API vs. EDI: Which Infrastructure Is Right for Your Business?

Effective communication within a business ecosystem is crucial. After all, no one wants to experience shipping delays, lost invoices, missing data, or any other complications arising from misunderstandings between partners. Thankfully, traditional business exchange has been gradually usurped by software solutions that automate and facilitate seamless communication. 

When it comes to supply chain management, there are two prominent solutions: Application Programming Interfaces (APIs) and Electronic Data Interchange (EDI). While each approach has its advantages, the two aren’t mutually exclusive — in fact, APIs can complement and support EDI operations. 

So, which supply chain management solution is right for your operations: API, EDI, or both? In order to make an informed decision, it’s essential to understand each system's advantages and disadvantages — and how they can function in tandem for optimal functionality and efficiency.

What is EDI?

EDI is a form of communication technology used to transfer data between systems with little to no human involvement. Companies use EDI to electronically exchange business documents between trading partners and supply chain connections, including customers, carriers, suppliers, and more. 

EDI replaces the process of manually sending documents back and forth over email, fax, or snail mail. To do so, it relies on a standardized system of transaction codes. Each standard acts as a sort of universal language, simplifying communication so that every system or computer along the supply chain can read and understand the data. As a result, invoices, shipping notices, purchase orders, and more are efficiently and effectively shared with trading partners, regardless of their internal business systems.

Beyond speeding up trading processes, EDI also saves companies wasted resources from stalled communications and human error. For example, a warehouse management mix-up that causes inventory to be held for an additional week before a freight partner can deliver it to stores disrupts the supply chain, takes up significant space, and costs time and money. 

Pros of EDI

• Secure communication: Thanks to strong security protocols, EDI enables secure communication and data exchange with integrated trading partners, ensuring protection against unauthorized access.
• Efficient document transfer: EDI facilitates the dynamic transfer of various business documents, such as purchase orders, invoices, and shipping information, in a streamlined and automated manner.
• Enhanced supply chain management: EDI enables seamless transmission of information related to payments, deliveries, and product movements, promoting supply chain visibility and coordination.

Cons of EDI

• IT requirements: Implementing EDI may pose challenges for companies with limited IT resources, as it requires dedicated EDI software integration with business systems like enterprise resource planning (ERP) software.
• Compatibility issues: Different trading partners may use different EDI standards, leading to compatibility challenges that require additional mapping and customization efforts.
• Onboarding delays: The integration process for EDI can be time-consuming, leading to delays when onboarding new suppliers and trading partners.

What are APIs?

An API is a set of protocols that allows web-based software applications to communicate in real-time. Instead of transferring files from computer to computer, APIs serve as digital connectors between logistics systems along the supply chain. 

You might think of APIs as data interpreters stationed between these different systems. They help the applications understand one another without human intervention by offering an interface for various programs to interact. Like a translator helps an English speaker talk to a Spanish speaker, an API takes data from one system and translates it so that it’s comprehensible for the next system in the supply chain. 

For example, when a customer places an order for a black sundress on an e-commerce clothing site, an API passes the correct translation on to the warehouse. “Black Maxi Italian Sundress, Size 16” in the vendor’s data system becomes “Size 16 Black Maxi 110465” to align with the warehouse’s data system, and the order is then forwarded to the warehouse.

Similar to EDI, API connections streamline trading processes, eliminate user error, and increase supply chain efficiency. Their purpose is to create seamless communication between software applications so integrating many complex systems — such as CRMs, databases, and ERPs — is possible. RESTful web APIs commonly use HTTP methods and URL-encoded parameters to access resources, with data transmitted in formats like JSON or XML. 

Pros of API

• Connectivity and integration: APIs enable seamless connectivity and integration between different applications, systems, servers, and software, allowing efficient data exchange and communication within the supply chain.
• Real-time feedback: APIs provide real-time data at every stage of the supply chain, enabling immediate responses and updates between applications.
• Modern development tools: APIs utilize modern development tools and common Internet protocols such as HTTP and HTTPS, making them familiar and accessible to businesses’ modern development teams. 

Cons of API

• Lack of structure: APIs can be more unstructured than EDI software, with variations in endpoint names, authentication methods, schema, and integration requirements among different trading partners. 
• Integration challenges: APIs may pose integration challenges, particularly for companies with complex IT landscapes or limited resources. Implementing and maintaining API integration with existing systems, such as legacy systems or (ERP) platforms, requires specialized knowledge and dedicated IT support.
• Security considerations: Money and resources must be spent on proper security measures to protect sensitive data and prevent unauthorized access. 

What’s the difference between EDI and API?

While the two technologies serve similar purposes, EDI and API have distinct differences when it comes to security, onboarding, expenses, and uses.

Security

EDI provides secure communication and data exchange with integrated trading partners, ensuring confidentiality and protection against unauthorized access. It does this through established security protocols and encryption methods used as safeguards.

APIs also support secure communication, but the level of security varies depending on implementation. API security relies on authentication, access controls, and encryption to protect data. The security measures can be more flexible and customizable compared to EDI, but not all APIs are created equal. In other words, some systems are more vulnerable than others.

Ease of onboarding

Onboarding new trading partners in an EDI environment can be complex and time-consuming. Each partner may have different EDI transaction requirements and standards, requiring mapping and customization solutions for compatibility.

Conversely, APIs generally offer a more straightforward onboarding process. APIs typically follow standardized protocols, allowing easier integration and fewer compatibility challenges. With well-documented API specifications, partners can quickly understand the integration requirements and start using the API sooner.

Cost

Implementing and maintaining an EDI infrastructure can involve significant upfront costs. The process requires dedicated EDI software, hardware, ongoing maintenance, and specialized staff.

APIs tend to have lower entry costs compared to EDI. Many APIs are built on existing web technologies, making them accessible and cost-effective. However, there may be costs associated with API usage, such as API gateway fees or rate limits imposed by API providers.

Common use cases

EDI is widely used in supply chain management for various real-time access transactions, such as purchase orders and invoices. Companies commonly employ EDI in retail, manufacturing, logistics, and healthcare industries, where standardized and structured data exchange is crucial.

APIs are versatile beyond supply chain and logistics management. They enable real-time data exchange, integrations with external systems and services, and the construction of innovative applications. APIs are used in e-commerce, mobile app development, cloud computing, social media platforms, and more.

Choosing infrastructure for your business

When choosing between EDI and API, the right decision depends on your ecosystem of trading partners and applications. Evaluate preferences, capabilities, and real-time interactions to determine the optimal infrastructure for your supply chain. 

EDI has long been the established standard for structured data exchange in supply chains, allowing businesses to efficiently and effectively exchange documents such as purchase orders and invoices with trading partners. Meanwhile, APIs offer a more flexible and real-time approach to data exchange and system integration, enabling applications, systems, and services to communicate with each other more dynamically.

But remember: API and EDI can also complement one another, providing a powerful combination for seamless data exchange and integration. If you’re tired of complex EDI integration, try Orderful, the cloud-based EDI solution revolutionizing supply chain connectivity. 

Orderful seamlessly connects your systems with modern API and a prebuilt EDI integration platform. Reduce integration time from months to days and optimize operations by joining over 1,000 trusted retailers, carriers, and manufacturers at orderful.com.