EDI, API - Why?
It is a universally accepted truth that modern Supply Chains depend on accurate and timely information to function, whether it’s internally with systems or externally between partners and organizations. That communication has evolved over the years and many organizations are finding themselves at a crossroads between sticking with tried, tested and still widely used technology (EDI) and the new, more dynamic upstart (API). Both serve similar functions—enabling electronic communication between systems—but they differ significantly in their design, capabilities, and use cases.
Maybe not quite as simple as this phone, EDI has been around since it was in fashion, first appearing in the 1960’s.
Electronic Data Interchange (EDI) is a technology that allows companies to exchange standardized business documents, such as invoices, purchase orders, and shipping notices, in an electronic format. EDI has been around since the 1960s and has long been a core part of supply chain, logistics, and retail operations. Business documents are exchanged between two systems using a predefined standard (e.g., ANSI X12) - these standards ensure that the data is structured in a consistent format, making it easy for systems on either side of the transaction to process the information automatically.
Key Features of EDI:
Standardized Formats: It ensures compatibility between businesses, even if they are using different systems. It also has transactions/formats for key components of a modern Supply Chain (Purchase Orders and Acknowledgments, ASN’s, Invoicing, Sell Out Data, etc.)
Batch Processing: EDI is optimized for high-volume, repeatable transactions making it ideal for businesses that need to exchange large quantities of standardized data with many trading partners.
High Security: As cybersecurity has become ever more important, the security of communication has too. EDI has a proven track record in terms of security and reliability, typically using secure communication protocols and often implemented in private, closed networks.
Long-Standing Industry Usage: EDI is widely accepted and has long been the standard in many industries, particularly in retail, logistics, and manufacturing.
Challenges of EDI:
Complexity and Setup: Setting up and maintaining an EDI system can be complex and costly. Businesses often need specialized EDI software and skilled resources to integrate and manage the system, often putting start-up or smaller organizations at a disadvantage.
Lack of Flexibility: EDI's reliance on rigid standards and batch processing can make it difficult to handle dynamic or real-time transactions. It may also be challenging to accommodate non-standard or evolving data formats.
Slow Response Times: Since EDI often uses batch processing, it is not ideal for scenarios that require instant or near-real-time communication.
Application Programming Interface (API) refers to a set of protocols and tools that allow different software applications to communicate with each other in real-time. For readers of Douglas Adams’ Hitchiker’s Guide to the Galaxy, it is your IT Babel Fish! APIs enable systems to send and receive data dynamically, allowing for more flexible, immediate, and often more granular exchanges of information.
APIs are a fundamental part of the modern digital ecosystem, enabling everything from mobile apps to cloud-based software to communicate with one another. With APIs, data is often transmitted in a lightweight format such as JSON or XML, and transactions can happen instantly, providing real-time data integration.
Key Features of APIs:
Ease of Integration: APIs often require less overhead for integration compared to traditional EDI systems, as they are more adaptable to modern technology stacks.
Real-Time Communication: APIs are designed for instant, real-time data transfer, which is ideal for customer-facing applications, e-commerce, and modern supply chains
Flexible and Dynamic: APIs are more flexible than EDI, allowing data to be customized and processed in a variety of ways. Crucially, API’s can handle different data formats and by design different ERP’s/systems.
Scalability: APIs can scale more easily with the growing demands of modern businesses. As business needs evolve, APIs can be updated without disrupting the core infrastructure.
Challenges of APIs:
Security Risks: As API’s operate through the internet they are vulnerable to cybersecurity threats if not properly secured. Ensuring secure data exchange requires encryption and authentication mechanisms from the outset.
Cost of Usage: APIs are often based on a consumption model, where businesses pay for each call or transaction. This can result in ongoing costs, especially for high-volume applications.
Dependency on Internet Connectivity: APIs rely on internet access for communication. If there are network disruptions or service outages, it can impact real-time data exchange.
EDI and API aren’t necessarily binary choices for an organization but knowing when and how to use both will be a key differentiator in both efficiency and cost.
When to use EDI:
You need to exchange large volumes of standardized business documents, such as invoices, purchase orders, and shipping notices.
Your Supply Chain operates in industries that have long adopted EDI standards (e.g., retail, automotive, healthcare).
You need secure, reliable, and batch-based communication that doesn’t require real-time data.
Compliance with industry regulations (such as HIPAA or electronic invoicing laws)
Resource availability to implement and maintain
Use API When:
You require real-time, dynamic communication between systems, such as for customer-facing services, e-commerce, or supply chain applications.
You need greater flexibility to integrate new applications, services, and data sources quickly.
Your business is operating in a rapidly evolving environment where adaptability is key.
You want to reduce integration costs and improve the customer experience by enabling seamless connectivity.
There is no definitive answer on which is better as it is always dependent on the context of need. In my career I have seen API’s boom when it comes to real time data, a great example would be the shipping milestones and the level of detail available to enable dynamic decision making within a whole organization. At the same time, from a bulk order management perspective, EDI persists and continues to be the standard, mostly due its to reliability and cost-efficiency.
By understanding the strengths and limitations of each, organizations can make an informed decision and leverage the right technology for their specific business needs.