EDI & APIs: Data Interchange in the Supply ChainAn introduction to data exchange methods in the 3PL supply chain logistics industry
Today, supply chain operations must move faster than ever before, largely due to the deluge of individual consumer orders that must be processed from online shoppers. Operational and order processing speed can provide a competitive advantage and affect the satisfaction level of consumers when rating the customer experience.
Keeping supply chain costs under control is another major challenge, particularly as this affects the cost of goods to consumers. Using effective inventory management business processes and digitizing the supply chain are two ways of keeping costs down.
But how can supply chain operations increase the speed of operations without also increasing the cost? One way of doing this involves data interchange. If you are a third party logistics provider or other supply chain business, you probably use some form of electronic data interchange to communicate with your trading partners or are planning to do so. When businesses communicate electronically with trading partners, there are less errors. Costs can be reduced and processes can be expedited. It all sounds good on paper, but how does this happen?
Many, if not most of today’s highest grossing online retailers and brands utilize some form of automated data exchange when operating their business.
Many, if not most of today’s highest grossing online retailers and brands utilize some form of automated data exchange when operating their business. For years, EDI has been the most popular form of automated data exchange,
The Basics of Supply Chain Data Interchange
What is Electronic Data Interchange (EDI)?
Inspired by developments in military logistics more than 60 years ago, EDI or Electronic Data Interchange is the computer-to-computer exchange of digital business documents in a standardized electronic format between parties that conduct business together. Exchanging data electronically makes this process less prone to errors, streamlines communication between business partners, reduces costs and improves operational performance across your enterprise.
By using EDI solutions, vital information can flow seamlessly from the computer system of one trading partner to that of another, without the need for manual intervention, postal mail, fax or email. In supply chain logistics operations, some of the most common documents that are exchanged include invoices, purchase orders, customs documents, documents involving shipping status, inventory and payments as well as advance shipping notices (ASNs). Using an EDI system significantly reduces the time and cost of sending documents and transmitting information.
An EDI System Relies on Electronic Standardized Formats
Developed to be independent of communications used by companies as well as of the software which generates EDI electronic data, EDI transactions enable fast, clear transmission of business-critical data. Processing business documents using computers instead of humans requires that there is a standardized format so that the computer will have the capability of deciphering, reading and understanding the information presented.
An electronic standardized format identifies what each bit of information is and the format of the data, i.e. decimal, integer, etc. so that each computer system “speaks the language” and can communicate effectively.
There are numerous EDI standards, also referred to as EDI formats, used across the world. Of these, the American National Standards Institute (ANSI X12) is most frequently used in North America and the only internationally recognized standard, United Nations EDI for Administration, Commerce
EDI Documents contain the same basic information typically found in the functional equivalent of a paper document. This eliminates the need for paper documents and error-prone human intervention in processing and saves vital time.
The Evolution of Electronic Data Interchange
Over the years, EDI has evolved. Now instead of having to install an on-premise solution or use a costly VAN, companies are using AS2 for secure communications over the Internet. EDI solution providers can host cloud-based solutions and transmit EDI messages via FTP.
Messages can be sent directly to business partners using AS2 or through a value-added network commonly referred to as a VAN. In this case, the message would be transmitted to the VAN which would then review it and send it to the correct recipient.
Somewhat cumbersome and
AS2 Direct EDI Solutions
The direct method, Applicability Statement 2, known as AS2 was advocated by Walmart. AS2 assures the security of EDI documents through encryption and the use of digital certificates. Because data is traveling over the Internet, there are no fees for data. With AS2, each trading partner must be implemented independently. Less technologically advanced organizations may find the process especially challenging.
To implement an AS2 direct EDI solution, each party must:
- Purchase and implement AS2 software
- Collaborate and agree on firewall access
- Exchange certificates
- Configure and test the entire EDI AS2 solution to validate that communications are successful
EDI Value Added Network (VAN)
Thinking of an EDI VAN as a virtual post office makes EDI
Typically when using a VAN, the EDI communications needs to only be configured once and can work for any other VAN trading partner.
Application Program Interfaces (APIs) and B2B Integration Technologies
Traditionally, EDI transmits data over timers. The data is stored then forwarded without confirmation, much like a fax machine. The storage delay can slow down processes somewhat and the data transfer gaps can result in decision making based on information which may have changed. Because the data is not real time, proactive decisions cannot be made using information that may be outdated.
APIs are a messaging format which
EDI vs. API Integration for Data Exchange Capabilities
The speed of supply chain operations and changing customer interface demands is driving businesses to evaluate a variety of options for data interchange including APIs.
EDI is a communication technology, a tool that enables the transmission of data from one system to another. As the capabilities of the Internet have expanded, EDI has not been modernized. Both EDI and API transmit data from one entity to another: the difference is how this is accomplished.
Application Program Interfaces (APIs) act as messengers to other systems and enable data to be transmitted in mere nanoseconds. To enable
Why are APIs becoming more popular for data interchange? For one thing, speed. Using APIs and the related
Another reason why APIs are increasing in popularity as compared with EDI involves basic functionality. Generally, EDI does not tend to be
Here is why traditional EDI must evolve and change:
Not so long ago, consumers made pilgrimages to shopping malls,
Speed = competitive advantage + positive customer experience (CX) + cost savings
From the automotive industry, grocery and
As times change, so much methods. Information flow of electronic data can now be facilitated using modern means including APIs and that will make it faster, less expensive and more efficient for supply chain businesses.