EDI integrations in logistics

What is EDI?

Electronic Data Interchange (EDI) is a method of data exchange that originated in the 1970s, and is still heavily used today. It involves the use of standardized formats to transfer data in a point-to-point or peer-to-peer connection. So when an EDI stream is set up, the connection is exclusively made for two partners.

EDI messages can contain a variety of information, such as transport bookings, tracking updates, and purchase orders. Before EDI it was common to share this kind of information through physical documents that required manual recording and recollecting from the different partners in the transaction. EDI was the first widely accepted way of structured digital communication, and has since grown to include a large subset of standards.

The benefits of EDI

• Standardized: it’s easily understood by different companies
• Secure: the connection between two parties is set up securely and the data exchange is encrypted. It can only be accessed by pre-defined authorized users. This makes EDI a trusted solution to comply with certain regulations or in situations where security is a high priority.
• Accessible: because EDI is so standardized and robust, it’s implemented and used by a lot of businesses. This makes it a very accessible option for data integration especially if the partner you’re looking to connect with already has EDI configured.

The drawbacks of EDI

• Legacy technology: EDI has proven merit but it’s built on older technology. It’s no longer being updated which means at some point it will lose compatibility with newer technology and it will be harder and harder to maintain.
• Version compatibility: Both partners of an EDI communication stream must be on the same EDI version. If that’s not the case, partners will have to make additional investments to support the same version.
• Expensive: Because of the setup it requires in infrastructure, time, and resources, EDI can come with a certain price tag. Having the right logistics tech expertise is crucial for rolling out an EDI integration on time and on budget.
• Limited flexibility: While EDI is great for transmitting standardized documents, it’s less suited for more complex transactions or situations that require real-time data exchange.
• Limited scalability: the nature of EDI’s point-to-point connection makes it a less scalable option for onboarding multiple partners quickly.
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Why EDI is important

If you can manage a strategic and effective EDI implementation, it will improve the overall efficiency of your supply chain. And while the technology in itself is not very modern anymore, there have been updates and it can be made an integral part of a modern and future-proof supply chain. And don't forget that 85% of the industry is still using EDI.

API integrations in logistics

What is an API?

An Application Programming Interface (API) is a set of protocols and tools that allows different software applications to communicate with each other. They were first developed in the early 2000s and while both APIs and EDIs serve to communicate data, APIs do this in a very different way.

While EDI requires a network infrastructure to enable communication between just two EDI systems, APIs use cloud infrastructure to be accessible to multiple clients and allow for real-time access and data exchange. APIs have become increasingly popular and are key to so many of the digital tools we have come to known and love.

The benefits of API

• Modern technology: The use of APIs has grown rapidly across all kinds of industries where digital is driving change. It’s a popular and state-of-the-art technology which also means that there’s a large talent pool with the right skills to help you develop and implement APIs.
• Speed of data exchange: APIs can transmit data in near real-time. This is particularly important in the logistics industry, where timely information is critical for ensuring that shipments are delivered on time and in good condition.
• Simplicity: APIs are designed to be simple. They typically have well-documented interfaces that developers can use to integrate their systems with other systems.

The drawbacks of API

• Limited Standardization: APIs are not as standardized as EDI. Each API is unique, and requires developers to understand how to work with it.
• Security Concerns: APIs can expose your logistics systems to security risks. Each API must be authenticated and authorized, which can be a complex process. This makes your systems more vulnerable to attacks and breaches.
• Cloud/Internet connection: The blood flow of an API is made up of the connection you have to the cloud. And even though the availability, quality, and connectivity of the internet haven’t stopped improving since its inception, it can pose a risk to your integrated logistics ecosystem.

Why API is important

As businesses continue to be drawn into (or pushed towards) a digital and connected era, API-based technology will be a crucial element to thrive in this modern economy. APIs, due to their intrinsic benefits enable a data-driven culture to emerge within companies. This goes far beyond shipment tracking and supporting just the logistics companies and supply chain teams. APIs can connect all types of organizational units within your company and outside of it. And while there's a lot of potential in building specific API solutions, it can be built as an additional layer on top of existing communication technologies as well, even EDI.

So, how to choose between EDI or API?

Well, it’s not a matter of simply choosing one over the other. A successful data integration strategy means understanding the technological landscape you’re in. You’ll need to balance the requirements and capabilities of:

• your customers, partners, and suppliers
• your operations, teams, and departments
• your enterprise roadmap for the future

What you’ll find is that the choices will be largely decided by the factors mentioned above. In many cases, this results in a side-by-side setup of EDI and API. A hybrid data integration strategy that works to unify data flows and connect your logistics ecosystem.

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Example case 1:

Imagine a shipper who wants to expand their shipping activities to new regions. As a consequence, there will be new 3PLs and 4PLs joining their logistics ecosystem. Many of these logistics service providers have developed a custom web portal for their clients to use, but juggling many of these portals can quickly become a hassle. They have APIs they expose as well, so it’s a great opportunity to integrate with them through these APIs and unify data streams towards for example your ERP and TMS, where you can then see all information in a single place. Have a look at our customer success story for TOMRA Food if you want to learn more.

Example case 2

Let’s say you will be providing logistics services to a large, mature company with a global presence. This company is operating in a strictly regulated industry which means that amongst many other aspects, security is a top priority when it comes to data integration with external partners. For these reasons, this company is using EDI for a lot the partner integrations and it’s no surprise they will require you to comply.

However, another service provider you need to communicate within this company’s ecosystem has developed a highly secure API. Making this connection will make life a lot easier and will result in better service levels for your client.