API, EDI, SFTP, email… Many solutions have come to exist for the seamless exchange of order documents, and the blend now consists of approaches originating from the 1970s to the highly complex solutions being developed of-late. This article will explore the two most popular options, EDI and API, look at their differences, and present their respective advantages and disadvantages for B2B document exchange.
In the end, we find ourselves with a clear winner: With faster, easier and futureproof technology the possibility of API integration beats the aging standard of EDI by a mile.
An API (Application Programming Interface) allows two different systems to communicate with each other.
Imagine you're sitting at a table in a restaurant. You hold the menu in your hand, consider your options, and then decide you want the kitchen to prepare a certain dish for you. The last piece of the puzzle? A waiter who takes the message from you and passes it on to the kitchen. The waiter is the API. He makes sure that your message is received correctly and then passed on to the kitchen in its entirety.
An API transforms defined inputs (the order) into defined outputs (the food). Another familiar example of this process is Google Maps: if I enter an address (my inputs) into the Google Maps API, I get the exact coordinates as the output. And maybe you've realized as you read that Excel is also a well-used program that consists of a bunch of different APIs.
Of course, it's very important to define the right inputs. Google Maps normally needs addresses as input and not your friends name. The waiter can only take orders from the menu as inputs. A menu thus determines the previously defined inputs. In a B2B context, this is often where errors occur, when these inputs are insufficiently respected.
Because of their manifold modifiability, APIs can radicalize the digital exchange of order documents. By providing a seamless communication channel between different ERP Systems (e.g. SAP and Xentral) or procurement platforms they close a gap which otherwise causes endless blockages in workflow and poor business relationships.
Most of us use millions of developed APIs as we go about our lives. Some are even publicly available, like the Instagram API, which makes it possible for third party developers to connect to these software or platforms. The use of multiple devices and synchronization between devices and software has led to a great need for APIs, and there is currently an exemplary run on hubs or integrating external services & software for third party providers.
EDI, or Electronic Data Interchange, is a data standard from the 1970s which enables the automated and digital exchange of data by various protocols like AS2 or OFTP2. To this day, it has remained the standard for transferring order documents.
It's incredibly popular, because for a time, it was the only option for automated digital ordering processes, and in the retail market, whatever the large retailers do is what the suppliers must follow. When the tomato.co guy would receive an onboarding package from his new trade partner outlining exactly how the orders should arrive, how the shipping label should be formatted, and the EDI standards to follow, the tomato.co guy would be forced to implement to get his products on-shelf. And that's how it's remained for fifty years or so.
EDI is considered robust, and once implemented, can indeed provide a real competitive advantage through automated ordering and significant error reduction. EDI is increasingly being mandated as a standard and penalties are often incurred if this standard cannot be served. Our article explores the dependency of retail businesses on EDI, and the need for foolproof accuracy in a digital ordering process.
Let's make it simple with a graphic. API has fast become the future-oriented option for businesses seeking to grow because of its ability to offer new levels of speed, transparency and ease. The differences highlighted below indicate how EDI creates friction in areas where API can jump in and change how things flow:
For startups and companies who want to handle resources sustainably, there are two further, crucial, factors: How to deal with potential bugs in the software, and the question on everybody's lips of who takes care of the APIs or EDI?
Since APIs can be used universally, basic features of the architecture are known to a large number of developers and they can be found in many application areas and industries. They're also already included in the curricula of many universities.
The situation is different with EDI. It's hardly exciting, due to its old age - and it also is't transferable to other application areas, so only few are familiar with it. Few graduates of a technical course of studies will have dealt with EDI. This fact is one of the main reasons why EDI has high costs and low flexibility: the developers aren't available, and when they are, they're uninspired by EDI.
The consequence: Using APIs leads to having your systems integrated in the modern tech world. You can be sure of having people with the right skills to help your company succeed and be sure of being able to interact with other digital enterprises.
Even the most stable software is not free of errors. But the advantage of digitally transmitting documents is that errors are noticed and are thus normally quickly resolvable. If an error occurs in an EDI message, the entire code must be read out and checked. This again would need to be done by a developer. Scanning the entire code of an EDI message for the error is enormously tedious, time-consuming and expensive.
With an API, on the other hand, error codes can be converted directly into an error message, so that a message with the specific error is received on the respective interface. For example, if the quantity of the received order is missing, this error immediately appears in the supplier's ERP system. In real time. No developer needed to fix the issue.
But with EDI, the entire code would need to be read to find this error. The operations team relies on developers, and a small careless action when entering the order ends up draining resources.
Some retailers, such as Amazon, have begun offering integration via API; a trend which can only grow in the coming years. But while it would in theory be possible to replace all EDI systems with API, this won't happen in the foreseeable future. True to the motto of Never change a running system, the majority of suppliers continue to rely on EDI simply because this technology works.
The key is rather in the fact that we can use API to handle EDI systems; to transform our business transactions with API, without needing everyone else to change too. With platforms like Procuros, which use API to consolidate countless different EDI and ERP systems onto one interface, we can benefit from the simplicity and transparency that API offers to meet the EDI requirements of trading partners.
Automated data exchange via EDI works and is by no means the standard in trade and industry for nothing. Nevertheless, it is becoming clear that the future belongs to the API. Especially due to the lower costs and the various possibilities APIs will become the new standard in the future.
The good news is that solutions like the Procuros Integration Hub offers the possibility to use a future-proof API technology to meet EDI requirements of trading partners while having a significant increase in transparency and cost savings.
If you want to learn more about how to digitally connect to your trade partners with the Procuros Integration Hub, schedule a free consultation with one of our experienced digitization experts here or contact us at [email protected]