Why Use EDI: The Answer to Why EDI is Important in the Modern Age

Electronic Data Interchange, or EDI for short – has been around for decades. It’s remained a staple in the B2B communications realm for so many years that some wonder if it’s still a relevant technology. As technologies evolve, companies grow, and compliance standards shift – many businesses may wonder what the future holds.

We’re here to quell concerns and address the digital elephant in the room: Why use EDI?

In this article, we’re going to address whether or not EDI is still relevant and used, why EDI is important, its relation to other interchange solutions, and what the future holds. So, whether you’re looking to adopt EDI for the first time or you’re thinking about ditching a legacy system and want to know if EDI migration is worth it, we have you covered. 

Is EDI Still Relevant?

Perhaps the most pressing question many organizations must ask is: “Is EDI still relevant?” Many working professionals seem to be under the impression that as a technology, EDI will soon be obsolete. In fact, it’s the opposite. EDI has grown by 61% in the last few years. But why?  

Simply put, because it works. You know the old adage. “If it isn’t broken, don’t fix it.” The same can be said for why EDI is still important, and most importantly, why use EDI at all. Whether you choose to manage EDI in-house or outsource to an experienced provider, we think that it’s important to know why EDI is important. 

Why EDI is Important

Firstly, let’s explain why EDI is so loved by businesses. It’s no secret that thousands of companies have developed their systems around EDI standards. In fact, EDI has grown by 61% in the last few years. But why? 

It’s simple: EDI makes business life easier. 

It allows companies to dynamically share reliable business information in real-time, including: 

• Sending orders
• Informing about incoming deliveries
• Confirming deliveries
• Booking transport
• Sending invoices 

It simply saves the time and effort of all parties involved in the process. EDI significantly speeds up the whole business cycle and eliminates the number of errors in the process. 

Why Use EDI? (5 Simple Reasons)

Integrating EDI software and solutions offers a multitude of benefits to businesses, enhancing their data management capabilities and delivering tangible advantages.

1. Cost Efficiency: Properly executed EDI integration streamlines operations, leading to reduced overhead and administrative expenses for companies of all sizes. By implementing EDI, you can cut costs associated with paper, printing, storage, filing, postage, and document handling. When combined with cloud-based systems integrated with CRMs, analytics tools, or other efficiency software, it can significantly curtail administrative, resource, and maintenance expenditures.
2. Accelerated Commerce: Integrated EDI optimizes your supply chain, increasing efficiency and productivity by seamlessly linking order data with accounting or ERP systems. This eliminates the need for laborious manual tasks, like manually calculating invoices, which can introduce errors affecting various aspects of your company.
3. Enhanced Accuracy: API-driven connectivity fosters seamless communication among disparate technologies, transforming them into a cohesive application network. This integration minimizes errors and enhances the vendor fulfillment process, ultimately improving accuracy.
4. Data Enrichment: EDI integration contributes to data enrichment within your CRM. This ensures that your CRM stays current with the latest information regarding changes in your existing customers' businesses. Real-time data enrichment and tracking enable your customer success team to identify customers requiring assistance or follow-up, repeat orders, or product suggestions based on order data.
5. Heightened Productivity: Team members will no longer need to generate stock receipts, hunt down invoices, or monitor supplier performance, freeing up time for more valuable tasks. 

If you’re looking for some tips on choosing the right EDI provider, we have you covered with this simple guide.

EDI vs API

Both EDI and API serve a similar function, exchanging data between business computer systems. Sure, they each have their own savvy definitions:

• APIs are used to communicate and integrate between various software applications to achieve real-time data exchange.
• EDI is a computer-to-computer electronic interchange of structured business data in a standardized format.

There are certainly pros and cons to each, and it's crucial to identify both during the great debate of why use EDI compared to API.

Pros of API 

• Real-Time Communication: APIs enable real-time data exchange, making them suitable for applications requiring immediate access to data.
• Flexibility: APIs are highly flexible and can support various data formats, allowing for a wide range of functions.
• Instant Access: API provides instant access to inventory and the ability to transfer updated data quickly.
• No Standardization Constraints: API doesn't rely on standardized document formats, allowing for greater flexibility in data exchange.

Cons of API 

• Lack of Standardization: APIs lack standardization, leading to potential challenges in data format compatibility when adding new partners.
  
• Costly Customization: Customizing APIs for specific business needs may require costly changes to ERP systems.
  
• Complexity with Multiple Partners: Connecting with partners who have their own APIs can be expensive and complicated, with no recommended data standards.
• Operational Complexity: Inefficiently designed APIs can require numerous operations for simple tasks, potentially increasing operational complexity.
• Multiplicative Partner APIs: For a wide supply chain, using multiple APIs from different partners can become complex to manage. 

Pros of EDI 

• Standardization: EDI follows standardized document formats (e.g., EDIFACT or X12), ensuring consistent data exchange across different partners.
• Reliability: EDI transactions are known for their reliability and low error rates due to strict formatting rules.
• Efficiency: EDI eliminates the time needed to request and send information, improving overall efficiency in data exchange.
• Minimal User Intervention: EDI transactions do not require frequent user intervention, reducing the need for manual data entry.
• Single Communication Method: With EDI, you typically have one communication method with your service provider and one mapping set for each transaction type, simplifying management. 

Cons of EDI 

• Complex Implementation: Setting up an EDI infrastructure can be complex and time-consuming, requiring specialized knowledge and software.
• Limited Real-Time Capability: EDI transactions are often batch-oriented and may not support real-time data exchange, which is important for certain applications.
• High Initial Costs: There can be significant upfront costs for software, hardware, and training when implementing EDI. 

The choice between EDI and API depends on your specific business requirements. When partners ask why EDI is still used, you can simply point to the solution as a standardized, reliable, and efficient data exchange option. APIs provide flexibility and real-time communication but require careful consideration of standardization and potential customization challenges when dealing with multiple partners.  

The Future of EDI

There are several projected outcomes for EDI, all of which include its continued usage. Is EDI still relevant? Certainly. However, the trajectory of its adoption may depend on the size of the business, industry, and individual business goals. Here’s a look at what the future may hold. 

• Smaller companies may adopt more SaaS solutions or web EDI opportunities in order to keep up with larger organizations
• EDI won’t be replaced by API, but rather work in tandem with it. Many experts, including those at IBM, predict that the real future of data transfer lies in the support of both EDI transactions and API capabilities.
• International organizations will need to pay close attention to global changes in the realm of EDI as companies sign up to be PEPPOL participants, and other countries adopt their own document interchange standards. 

When we’re asked why EDI is still used, it seems like a fairly obvious question. It’s used because it’s a successful means of document interchange, especially for industries that cannot afford errors or inefficiencies.