Electronic Data Interchange is a mature technology with over 60 years of history. It has remained a staple in the B2B communications realm for so many years that some may wonder if it should still be in use. Is it effective enough to compete with other modern technologies? In this article, we explore the greatest strengths of EDI and its potential for future development.
Business needs automated, seamless data exchange
Firstly, let us explain you why EDI itself is so loved by businesses. We can clearly see that thousands of companies have developed their systems around EDI standards. Wondering why? It’s simple: EDI makes business life easier. It allows companies to dynamically share reliable business information: sending orders, informing about incoming deliveries, confirming deliveries, booking transport and sending invoices are just a few of the many business transactions that can be done in real-time. It doesn’t involve any human interaction and doesn’t require calling, sending emails or faxes. It simply saves the time and effort of all parties involved in the process. EDI significantly speeds up the whole business cycle: when processes are automated, it reduces the time needed to process the data manually and eliminates the number of errors that occur when data is entered, filed and compared manually. EDI transactions take seconds or minutes, while paper processes can take days or weeks. Speaking of paper, EDI software also allows businesses to save money by reducing the amount of paper (printing, copying, storage, postage) needed and eliminating its processing and dealing with illegible and lost documents. Matson Logistics research shows that using EDI can lower transaction costs by 35%.
EDI is constantly changing, just like its users
At the beginning of EDI history, the only method of communication was direct EDI (point-to-point EDI) based on so-called on-premise solutions, but today, communication methods are constantly evolving and now companies can choose from wide variety of EDI solutions: AS2, FTP, Web EDI, EDI Service providers, cloud based solutions, or even mobile EDI. Nowadays, any enterprise has a chance to find a solution that answers their needs: simple EDI mapping installed on-premises, no local software at all or a legacy system with advanced functionalities. EDI standards are updated when needed – along with local and global standards and regulations. Modern EDI systems not only provide users with useful functionalities for years to come, but also optimize their processes with most innovative tools supported by Artificial Intelligence: validation, mapping, routing, notifications or workflows creation. EDI has been a standard business software for years due to its constant development.
What about other technologies – do you need them?
EDI covers most transaction types in many different industries. You’d need to try pretty hard to find a business transaction that isn’t covered by Electronic Data Interchange documents. For reference: one of the EDI standards – EANCOM, covers around 60 different messages while another EDI standard – X12, covers over 80 just in the range of a supply chain processes. For EDI, it doesn’t matter what business your company operates in or what the scale of the documents exchanged with your partners is. Once it is implemented, EDI is simple, inexpensive and trustworthy.
EDI vs. API debate – which is more beneficial?
The alternative for Electronic Data Interchange is Application Programming Interface. Via API, you can access web-based software that allows you to communicate with your trading partners. It creates a “bridge” between different systems and doesn’t require any user intervention. This solution offers many benefits like real-time connection, instant access to the inventory and ability to transfer instantly updated data. It improves efficiency because it removes the time needed to request and send information. However, EDI has numerous advantages over API, which for some companies may be far more important. One of the most important is the standard of document transfer. API doesn’t have any standardization in use, so whenever you’re setting up an API, you must be prepared for new data formats that are not always covered by API. It often does not require any standard information to identify users or products like EAN or GLN. Companies creating APIs adjusted to their businesses may face many problems in the process of adding new partners to their system – it may require changes in their ERP systems as no standard information may be included in this API to exchange data (which is often very costly).
Another challenge might be the need to connect different partners who have created their own APIs. In API creation, there is currently no data standard implemented or even recommended. Therefore, it can be very expensive to switch to API communication with multiple partners. And – if the API is not correctly designed, sending an simple order could even require several dozens of operations (for example: asking for order number and receive order header data,), while with EDI, you can be sure it is always one document delivered to your system. What is more, one API might not cover all the communication with the entirety of your supply chain. The more business partners you have, the more APIs you might have to use, and it could become a complicated process to manage. In the case of a modern EDI system, you have one communication method with your service provider and one mapping set for each transaction.
EDI continues to be the primary system for data transmission
Companies that have already implemented EDI are not willing to change their communication method. EDI works well for them, and it is tightly connected with most important part of both their business and core systems. EDI is the standard for B2B communication, while API is better for use in other processes. EDI helps improve processes across the supply chain and reduces paper usage. Once it is implemented, it significantly reduces the amount of administrative work, lowers the cost of data management and improves relations with business partners. When using the services of a reliable EDI provider, a company doesn’t need to worry about setting up new communication channels, onboarding customers, creating mappings or implementing new formats of EDI standards. And so it seems that EDI is here to stay.