Many may recall the days of paper documentation in the shipping industry, the lengthy processing times, frequent errors, and the ancient fax machine. But the fact is, the days of paper-based transactions is in the past.
Now, most shipping companies operate using electronic data interchange, or EDI, as the system of choice to do their work. And many are making the transition to application program interface, or API. Similar to the debate in the 1970s about which videotape standard would survive, Beta or VHS, which system will survive depends on who in the shipping industry you ask.
Let’s look at the benefits and challenges of using either EDI or API, and you can make your own conclusion as to which one defines the future of shipping.
What is EDI?
Electronic data interchange (EDI) is simply a computer-based exchange of information required for a business transaction. It is used in most industries that have a business transaction involved and eliminates the need for paper and reduces the number of people involved in the process.
Before EDI, a standard business transaction may include many steps:
The buyer of the product creates a purchase order.
The buyer faxes or mails the purchase order to the supplier.
The supplier enters the purchase order into their system.
The supplier prints an invoice.
The supplier faxes or mails the invoice back to the buyer.
The buyer enters the invoice into their
The buyer pays the supplier according to their process.
An API is essentially a set of tools and protocols for building a software application, specifying how components of the software should be used. A good API makes it simple for programmers to build software. APIs help programmers do many things, such as embedding a Google map into a webpage.
In the shipping industry, an API is web-based rather than just computer-based as in EDI. This makes information available in real-time, and accessible and editable from anywhere pending security of course. It uses cloud data and complex analytics using “big data.” Due to the cloud-based server holding all the information, it can be cost-effective to run.
What Is the Industry Standard?
Both EDI and API are used in the shipping industry to manage transactions and business overall. Shippers have used EDI for over 30 years. A recent poll found 85% of those in the supply chain industry are using EDI.
That same poll indicated 55% of companies are considering using web service APIs but haven’t yet made the switch.
So why aren’t companies making the switch? Many have legacy EDI systems that cost a lot of money to create. And many of those systems have full teams dedicated to maintaining those systems. In short, it is a huge change to make and one that means process change throughout the company.
There are, however, still some benefits to EDI.
The Benefits of EDI
Using EDI is much quicker and efficient than paper processes. But it also allows for fewer people to be involved in the process, allows for large documents and several documents to be transferred at the same time. And it’s often a very customized system that is made for the companies’ specific needs.
Because of the long-time use of EDI, company employees are often used to the system and don’t require intensive change management, which is the case for those leaping to use APIs.
The Challenges of EDI
The information is stored within the system physically, so it takes time to update. Also, because of the customized build, EDI systems can encounter bugs that may be difficult to fix. It’s costly to maintain these types of systems. And vendors providing EDI are on the decline due to the general transition to cloud-based APIs.
The Benefits of API
The biggest benefit of APIs is that information is available real-time and from anywhere. More processes can be automated, and companies can be more flexible with where their people and systems are located. There are numerous benefits of using cloud-based systems, and they can be less costly to implement than EDIs. Also, errors are far less likely due to the real-time data and information available.
The Challenges of API
One of the most difficult challenges related to API is the complexity of the technology. Implementing the system requires a highly skilled and knowledgeable technician. Many report that the testing infrastructure takes time and requires very specialized knowledge to get the system functioning.
Like EDI, it too is costly though the price has begun to fall. The system requires regular upgrades and maintenance. Many companies believe a cost-benefit analysis favors remaining with EDI for now.
Many believe API is the future of the transport industry, and while EDIs will continue to be used by companies not yet ready for change, eventually cloud-based API will become the standard.
The transfer of information in real-time, the reduced risk of error, and the ease of use of an API-based system are all reasons many are looking toward the future and considering API.