As businesses embrace digital communication methods to streamline supply chains, tension is growing between two different types of automated information exchange.
Application programming interfaces (APIs) are vying with electronic data interchange (EDI) for supremacy, especially in industries where businesses exchange high volumes of information. However, with the right infrastructure in place, organisations don't have to choose between APIs and EDI.
EDI is the exchange of business information, like purchase orders and invoices, directly between business software. The sender's software generates a file, and it's then sent to their EDI provider.
EDI standards, like EDIFACT, dictate how the message data is structured, including the format as well as the content. The EDI messages can be transferred through any protocol, like HTTP or FTP. If the recipient requires a different file format, the file will be mapped (or translated) and sent directly to the recipient's software. The EDI provider ensures that the sender and receiver are communicating clearly, even if they're using different file formats at each end. They can also manage any errors that occur, to make sure full visibility is maintained throughout the chain.
Using EDI for procurement cuts out many of the manual steps involved in ordering. The buyer enters a purchase order in their own software, and it appears in the supplier's software so the order can be fulfilled. Similarly, the supplier enters the invoice in their software, and it appears in the buyer's software so the invoice can be paid.
The business benefits of EDI include fewer errors, lower costs, minimal manual labour, a simplified and streamlined procurement process, better visibility into the supply chain, and increased information security. Exchanging EDI messages in real time can dramatically lower the cost of doing business and provide accurate information that decision-makers can base decisions on.
The rise of cloud-based software has seen a massive increase in the adoption of APIs. In contrast to EDI, APIs are not a standard, but a method to move data. They don't have a defined standard, and they certainly don't use a standard data format.
For a business collaborating with numerous organisations, each with its own API, setting up and maintaining these communications can become highly complex and costly.
At first glance, APIs can be attractive for businesses without a background in EDI because APIs can be simpler to set up in the short term and are seen as the latest technology. However, with no standards or governance in place, it becomes complicated quite quickly.
The good news is that organisations don't have to choose between APIs or EDI. With the right technology, they can accommodate both, giving them more flexibility in choosing which organisations they do business with, as well as keeping costs and maintenance effort at bay.
The solution is to use EDI with APIs, facilitated by a gateway. A gateway is a service between businesses that maps (or translates) messages between buyers and sellers, handles the connections and manages errors so all parties can communicate clearly.
This removes the need to create and maintain separate communication protocols for each organisation in the supply chain. Instead, organisations can set up one connection to the gateway or integration service, which then manages all of the communications with business partners.
Businesses should choose an integration service that can exchange messages between enterprise resource planning (ERP) systems, accounting packages, and other systems regardless of protocol or platform. This includes being able to turn data received through an API into EDI messages.
Organisations should also look for a service that's easy to configure, meets all the required message formats, and complies with all relevant technical standards.
Smooth, error-free, streamlined trading depends on accurate and frictionless translation of messages between organisations. Regardless of which systems a business uses, the right integration partner can help it trade more efficiently.