B2B Integrations, Demystified: EDI vs API

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Thousands of CPG organizations utilize B2B integrations in their business with retailers and other trading partners. There’s a lot of information floating around online about B2B integrations, much of it being extremely technical. Therefore harder for smaller and newer companies to understand what it can actually accomplish for their business. We’re here to demystify all of it, starting with EDI (Electronic Data Interchange) and API (Application Program Interface).

Business-to-business integrations can be defined as the integration, automation, and optimization of business processes between two entities (i.e. Del Monte Foods and Walmart; L’Oréal and Target; Bayer and Walgreens, etc).

In this blog post, we’ll cover two of the most commonly utilized B2B integrations, how they differ, and which integration is the smartest option for a growing CPG.  

EDI (Electronic Data Interchange)

What is EDI?

We’ve gone over the basics of EDI before, but as a refresher, Electronic Data Interchange is “the direct computer-to-computer exchange of standard formatted business transactions between one or more business partners, known as trading partners. It allows for the exchange of business documentation to happen in a structured, machine-processable format.”

EDI facilitates the exchange of electronic documents (such as purchase orders, advance shipment notices, and invoices) without human intervention or human readable (paper or electronic) documents.

How does EDI work?

The direct exchange of data between two trading partners requires some kind of intermediary such as a VAN (value added network) in order to send and receive necessary data. The transmission process can be broken down into 4 steps:

  1. The sender uses internal computer files to assemble the data necessary for the transaction to begin.
  2. This assembled data file is input to a software module that generates the transaction into the standard EDI format.
  3. The resulting EDI data file is then transmitted, or sent, to the receiving trading partner.
  4. The receiving trading partner inputs the data file into their own software module that translates the EDI format data back into a file format which can be entered into their computer apps.

Why do businesses use EDI?

EDI is perhaps the most commonly used type of business-to-business integration. EDI involves over 2 companies communicating via B2B networks, using technology dating back to the 1970s. Because it operates based upon an industry-wide agreed communication standard, EDI has become a prerequisite for doing business with some of the world’s largest retailers. This has solidified its status as the preemptive B2B integration technology of choice.  

API (Application Program Interface)

What are APIs?

APIs have been referred to the EDI of the 21st century. APIs, in a general sense, enable data to move from program to program quickly and seamlessly. One of the most common examples of this is the option to use your Google or Facebook login on websites and apps you’ve never previously visited.

API login example

How do APIs work?

In layman’s terms, APIs are established by companies leaving specific pieces of their software “open”. This is so other softwares may integrate with them and request information. APIs are another messaging format that allows data to be transmitted from one system to another in nanoseconds. (Read: much quicker than EDI).

Why do businesses use APIs specifically for B2B integrations?

Implementing web-based APIs is often far less costly than EDI implementation, and typically does not require the ongoing translation or maintenance that EDI requires.  

EDI vs. API: Which is better?

Both B2B options have their benefits and weaknesses. EDI remains a steadfast, cost-effective and trustworthy option that has been adopted by nearly every industry. Yet, the technology must continue to evolve in order to stay relevant in a world being driven by mobile data. Gartner predicts that 25% of B2B transactions will be handled by APIs by 2020. The best bet for a CPG in need of a B2B integration technology provider is to partner with a company offering a wide range of options that can be tailored to the CPG’s needs.

To learn more about what EDI or APIs could do for your business, fill out the form below to get connected with a B2B integration expert.  

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