Managing data exchange across your supply chain partners is a critical challenge that affects efficiency, accuracy, and costs. When your systems can't communicate effectively, you face delays, errors, and missed opportunities. Technology has introduced several solutions that are designed to improve connectivity throughout your entire logistics operation. Two of the most common include electronic data interchange (EDI) and application program interface (API).
In the world of big data, you'll find two main systems that specialize in transmitting large amounts of data across your partners and companies. These two systems have different capabilities and methods of achieving this goal, but they essentially aim to fulfill the same function: getting data to and from two or more recipients.
You can use both protocols throughout multiple industries to streamline your flow of communication and daily fulfillment tasks through cloud-based SaaS solutions.
In this article, we'll discuss the differences between EDI and API as we dive into each protocol's pros and cons. By analyzing each, you can determine which protocol would best fit your big data needs.
EDI
EDI stands for Electronic Data Interchange and has been around since as early as the 1970s. EDI works by first establishing a connection to a secure, reliable peer-to-peer (P2P) network. It standardizes data from large quantities of physical documents and processes the information into an electronic format. It can further facilitate the transition from physical tasks like mailing financial or shipping records such as billing invoices, order forms, and the like to a more modern digital process.
EDI solutions are a staple in the logistics industry for a number of reasons. Most notably, however, they help minimize labor, time, and reduce the risks of inaccurate data from illegible handwriting or incorrect documents being processed manually.
EDI Pros
- Security - Systems using EDI protocol are known for their robust security and privacy settings, allowing companies to rest assured that their trade secrets and confidential information cannot be hacked or stolen. EDI opens a secure connection between only two parties and allows each party to send and receive information once set-up is complete. Users control which information is sent and data is protected so that only predefined authorized users may access it.
- Ease of use- EDI takes an antiquated practice of manual document processing and transforms it using technology to streamline data collection and transmission. What used to take hours of manual labor can be done a fraction of the time, thereby freeing up manual labor and driving down costs. EDI specialists are abundant and can teach users how to be up and running within a few months.
- Accessibility - Due to its popularity, EDI has become an industry standard and any business looking to adopt EDI technologies will find that many partners are already set up with EDI.
EDI Cons
- The number of versions - EDI systems have 3 specific versions, and versions must match between two partners. Outdated versions are not compatible with each other so if a supplier has a different version, they must upgrade before integration.
- Limited Scope between Partners - EDI functions as an open channel between only two parties. To include another partner, another EDI connection must begin and essentially start from square one to make sure all parties have compatible versions. Also, both parties must accept the same transmission guidelines to complete integration, including methods, translations, and standards of data.
- Outdated Technology - EDI uses technology that is quickly becoming outdated. EDI has a history of minimal updates and only made revisions to its software 30 years after its inception. Because of this, EDI will not be compatible with future technologies such as blockchain and may hinder progress for companies that have outgrown their legacy tech stack. Also, transmission times may vary depending on the amount of data. Times may range between 30 minutes to 2 hours if the scope of data is particularly large.
- Cost - EDI is not cheap. This is due to the time it takes to synchronize systems and train employees. EDI projects may last from 3-6 months before full functionality can be achieved, and while customization may offer more data control, this still requires manual intervention. EDI specialists usually must be sought after separately, and their associated costs may rise quickly.
Now let's see how API, a newer technology solution, compares to EDI...
API
API, Application Programming Interface, performs the same function but in a significantly different manner.
While EDI establishes a connection between two EDI systems, API is a web-based protocol that allows different systems to communicate with each other. Using cloud-based technology, API allows for data to flow in less than a second between systems. This real-time access to big data is showing promise as many industry giants such as Amazon have already incorporated API into their supply chain.
Universal transmission and automation also make up another major difference to EDI, meaning human intervention is practically nonexistent while using API. As the EDI is a network-based solution, the API streams connectivity to the cloud. This flexibility is a major reason why several supply chain businesses opt for API over EDI.
API Pros
- Faster Data - API is a powerhouse when it comes to accumulating data because it is not dependent on manual users uploading documents. Using IoT technology, API connects systems and continually updates information and data as it becomes available. EDI's transmission time pales in comparison to API's instant and accurate data accrual. What takes EDI 30 minutes to 2 hours to upload, API can perform in minutes. API also allows pickup requests to be input automatically rather than manually. This data accessibility will allow users to respond faster to issues and make accurate projections about their materials and products.
- Simplicity - API simplifies data transmission and allows users to gather data without the need for customization. Also, the need to match versions between two parties is nonexistent because API connects systems that are already in place, such as your TMS platform, WMS, and ERP.
- Future Technology Compatibility - Part of the allure of API is that it is software that anticipates new technologies. As future technologies roll out, API systems can support them and become compatible, further accelerating its capacities and visibility across the supply chain. For example, blockchain technology allows for every user of the supply chain to witness all transactions happening in real-time, giving maximum visibility and discouraging any sort of unethical practices. While it's not yet perfected, taking advantage of future technologies is something to consider if you want to invest in a system that will continue to improve.
API Cons
- Newer Technology - API is a relatively new player and is not as popular as EDI among industries. As with any new technology, there will initially be more EDI users who refuse to adapt and stick with traditional software. This may affect your decision if a partner currently uses EDI and does not want to switch to API just yet.
- Lack of Security - API is software-dependent on the web, meaning it's much more susceptible to hacking and data breaches than EDI. Due to its connectivity to many systems, a data breach could potentially mean that all of your systems are compromised.
- Reliant on an internet connection - While the internet has become as commonplace as oxygen, unforeseen connectivity problems happen. API lies at the mercy of a stable internet connection, and any interruptions can affect every system connected via API. As anyone in the industry can attest to, when the system is down, nothing gets done.
Solutions API and EDI Improve
The primary objective of both is to save time with the transfer of electronic files. This helps to expedite order entries, pay invoices, and provide a safe electronic record of transactions.
These solutions are also intended to automate common tasks.
Some of the popular solutions that API and EDI technology helps to improve includes:
Connect supply chain partners
The API and EDI technology is used to connect partners within the supply chain. Their mode of transportation, however, is much different. The EDI requires a physical network on both ends, while the API can be accessed from multiple devices with a single internet connection.
Improve payment gateways and processes
Both solutions can be used to process invoices, order products, or set up freight movement. However, like the above example, the EDI requires similar hardware and software to be installed in computers to accomplish this task – while the API is cloud-based.
Reduce administration duties
When supply chain partners are connected through a network, many of the common administration duties of the past are eliminated or seriously reduced. To see how real companies have leveraged technology integration to streamline their operations, explore our supply chain success stories.
Final Thoughts
When you're evaluating data transmission protocols for your supply chain, understanding the differences between EDI and API is crucial. While EDI continues to serve as a reliable system for many organizations, API offers speed and connectivity advantages that are increasingly important in today's fast-paced logistics environment.
Redwood's Modern 4PL approach leverages API technology to provide seamless integration across your supply chain partners, delivering real-time visibility and automated data exchange. By combining the best of both worlds—security where you need it and speed where it matters—Redwood's technology solutions help you optimize your transportation spend while reducing manual intervention. Whether you're looking to modernize your existing systems or build a more connected supply chain ecosystem, choosing the right technology partner can make all the difference in achieving your operational goals.