It’s hard to imagine an effective supply chain management solution that doesn’t rely on EDI or API. They both allow you to quickly and securely exchange data from system to system, which is a huge part of the supply chain management process.

But even though both API and EDI are widely used across many different business software solutions, they do have their differences. These differences need to be understood in order to make an educated choice when choosing a software solution that best suits your business needs.

While EDI has been around for longer and is, therefore, more widespread, API has a growing number of users, and is becoming a potent choice for data transfer tasks. To really understand which one is better for supply chain management solutions, we must first analyze each of them to understand how they work.

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How Does EDI Work?

EDI, or Electronic Data Interchange, is the most popular communication technology that’s used to effectively transfer data from system to system. It offers businesses an easy and secure way to send data to other businesses electronically instead of using paper. It employs standardized electronic formats that make it easy for computer systems to process the information, greatly reducing or even removing the need for manual labor.

There are numerous ways to exchange data. Some of the options include peer-to-peer networks or serials links, although most of them are internet-based. However, because EDI solutions are set up to provide access only to pre-defined authorized users and to use audit trails and archives to accurately track use, there’s no need to worry about security. EDI is one of the safest ways to transfer data, which is a big reason for its popularity.

With EDI, companies are able to send large amounts of data at the same time, including the ability to transfer huge quantities of documents with a single transfer. This is not only convenient and efficient, but also contributes to minimizing any potential inaccuracies. This increase in efficiency can make a big difference in the efficiency of a supply chain management system. A survey by Supply Chain Insights revealed that the implementation of various EDI documents improved supply chain performance for more than half of the respondents.

The fact that EDI minimizes human intervention means that computer systems must be able to understand the information that’s exchanged. That means that a clearly defined standard format must be maintained by all parties, which is exactly what EDI documents help accomplish. This leads to a significant increase in accuracy and efficiency, while at the same time reducing the number of human errors that inevitably occur from illegible handwriting or incorrect document handling.

The end result of EDI implementation is a huge improvement in the quality and reliability of the company’s data, removing the need to manually rework orders. What’s more, with EDI, orders can be processed without the need to process each order manually, which also results in the entire process becoming much quicker and more accurate.

Another way that EDI makes sending documents more efficient is the way in which it helps reduce the integration costs of document integration by creating standards for layouts of common business documents such as ANSI, EDIFACT and ebXML.

But while the standards system has a lot of benefits, there are drawbacks to it as well.

Each of the standards has three different versions, which means that the amount of standards that are available is quite high. That can make it difficult for smaller businesses that are trading with larger companies that use updated versions of the same standards.

Another drawback of EDI that’s forcing some companies to look for alternatives is the fact that they aren’t able to keep up with some of the technological software developments, such as real-time visibility and responsiveness, sometimes taking a long time to configure in accordance to business requirements.

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How Does API Work?

Application Programming Interface, or API, is a set of programming instructions and standards for accessing web-based software applications that allow software platforms to communicate with each other. Basically, API serves as an interface between software programs and helps them interact effectively, similarly to how a user interface helps humans interact with computers. This allows software systems to communicate with each other without any intervention from users.

A good example of this is online purchasing. When you enter your credit card information to buy an item online, the web store uses an API to send that information to a remote application, which then verifies it to ensure that it’s correct. After confirming that your credit card info is valid, the application sends back a confirmation that the order can be processed.

This kind of real-time connection is what makes API so effective when compared with EDI. APIs are able to transfer data in less than a second, which means that all of the data can be updated instantly, without the need for an intermediary. It’s easy to see the benefits that this can bring to supply chain management.

When using API to transfer supply chain data, companies can automatically add pickup requests into a carrier’s system, which can greatly improve efficiency by removing the time it would take to make each request manually. Today’s technology provides retailers and 3PLs with real-time access to Big Data that can help quickly respond to issues and make accurate projections about numerous parts of the supply chain.

Selection Strategy

While APIs clearly have some innovative features that make it a growingly popular option, EDI remains a popular choice because of its robust security and reliability that has made it a long-time industry standard for data exchange.

There are a lot of supply chain management solutions to choose from, offering numerous benefits to companies, so the choice between EDI and API will come down to your company’s individual needs.

EDI format is an older technology, but because it’s been used for decades, it’s still the most popular standard, which makes it a more convenient option since many businesses have adopted it.

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API, on the other hand, is newer and not as widespread, but its powerful features for synchronizing web applications make it a worthy consideration. Even if it isn’t yet at the point of completely replacing the EDI format as the new standard for transferring information, it’s still a great choice. But in all likelihood, it’s only a matter of time before that happens. According to EFT, 55% of executives that were surveyed considered web service APIs as an alternative to EDI because of its overall flexibility and a more efficient exchange of electronic documents.