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EDI vs. API

August 07, 2018| by Kelly Green

Supply chain management solutions make use of an electronic data interchange (EDI) system, a system based on application programming interface (API), or an integration of both types of systems. The main considerations, in choosing between using these alternatives, are the standards used by suppliers, security concerns, and the need for real-time data processing.


For many businesses, EDI is an effective solution for the challenges of supply chain management. If a business benefits from batch processing and is concerned about security this is still a good choice. Legacy systems still operate effectively in many industries using this type of system, as long as the delays between batch processing of the data do not have any material impact on a company’s operations.


API solutions are becoming more widely deployed across all industries and platforms. API transfer data from one system to another in nanoseconds. This results in efficiency that may translate to revenues.


There are hybrid solutions that combine the use of both data processing styles that may be advantageous for certain kinds of operations. For example, a manufacturer that makes products for sale on a seasonal basis might use both types of systems. This might use an electronic data interchange to buy raw materials to make products that are produced well in advance and then use an application programming interface system to process product orders during the high-pressure period of seasonal sales to maximize sales in real time.


Setting up a API integration can take many months and may have substantial costs when it needs to be upgraded. Setting up an EDI system is a one-time process that may take less than a month and upgrades are much easier to implement.


Examples of companies that benefit from real-time data processing include those involved in transportation and those that do a lot of shipping. Since transportation rates constantly change and efficient shipping costs affect the bottom line, API of these types of transactions is not a preferred solution. Instead, real-time data transfer between companies, using freight system EDI gets the best quotes available.


Initially, the tariffs are loaded into the system for each carrier along with the shipping rules. Subsequently, when a rate quote is requested by the system for a new shipment, the rate information is automatically updated and the rules applied to determine the best quote as the preferred carrier for that shipment. This is not possible without having real-time data processing because the changes are continuously happening.


Other industry examples that benefit from real-time EDI processing include the ecommerce, logistics and supply chain that dynamically updates pricing based on supply and demand considerations.


The type of supply chain management solution that works best for a particular company depends on their business dynamics and the marketplace in which they operate. However, most industries are using EDI-based systems because of the faster implementation timelines, lower maintenance costs, and the value of having real-time data processing information to use in order to make better business decisions.


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