By Nick Roquefort-Villeneuve, Global Marketing Director – Amalto Technologies
For the last fifteen years, you must have come across an article that talked about the imminent death of the Electronic Data Interchange, also known as EDI, and yet today still nothing. If only EDI’s supposedly planned obsolescence were identical to this fridge that gave up on you a few hours before the New Year’s Eve party you were so looking forward to hosting last winter. How did it feel to hear your best friends wish you “Happy New Year” with much sarcasm…?
Back to EDI. It’s still very much here and certainly an intrinsic part of your Supply Chain Integration and File Transfers. However, the debate around its survival has not ceased, mainly for reasons that pertain to a growing need for more flexibility due to a perceived outdated and inefficient system of data transmission. The detractors of EDI argue that it does not respond to sudden changes in market conditions. This rigidity represents a significant problem for commercial airlines or trucking companies, for example, that fill their seats or their trucks based on supply and demand variations. You may have experienced the same issue in your organization. If your revenue model revolves around real-time online pricing, you might already have succumbed to the temptation of inquiring about an alternative to EDI, like APIs.
Reasons for Still Using EDI TransactionsIf you’re currently using EDI, you are not alone. The annual volume of global EDI transactions exceeds 20 billion per year, and there is currently no sign of slowing down. There are three solid reasons behind such a sustained business enthusiasm:
- Cost-Efficiency: The switch to EDI transactions from paper transactions has considerably lowered if not eliminated all paper-induced costs. On the supplier’s side, the cost ratio between processing an order using EDI and processing the same order manually can easily reach 1:25. Electronic processing also limits all sorts of errors, which save staff valuable time from, for example, handling data-related disputes. Also, on the buyer’s side using EDI can result in significant annual savings due to early payment discounts. It looks like a win-win for all stakeholders.
- Decreased Sales Cycle: Thanks to the electronic exchange of documents, transactions happen faster and the margin for error decreases. Using EDI can lower the order-to-cash cycle time by more than 20%, which drastically improves transactions and relationships among business partners.
- Opportunity for Expansion: EDI provides a common business language, which allows for the on-boarding of business partners worldwide.
Overall, EDI gives Finance departments the ability to focus on what they know best: Manage money.
Reasons for Abandoning EDI
The choice of adopting another technology depends on the way an organization’s pricing model functions. As much as possible, supply chain and logistics businesses’ prices need to reflect sudden changes due to economic fluctuations. And EDI does not offer such flexibility. To that effect, APIs have been gaining an edge.
You and I interact with APIs every day on the Internet. APIs are computer-generated programs that make it possible to move data between various applications quickly. A simple example is your ability to use your Facebook or Google login credentials on websites you are visiting for the first time. This is powered by an API. APIs are created by companies that allow parts of their software to remain open, so other applications can easily integrate with them and request information. How does this pertain to the supply chain and logistics industries? APIs can synchronize with partners, whenever there is a change, for example, in pricing structure. Thus, looking for a vendor who offers not only EDI capabilities but also API integration with various partners is part of a pertinent strategy that should ensure long-term success. The use of API integrations is indeed a step towards modernization. It provides faster and more accurate transmissions of data among various parties. In conclusion, APIs bring simplicity and quicker time-to-market.
Conclusion: EDI vs. API
EDI and consequently EDI software are still very much alive, because the Electronic Data Interchange makes a lot of sense financially to a large majority of businesses. However, the technology lacks in flexibility. APIs though are gaining in popularity, since they are able to respond more accurately to an ever-increasing speed of markets and changing client interface demands. The ability to transact by taking real-time information into account is crucial for industries like supply chain and transportation, whose financial results depend on their ability to reduce time-to-market. There lies a real challenge for providers of B2B document exchange automation solutions.