation strategies.
Some Industries Won’t Stop Using EDI Anytime Soon
EDI's continued dominance in sectors like finance and healthcare is largely due to how well it fits within the regulatory and operational fabric of these organizations.
Its structured approach to data exchange simplifies compliance when it comes to handling sensitive information, a critical factor in such stringently-regulated industries.
However, it's worth noting that adherence to regulatory frameworks does not always equate to the forefront of cybersecurity best practices. While EDI meets compliance needs, it may not always represent the strongest security measures compared to newer technologies.
The integration of EDI with deep-rooted business processes adds another layer of complexity to the transition towards APIs. The cost and effort involved in such a shift, coupled with the inherent risk aversion in these sectors, make the move to more modern systems a challenging proposition.
As the business world at large leans into API-driven models, some sectors will probably continue to rely on EDI. This persistence is a reflection of its alignment with specific regulatory needs and its deep integration into the essential operations of these industries.
API and EDI Integration: a Hybrid Approach?
A growing trend in supply chain IT is the fusion of traditional EDI systems and modern APIs.
For businesses entrenched in EDI, APIs extend their existing capabilities with interactivity and integration with cloud-based services. This blend allows for maintaining critical EDI-based relationships and processes while opening doors to new, more powerful forms of system interconnectivity.
For example, consider shipping schedules and inventory levels, traditionally managed via EDI. When integrated with APIs, these elements gain real-time visibility and updates. This is a significant step beyond the batch processing of standard EDI, allowing for more responsive inventory management and scheduling adjustments.
However, the implementation of a hybrid EDI-API system requires navigating the complexities of data formats and workflows unique to each. This process calls for careful planning and a robust understanding of both technologies to ensure seamless integration.
The adoption of a hybrid EDI-API approach reflects a general preference in the logistics sector not to completely discard legacy systems. Indeed the industry's overall pace of digital transformation has been gradual. But in recent years, supply chain disruptions have started to increase the pressure.
Digital Transformation: Logistics and Warehouse Management APIs
Recent disruptive events have highlighted the need for faster decision-making. There’s a strategic realignment towards more data-driven operations, and a business-level push to bring transparency to processes that have long been hidden in silos.
The power of APIs in logistics is their ability to automate data collection from different sources. They make it much easier to bridge different types of systems, e.g. TMS to WMS rather than merely shipper’s TMS to carrier’s TMS. This kind of interoperability is key to unlocking more scalable operations.
This transition is part of a broader IT paradigm shift. Traditional IT expertise is becoming less common, while younger generations are more accustomed to developing "low-code" solutions using cloud-based services. Today a successful technology strategy is about using these third party services as effectively as possible.
In an industry where delays can have significant financial implications, APIs offer a way to respond quickly to market changes and disruptions. Continued dependence on legacy systems and EDI is just one more roadblock to achieving the kind of capability and competitive advantages that companies will urgently need in the coming years.
The Role of the Loading Dock in Supply Chain Data Strategy
The loading dock is a data goldmine waiting to be leveraged.
Embracing an API-driven approach, particularly in this area, is essential for businesses seeking to stay ahead in the digital era. DataDocks is a game-changer in this respect, designed to integrate effortlessly with your TMS, WMS, or any other system. Stakeholders can be instantly updated, facilitating prompt and informed decision-making.
The DataDocks API allows for creating and updating appointments, and fetching detailed information, like duration, quantities and weights of specific products, and associated documents like BOLs. The API triggers webhooks for loading dock events, ensuring precise timing and efficient dock utilization.
By offering the capability to implement EDI via a custom endpoint, DataDocks accommodates legacy systems while paving the way for a more advanced, API-driven approach.
This digitization, starting at the loading dock, is a gateway to harnessing deeper, data-driven insights throughout the entire supply chain. It marks a shift from towards more dynamic, real-time data handling and decision-making, positioning businesses at the forefront of efficiency and innovation in an increasingly digital world.
To learn more about how DataDocks can help you digitize your loading dock operations, give us a call on (+1) 647 848-8250, or book a demo.
