EDI & API: B2B’s New Power Couple
As businesses blend strategies, EDI and APIs collaborate for seamless data exchange across industries.
For years, the debate between EDI and API has pitted the two integrations against each other. But now, organizations are beginning to understand the complementary function of these mechanisms, says Bryan Cooper of Cleo.
For years, various industries have argued over the benefits and downsides of electronic data interchange (EDI) and application programming interfaces (APIs). Traditionally, EDI is used to exchange standardized, structured business data between trading partners. Meanwhile, APIs provide an interface that allows different software applications to communicate and exchange data. Though both offer reliable data exchange methods, organizations continue to examine which protocol is most beneficial. However, the age-old debate of EDI vs. API has lost its luster as organizations realize that EDI and API may better work as complementary. Moving forward, a strategic combination of EDI and API integration will provide businesses with seamless data exchange across various industries.
To understand how these mechanisms work together, we first need to understand the benefits and functions of each integration.
Electronic Data Interchange: The Non-standard Standard
EDI, the digital transfer of business documents between trading partners, was first introduced in the 1960s and used between shipment supply chains and the United States Army. This process allows businesses to send and receive information in a standardized format across manufacturing, retail, eCommerce, healthcare, transportation, and logistics. Embracing EDI instead of outdated paper, email, or fax transmission carries many advantages, including decreased business communication costs, faster processing times, fewer errors, and stronger business relationships.
Through EDI, companies can execute workflows that reduce costs, such as printing, reproduction, storage, and postage expenses. Additionally, EDI cuts processing times through automation and accelerates business processes, particularly order-to-shipment cycles. Eliminating manual data entry through EDI also reduces the odds of mistakes that can cause costly delays, saving employees from extra time spent handling data disputes or finding errors. Finally, accelerated onboarding time and real-time visibility into each transaction creates a frictionless data exchange that allows companies to focus on increasing business instead of monitoring every transaction. Through EDI, customer relationships are improved, errors are less common, and the delivery of goods and services is expedited.
In addition to accelerated business operations and time-saving features, EDI provides enhanced security and compliance capabilities. EDI streamlines the documentation process to guarantee that organizations comply with regulations and service standards, ensuring businesses avoid violations, potential delays, and performance gaps.
The strength of EDI lies not only in its security but also in its ability to handle high-volume, structured data exchanges between established trading partners. While some may see the standardized format of EDI as a weakness, claiming it lacks flexibility, EDI maintains the ability to provide reliable results consistently. Though EDI may lack the speed and agility of APIs, it carries advantages in the efficiency of large-volume data transfer.
Application Programming Interfaces: New Dawn of Integration
Though EDI first paved the way for structured data exchange, organizations have recently adopted APIs, or Application Programming Interfaces, which enable two or more applications to exchange information. APIs can be considered a virtual interface, allowing organizations to send and receive data. APIs first saw widespread commercial adoption in the early 2000s and are now used across logistics and manufacturing industries to provide customers with real-time tracking, delivery management, freight management, warehouse management, eCommerce integration, and marketplace integration.
API integrations allow organizations to interoperate in real-time using multiple APIs, saving organizations time and money. API integrations also solve the direct challenge of integrating legacy applications, which is increasingly relevant as cloud-based applications enter the market. Many organizations have invested heavily in legacy applications and oppose the sunk costs of abandoning previous investments.
API integration eliminates manual intervention and automates as much of an organization’s critical revenue-generating processes as possible. Leveraging APIs provides a consistent pattern for internal and external data exchange, facilitating business operations and improving relationships with trading partners.
The benefit of APIs is that they empower businesses to accelerate end-to-end integrations between their multi-enterprise ecosystem and their internal systems. Increasing access to shared information is another strength of API integration, which allows companies to share information across databases and internal systems, increasing the value of data across multiple teams.
The specific value of APIs is that they provide real-time connectivity advantages and can connect with partners and software as a service (SaaS) applications quickly and efficiently. The advantage of APIs over standard exchanges like EDI is that they provide greater communication flexibility and integrate with diverse applications and data formats. Though agile, they can complicate standardization matters as complexity increases in managing multiple APIs. Similarly, APIs frequently lack the security and compliance reassurance that EDI offers. Though APIs hold certain advantages over EDI, and vice versa, both integrations offer valuable uses to various businesses across industries.
See More: Five Common API Integration Issues and How to Avoid Them
EDI & API: Combining Strengths and Weaknesses to Complement One Another
At the surface level, both mechanisms are designed to transfer information. If EDI and API are used to transfer data from one system to another, what would the value be in purchasing and utilizing both? The reality is that the answer likely depends on a business’ ecosystem of partners and applications. The common denominator is that for an organization to grow in the long term, it will likely need to support both of these mechanisms on a single platform.
The business of information exchange may be complex, but by uniting the strengths of EDI and API, organizations can tailor business needs to each customer, product, and industry. Though EDI is used for exchanging structured business data between trading partners’ systems and APIs are used to integrate and communicate between different software applications, combining these two tools can provide a seamless workflow that accelerates timelines for businesses and customers alike.
As complementary technologies, API integration augments EDI to provide deeper context to integrations within a digital ecosystem, as EDI enables downstream business processes and data orchestration. For example, while APIs might be utilized for tasks like product availability or price checking within an eCommerce platform, actual order placement, shipping, and fulfillment typically rely on EDI’s structured data exchange capabilities. Including both platforms in an organization’s software arsenal allows API to excel at point-to-point connections while EDI handles the coordination of complex workflows. APIs add new layers of meaning to EDI data, and their union proves much more advantageous than leveraging one over the other.
Similarly, combining API and EDI solutions allows organizations to automate and take on new ecosystem trading partners faster. The value of a single platform to perform API and EDI integration provides value to businesses by eliminating the need for multiple disparate integration solutions. This provides direct control and visibility over an organization’s most revenue-critical end-to-end business processes.
The conversation is no longer a debate over superior integration as organizations realize that these two solutions complement one another. Businesses stuck in the antiquated debate of API versus EDI will fail to recognize that these two solutions, working in tandem, serve a much greater benefit to an organization than just one solution alone.
How can combining EDI and API revolutionize your data exchange? Let us know on Facebook, X, and LinkedIn. We’d love to hear from you!
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