The conversation around API vs. EDI is a heated one in the supply chain space. It’s a complex issue with a lot of nuanced concerns both practical and theoretical. It’s also one of the most important conversations for supply chain leaders to be having as we all work to retool our organizations and workflows to meet rising demands and ever-greater logistical challenges.
As such, I was honored to take part in a recent panel discussion at McLeod Software’s UC2020 annual user conference. For the hour-long presentation, titled “Are APIs The Future of EDI?”, I joined Anika Schurmann and Dana Ortego of McLeod Software, as well as Taylor Groenhout of KBX Logistics, to discuss the complex relationship between logistics professionals and EDI, and how that relationship stands to change in the coming years.
API vs. EDI: What’s the difference?
In my role as a Carrier Operations Team Lead at FourKites, I’ve seen firsthand how much confusion exists within the industry around API and EDI. In essence, the purpose of both technologies is the same: to transmit information from one place to another, much like supply chains themselves transport goods from A to B. The key differences between the two is in how they carry out that task.
Since the early 1970s, Electronic Data Interchange, or EDI, has been the standard mode of exchanging information throughout the global supply chain. From status updates on shipments in transit to invoices, orders and reports, EDI has formed the backbone of supply chain workflows for the past 50 years.
But times are changing. As the capabilities of internet-enabled technologies have grown by leaps and bounds, EDI has lagged behind. EDIs put a disproportionate strain on server processing resources, making them slower and less stable. In addition, the sheer number of different standards that are in common use today is simply mind boggling, due to the rampant customization that has taken place over EDI’s five decades of existence. These standards can vary by industry, geography, company and more, meaning that organizations employing EDI have to decide among numerous transaction sets before they can accomplish their intended task.
As EDI has grown steadily more obsolete, a different technology has begun to take its place: Application Programming Interfaces, otherwise known as APIs.
The rise of the API
In simple terms, APIs allow data to flow seamlessly between two or more parties in real time, while EDI consists of a series of discrete, self-contained updates. Because of this, APIs bring a greater level of flexibility, and are easier to use, thanks to their simpler interfaces and development environments. With APIs, software developers can more easily accomplish challenging projects, saving companies both time and money.
APIs can also leverage real-time validations. Even a simple user registration form that you come across on any website has validations. They don’t accept your registration if, for instance, you enter an invalid email address. Critical business transactions deserve the same treatment. One of the major drawbacks of EDI, as it exists now, is the lack of real-time validations.
One great example of how APIs are used in everyday life is the Apple weather app on the iPhone. Apple doesn’t have a team of meteorologists on standby, updating global weather forecasts. Instead, the company partners with The Weather Channel to gather real-time weather data, which Apple can then provide to their own customers through an API.
Striking a balance
At this point you may be wondering: “If APIs are so great, why doesn’t everybody use them?”
The answer to this question is complicated, but it’s important to first realize that APIs are not a silver bullet: You need to have good data before you even start to think about how to transmit it. If you don’t have access to real-time information in your operating system, then it’s impossible to send this data by either method. Data is the bedrock of any digital transformation.
The reality is that even though APIs are technically superior to EDI in many ways, much of the logistics industry still has yet to deploy them in any significant way, meaning that EDI still plays an important role in today’s freight ecosystem. At FourKites, we still ingest EDI data from a small percentage of carriers, though we typically do so only as a last resort, particularly smaller companies that don’t have the IT resources or a sophisticated Transportation Management System to enable a full-scale API rollout. But we’ve also built robust API capabilities that can be adjusted easily to ingest a wide range of data, affording the flexibility to address our customers’ various challenges. So even though the ideal digital transformation strategy would include a fully API-driven exchange of data, many operations will likely have to rely on both technologies to some degree for the time being.
The road ahead
Will it always be this way? Probably not. If there’s one thing I’ve learned over the past several years, it’s that you don’t want to bet against technology. Twenty years ago, people walked into Blockbuster to rent movies. Now, the idea of leaving your couch to rent a movie is crazy. In similar fashion, APIs or some other advanced method of data exchange will likely supersede EDI as the standard for exchanging information within the supply chain industry. It is only a matter of time.
APIs provide considerable long-term benefit to create a better, more sustainable path forward for the digital connectivity of our industry. In all likelihood, EDI will be replaced in its entirety. However it’s unclear when that will happen. Whether it’s in five years or 25, the future of supply chains is most definitely one of change and adaptation. The companies that position themselves best for this dynamic business climate will be the ones who succeed and thrive – no matter what changes technology can bring.