API & EDI: Key Challenges of Supply Chain Integration
Global supply chains are complex environments that involve a myriad of stakeholders and technology systems. In these interconnected ecosystems, data integration facilitates the centralization and synchronization of information from all sources. When it comes to supply chain integration, there are two main technologies that enable data integration: APIs and EDI.
While API development and usage are relatively new and technologically advanced, the industry continues to be heavily on EDI-based communications. The function of both is essentially the same, transfer data quickly, consistently and at the lowest costs; yet there is still a heated debate over the two options. Despite the bold statements about EDI’s ‘death’, it is still deeply rooted in the supply chain industry, and despite the introduction of new communication technologies, such as APIs, which while impressive and easier to design and implement, are not a magic pill for resolving all integration issues.
The supply chain industry has tried to standardize around EDI for the past years and, while moderately successful, but EDI’s limitations have restricted too many supply chain players. To understand the roles of these two technologies in the modern supply chain, let’s take a closer look at the issue.
What Is an API?
Application Programming Interface (APIs) provides a connection between different software systems through defined requirements interactions. Through APIs, a company can more easily connect its technology to a wide range of third-party software. It is a cost-efficient and reliable way to integrate multiple software systems without the need to extend development or develop internal tools.
APIs have gained usage in a wide variety of industries, not just supply chains. According to Gartner, 25% of all B2B interactions are handled through APIs today, which are becoming the preferred data communication exchange mechanism for global firms.
Here are some of the different types of APIs used in the supply chain domain:
- ‘Control tower’ APIs that provide shipment visibility, the status of payments, and general real-time visibility into operational and transactional processes.
- Order management APIs that are responsible for connection and interaction between stakeholders, and exchanging order and shipment data.
- Data APIs that collect important data and distribute it across organizations.
Since the first implementation of an API into a supply chain more than 20 years ago, there has been a long battle to digitize all supply chains and stakeholders’ software systems, by connecting through an API and eliminating the use of EDI completely.
What Is EDI?
EDI stands for Electronic Data Interchange and is an older method of data integration. First implemented in the 1970s, EDI was initially the primary form of data transmission between technology systems in supply chains. With the flow of time and increased digitalization, EDI has proven less capable in comparison to APIs, which operated faster and more smoothly. However, many carriers and companies are still hesitant to change their EDI for a variety of reasons, such as insufficient budget and encountering troubles with development and implementation.
API vs EDI: What Are the Key Integration Challenges in Supply Chains?
Both API and EDI serve as data transmission tools. Over the last few years, EDI has shown itself to be largely outdated, being gradually replaced by APIs, which better serves the modern requirements of today’s global supply chains. While APIs are more advanced, it doesn’t mean EDI is completely erased from the supply chain environment. Even more, not all APIs resolve integration issues. The development and adoption of APIs is a long road, as there are many different APIs, some of which lack quality and construction. It is not enough to just utilize APIs; it is critical to choose sophisticated solutions that will bring ROI, not implementation burdens.
While APIs can be effective, there are still many challenges companies face on their way to API implementations:
- Industry standards are lacking, the supply chain industry hasn’t been able to standardize data formats on common EDI in 50+ years.
- Not all companies and supply chain stakeholders can support APIs
- Not all APIs are created equally in terms of structure, responsiveness, and technology.
Striking a Balance: What Do You Need for Supply Chain Integration?
It is evident that in today’s technology-enabled world, APIs are better tools for smooth supply chain connection and data integration, but it will still be a long time before EDI becomes eliminated. After all, APIs and EDI are just tools for exchanging information, and not all businesses are ready to completely replace one technology with another.
If a company doesn’t have the luxury to refuse to work with partners who use EDI, its strategy must boil down to having the robust infrastructure to support both APIs and EDI. The problem is, not many solutions in the market can offer this dual support. With visibility platforms like Agistix, there is no need to choose between API and EDI because its infrastructure enables connection through both. Learn more about our flexible solutions here.