You know you need to connect your business systems, but what’s the best way to get it done? You may have heard about application programming interface (API) integration and electronic data interchange (EDI) integration. But now you’re wondering about the similarities and differences between these two processes and the benefits of each. Below we review how these integrations work and why they may — or may not — be a good choice for your business.
What is EDI Integration?
EDI integration is used to automate business transactions, especially when data needs to be secure. EDI integration connects systems, replacing the need for manual communications such as postal mail, fax, and email. Instead, data automatically passes from one organization to another in predefined workflows. Industries that commonly use EDI integrations include the supply chain, health care, and accounting.
EDI integration requires that business partners or trading partners use the same protocols to transfer the information. These standard protocols help ensure that there aren’t variations within the companies’ data and systems that might prevent the process from working efficiently and seamlessly. However, companies can also work with an intermediary to facilitate the exchanges.
Here is an example of how EDI integration might work:
- Your system autogenerates a purchase order (PO) when inventory reaches a certain level and sends it directly to your vendor through a connected system.
- The PO automatically triggers the next step. Maybe your job is put in queue to print the standard order, or the vendor automatically ships the inventory you need.
- The supplier’s systems autogenerate and send documents such as an advanced shipping notice (ASN) and an invoice to your connected systems.
Benefits of EDI Integration
- Easier and faster business transactions. You can use EDI integrations to quickly send and process 100s of standard documents, including purchase orders, invoices, shipping statuses, customs information, inventory documents, and payment confirmations.
- More accuracy and less busywork. Since documents are automatically generated and transferred based on the rules of preconfigured workflows, there are fewer errors and busy work for team members. But you may need a technology partner to set up the EDI integration to ensure all the data flow in the correct places.
- Lower costs. You’ll have lower overhead because you don’t need a person to create and send all these documents. Plus, there will be fewer lost opportunities since you’ll have your supplies when you need them.
- Better security. There are robust security and privacy settings built into EDI integrations. Confidential and sensitive information will not be hacked or stolen since the integrations only allow for secure data transfer between systems that have been appropriately configured for the purpose. Plus, you can control what type of information you send and who has access to it.
Challenges of EDI Integration
Successful EDI integration requires cooperation and alignment from partners — plus some technical know-how. While there are undoubtedly substantial payoffs with EDI integrations, the process can be long — up to 3 to 6 months depending on the project’s complexity — and costly. Plus, adding new partners requires the process to start over.
There are compatibility challenges as well. For EDI integration to work, everyone needs to use the same EDI software and version — different operating systems aren’t compatible with each other. Additionally, current EDI software may not be compatible with emerging technology like blockchain, other software tools, and the millions of internet of things (IoT) devices used in business.
What’s API Integration?
An API is built into practically anything in the digital world — these interfaces ensure that applications and web systems operate and perform as they should. APIs allow companies to integrate their systems with other systems, gaining access to additional functionality and services.
API integrations connect web-based applications via their APIs and allow the systems to automatically exchange data without human intervention, providing greater flexibility and accuracy in data delivery. In short, API integrations can unify and improve the overall customer experience.
API integrations can cross platforms, allowing you and your customers access to services regardless of device and source. And if you use API integration to pair your product or service with IoT technology, fresh data will be added to your system as it becomes available.
Benefits of API Integration
- Efficiency and simplicity. Because no one needs to upload data manually, systems can swiftly accumulate vast amounts of information.
- Data quality. Automates processes without human intervention, leading to reduced errors. Additionally, users can easily collect a more robust data set since APIs connect different types of systems such as ERPs and CRMs.
- Scalability. It’s easy to connect other systems and services at any time without starting over.
- Future compatibility. Web-based technology continues to grow and expand with innovations such as blockchain and Web 3.0. APIs are easily updated when technology changes. So, the time and investments put into API technology will likely pay off.
Challenges of API Integration
API integrations can have some security issues. Since APIs run on the web, there’s a higher chance of hacking and data breaches than with EDI. And, because APIs so adeptly connect many systems, one data breach may mean that many systems are compromised.
Another challenge is that your business partners may prefer EDI integrations. If companies have developed processes and systems with EDI integrations, they may not be interested in using APIs to integrate with your business systems.
EDI Integrations vs. API Integrations
|EDI integrations||API integrations|
|Computer to computer||Cloud to computer|
|Connects two EDI systems together||Connect one system to many systems of various types|
|Standardized protocols||Custom integrations
|One-way communication||Bidirectional exchange of real-time data|
|Processes batched files||Facilitates individual transactions|
|Primarily for business systems||Primary for mobile devices|
|Large messages and files||Mostly small messages|
|Data transfer in minutes||Data transfer in seconds|
|Increased speed and efficiency|
So Which Type of Integration Do You Need?
The best type of integration for you largely depends on your business needs and priorities.
EDI is a powerhouse for securely connecting systems and streamlining business processes. However, it can be costly for smaller businesses to set up and maintain EDI integration. Plus, it’s not designed for real-data data exchanges and individual transactions.
API integrations are easier to set up and use. APIs are also excellent for facilitating mobile experiences and should remain relevant in the future. However, data security can be an issue. Additionally, APIs aren’t well suited for managing the behind-the-scenes communication of business systems.
Of course, sometimes it’s not an either/or situation. For example, you may need EDI for secure data transfer and API integrations for a better mobile experience for your customers.
If you’re still not sure what type of integrations you need, that’s okay. Our team of expert developers would love to hear about your technology challenges and help devise a perfect solution for your needs.