EDI and API are an integral part of supply chain management. In fact, the industry relies completely on the two and can hardly work without them. API (Application Programming Interface) and EDI (Electronic Data Interchange) enable quick, secure, and effective exchange of data across systems, applications, and business units which are a crucial part of a supply chain business. Although both of them are popular for business software, the two have a lot of differences which business owners and the industry must understand to make informed decisions while choosing between them.
EDI has been in existence since the 1970s and is considered to be a standard system for document exchange. Rest assured that it is here to stay for long and companies using it have no reason to replace it. On the other hand, API is a popular alternative to EDI software development solutions with new entrants in the business relying on it more. It is witnessing a growing number of users and offers a cost-efficient solution. Also, API facilitates more synchronized and real-time data sharing, hence gaining users for communication with trading partners.
EDI is a key for seamless integration between partners and B2B systems while API offers selected system functions that can be accessed by other applications. Considering their significance and role in supply chain management and business communication, it is worth comparing the two and discussing the differences. So, let’s analyze and understand how EDI and API work and which is a better option:
EDI and How It Works?
EDI emerged in the 70s as a solution to streamline business communication and processes. The aim was to enable smooth B2B interaction between trading partners, secure data and information exchange, and eliminate paper-based communication and manual tasks. It includes everything from invoices to shipping notices, to purchase orders being transferred across systems. This easy and electronic mode to share data is established as a long-time industry standard, considering the reliability and security it offers. EDI service providers have extended it across a wide range of industries, including supply chain, distribution, logistics, retail, banking, manufacturing, and more.
It employs a set of standard electronic formats to make it easier for computer systems to process the data which reduces human work. With minimal manual intervention, systems can understand the information accurately and efficiently, thereby mitigating human errors due to illegible handwriting or incorrect document handling. A clearly defined format is maintained by all the involved parties which is the ultimate goal of EDI documents. The formats, such as EDIFACT are used in Europe, and ANSI X12 is common in the USA and Asia. There are many options to transmit data, such as peer-to-peer networks, web-based, mobile, cloud-based, etc. EDI provides accessibility to only authorized users and utilizes audit trails. As one of the safest modes of data transfer, EDI is now a popular choice for supply chain management.
With an on-premise EDI solution, organizations provide easy and quick access to stakeholders which further ensures security, audit trails, and archives. However, there is still a need to align communication with partners through standardization and this is where cloud-based EDI comes into the picture. EDI has predefined rules for content and relationships between items, including the amount billed and invoice number. In the supply chain industry, the EDI exchange offers a strong structure of data, especially for B2B communication. It allows businesses to send and receive large amounts of data simultaneously along with enabling them to send multiple documents through a single transfer. Apart from adding efficiency and convenience, this reduces potential inaccuracies which enhances the entire supply chain management system. In fact, EDI implementation has improved the performance of more than half of the respondents.
However, EDI also has its drawbacks. Every EDI standard has three different versions which makes the number of available standards very high. This is a complicated situation for small businesses that trade with large enterprises that use updated versions of the same EDI standard. Moreover, when some companies switch to the alternative, they might fail to keep pace with technological advancements and it can be time-consuming to finally configure according to business requirements.
API and How It Works?
API is an interface between two endpoints that allow interaction and transaction in real time. It includes a set of programming standards and instructions to access web-based applications that consume the services of each other which enables them to exchange data with each other. Creating an API is a cost-effective and straightforward way that allows partners to cross information. Serving as an interface between software programs, it connects them effectively without any intervention from users. From partners to customers to employees, API allows access to data service and business on any device from any source. It is used for similar transactions to EDI but works on a response or request basis with smaller payloads.
Providing easy integration to backend systems, companies can leave a part of software open through API so other software can connect easily. For example, in an online purchase when you enter the card information, the store uses API to send information to the app to verify it is correct. Once confirming the validity of the card, the app sends the information back to process the order further.
One reason that makes API more effective than EDI is its real-time connection and its ability to share data within seconds. Hence, the data can be updated within no time without any intermediary. Supply chain companies can add pickup requests automatically into the system which takes less time than requesting them manually.
EDI vs API: Which One to Choose?
EDI is an older concept and the companies already using it will hardly switch to another system as it requires an overwhelming budget. Of course, API has some great and innovative features, making it widely popular. EDI is still preferred for its reliability and robust security, making it a consistent and long-term standard for data exchange. As far as API is concerned, it might not completely replace EDI but it is a great choice for startups. Both options have a lot of offering for supply chain management but the final choice comes down to a company’s specific needs and requirements. The ideal pick would be to have the right balance of API and EDI for seamless and effective communication.