Application Programming Interfaces (APIs) are often revered as one of the great innovations in logistics today – almost on par with delivery drones and self-driving trucks. This perspective is centered on the idea that Electronic Data Interchange (EDI) is dead, with APIs being the heir apparent as the de facto standard for how data will be exchanged everywhere in logistics.
While APIs unquestionably have a role in how data can be exchanged, it’s our belief that the death of EDI has been greatly exaggerated in the transportation industry. For now, EDI is still the best, simplest, and most cost effective way to connect logistics partners and share data. Research supports this, showing that EDI has not even reached its full potential in the logistics marketplace, much less its decline.
A large portion of shippers and manufactures outside of Fortune 500 companies still use legacy systems. McKinsey & Co. states that companies on average are less than 40 percent digitized, including everything from deployments of digital tools in their supply chains to customer-facing products and services. Those systems simply aren’t ready for an API integration. However, they are typically able to easily integrate with EDI technology. This fact means that EDI for logistics is still the most broadly accepted communication tool, and will not be completely replaced by API any time soon.
The point here is not to disparage innovation or resist change . Technology is important to moving the logistics industry forward and is constantly improving processes that drive efficiency — better load planning and routing decisions, cost savings, improved service, more accurate track and trace, etc.
The point is to remove the perceived burden and urgency on shippers and manufacturers to adopt another new technology. Instead, investment in quality middle-ware that can deliver on big data should remain a priority for 3PLs and shippers who are required to maintain their direct carrier network – and only to the extent that integration of this sort is desired or beneficial.
The Benefits of EDI for Logistics
The benefits of digital data exchange are clearly superior to manual processes, regardless of API vs. EDI. Key enhancements include:
- Reduction in paper processing and costs
- Reduction in errors caused by manual order entry
- Better information access and storage
- Increased ability to provide good customer service
- Increase in processing speed
- Enhanced visibility into order status
Specifically, at Zipline Logistics, we recently transferred a client from manual order entry to EDI tendering, and we reduced average processing time by 66%.
Why EDI in Transportation is Still Alive and Well
Currently, EDI is still a favorable choice when compared to APIs. Although EDI is an ‘older’ process of exchanging data, a big part of the reason it’s still around is very simple: EDI is cost effective and it works reliably.
These comments from a recent Transport Topics article illustrate both the future trajectory of EDI for logistics as well as the “stickiness” of the solution for both carriers and shippers.
“We’re seeing a pretty heavy uptick in EDI setup requests,” said Eric Whitton, VP of information technology for Covenant Transportation Group. “EDI is still very heavily in demand [by] our shipper base.”
Standard EDI “is the easiest [way] because we know how to pull the data out of our system,” said Steven Edmonds, VP of information technology at truckload carrier Celadon Group. He cited as an example a shipment status document — “a 214” in EDI-speak — that provides information about a shipment’s pickup time, location and expected delivery time.
In other words, the marketplace is not pushing for the change – the opposite is happening. EDI already represents a working business language that facilitates communication between supply chain partners anywhere in the world.
API vs. EDI: An Objective Look
Of course, cost is always a primary consideration with any business decision, including the EDI vs. API debate. By comparison, making API connections is expensive and also require more ongoing maintenance. The differences go deeper than just hard costs too. By their nature, APIs create new security risks by opening up additional access points to company systems.
Another important consideration is that EDI continues to be used by these same companies in other parts of their supply chains. It’s common for distributors, warehouses, and retailers to send and receive orders and information using EDI. These companies will continue to need employees who are knowledgeable about EDI. Meanwhile, programming APIs can have a steep learning curve and may require entirely new employees with a different skill set.
So, despite all the attention APIs are getting, logistics services providers are well served to maintain present course but understand that APIs are a technology with great potential whose hype may be slightly ahead of its time.
Evaluating options honestly is what good critical thinkers do. An objective view of the marketplace and costs shows a definitive need for EDI now, and many reasons to think this will not change in the immediate future. API’s day in the spotlight may come in transportation, but for most players, it won’t be today.