EDI vs. API — Everything You Need to Know

Shot of a man and woman going through paperwork and using a laptop together in their coffee shop

January 11, 2023

Enhancing communications between business partners is crucial for increasing productivity in today’s fast-paced market. Trading partners use two primary technologies for communicating large amounts of order data — Electronic Data Interchange (EDI) and Application Programming Interfaces (APIs). EDI has been the standard method of document exchange for decades. However, with the rise of API across multiple industries, decision-makers want to determine the best choice for their companies.

Each integration type provides unique capabilities that make them ideal for different applications. However, companies can also use these technologies together to simplify doing business in any direction.

Understanding the differences and benefits of EDI vs. API can help manufacturers, suppliers, and retailers decide how to use them within the supply chain.

The Difference Between EDI and API

Comparing the advantages of API vs. EDI starts with a knowledge of their core functions. With EDI software, automation replaces paper documents and streamlines the process of sharing data like purchase orders and invoices between retailers, suppliers, distributors, 3PLs and others in the supply chain. The technology uses specific transaction codes to communicate electronically between two EDI systems so both can process the data.

Because API platforms are often uniquely developed, API data transmission works a bit differently. This technology enables real-time data exchange between multiple parties by creating a direct connection between systems. API gathers and transmits data through the web in seconds and continually updates information instead of requiring users to upload documents manually, or using a system like EDI to send large batches automatically at pre-set intervals. Retail giants like Amazon and Wayfair now use custom APIs to manage data sharing, in addition to other communication methods.

Despite their differences, these technologies work toward the same goal — transmitting data more efficiently between business partners. Because these systems can be helpful in different scenarios, some companies implement them together within their supply chain to gain the benefits of both.

EDI vs. API for B2B Data Transmission

Deciding between using EDI vs. API in your supply chain depends on your needs and your trading partners’ requirements. Both protocols can simplify B2B communications, although they might be better suited for different applications. Retailers and distributors might offer both types of connectivity, or only one of the two, which can make the choice simpler for suppliers. Consider the advantages and disadvantages of API vs. EDI integrations:

EDI Pros and Cons

EDI is standardized across different industries for a reason — it effectively transmits data between suppliers, third-party logistics providers, carriers, and other partners. An EDI solution replaces communication methods like email and faxes with electronic document exchange to increase operational efficiency and improve relationships between business partners.

The pros of EDI include:

  • Accessibility: Since EDI has been the standard data transmission method between trading partners for years, its use is widespread across the logistics industry. Companies wanting to use EDI are sure to find a range of partners already set up with the technology.
  • Security: Trading partners must have an agreement with stakeholders before communicating using EDI, which increases security and tracking. EDI protocols also provide robust privacy and security settings.
Key Components of EDI
  • Ease of use: EDI solutions turn demanding paper-based communication into a streamlined process requiring less manual input from employees. EDI frees companies from inefficient manual processes, allowing them to focus on other business tasks.

EDI also comes with a few cons:

  • One-to-one transmission: While an EDI systems can operate across many trading partners, each transaction only communicates between two enterprises. A new EDI connection, or “map” must be created for each transaction type and each trading partner.
  • Periodic transaction processing: EDI technology typically transmits information in batches, which are can be automated to process at regular intervals, including outside business hours. This is a significant improvement on paper-based communication. However, some businesses choose to leverage APIs as an alternative in order to get direct, truly real-time communication on factors like inventory availability.

API Pros and Cons

APIs use different systems to open up additional communication channels between companies and simplify data flow. The newer technology of APIs improves upon some of EDI’S drawbacks, although it also introduces new challenges.

Here are some of the pros of APIs:

  • Faster communication and updates: APIs often rely on cloud applications, meaning they can gather, move, and update data almost instantly. Companies can transmit data in real time with an API, much faster than they can with EDI.
  • Simplified data transmission: While EDI requires that employees manually input data before transmission, APIs automatically accrue data. APIs also remove the need for matching versions because the software uses in-place systems like Enterprise Resource Planning (ERP) systems.
  • Flexibility: APIs are adaptable and anticipate new supply chain processes and management technology. Companies can integrate APIs with emerging solutions to continually improve processes.

Depending on your company’s needs, APIs may have a few cons as well, including:

Limited partners: APIs are most common among start-ups, from manufacturers to suppliers. These newer businesses could have difficulty communicating with more established trading partners that continue to rely on EDI transmission software.

Security: API may not be a suitable data transmission solution for financial data and other sensitive information. Since external business partners have access to this data through the API, the technology could cause compliance issues.

EDI and API — Working Together

EDI and API technologies have their own benefits and potential challenges. EDI will likely remain an essential tool in business communications, though the flexibility and speed of API data transmission is a valuable benefit. Some companies may wonder if they can capitalize on the advantages of both systems. Fortunately, when you’re considering API vs. EDI technology, the answer can be both.

The best solution is EDI and API integration. EDI and web-based API solutions can combine on one platform to provide trading partners with a more comprehensive approach to B2B information exchange. A hybrid EDI and API integration platform facilitates data sharing across the two technologies.

Combining EDI and API offers logistics companies several advantages. EDI integrations automate data transmission between multiple systems to enable faster communication. This strategy also allows businesses to gain a firmer foothold in the market and opens business opportunities with new trading partners. With modern integrated EDI solutions, trading partners can have the best of both worlds.

How API Works

API Integration with the TrueCommerce Platform

Managing business operations and communications with trading partners can be a challenge. A combination of EDI and API technologies can significantly improve B2B communications. With an integrated platform, companies can process orders, invoices, shipping notices, and more without relying on manual processes.

At TrueCommerce, we provide a unified commerce platform that enables companies to manage data sharing and do business in every direction through our integrated EDI software. The platform utilizes API-first open architecture for superior extensibility and integration. Request a demo of our software today to see what the TrueCommerce platform can do for your business communications.

About the Author: Peter is Vice President of Product Management-Retail with over 25 years of experience helping organizations in Retail and CPG leverage B2B integration throughout their supply chain by using data standards and technology to automate complex order and fulfillment processes. Peter is actively involved in industry trade and standards groups such as NRF, GS1, and RVCF. In addition, he is currently an advisory board member of the Center for Supply Chain Research at Lehigh University, where he actively participates in industry research. Peter is a veteran of the U.S. Navy and attended Central Texas College and Embry Riddle Aeronautical University, where he studied aviation and business management.

Stay ahead of the competition

Get expert supply chain insights delivered directly to your inbox weekly.