Electronic Data Interchange (EDI) is a staple in the buyer-supplier relationship, enabling business partners to send data to each other electronically in a standardized format. The tool has been around for decades, but with supply chain digitization pressing full steam ahead, the ability for buyers and suppliers to seamlessly and quickly share information is now more valuable than ever.
However, EDI is not without its drawbacks, particularly as application program interfaces (APIs) gain more popularity. With banks and FinTech firms embracing API connectivity to seamlessly move data between platforms, innovators are exploring how to apply that technology to the buyer-supplier relationship, too.
Whether businesses choose to deploy EDI or APIs, the challenge is the same: Suppliers must often build individual connectivity with each customer to address their clients’ particular systems and data exchange needs.
Orderful, a tech startup focused on facilitating data exchange between buyers and suppliers in the supply chain, is taking a combined approach to this challenge by deploying API technology to facilitate EDI connectivity. The firm, which recently announced $10 million in funding from Andreessen Horowitz, launched an API platform this week, designed to accelerate the time it takes for B2B vendors to integrate with corporate systems. According to Erik Kiser, Orderful's founder and CEO, it’s not necessarily the technology of that connectivity that’s the biggest problem in supply chains today.
“Whether you’re a buyer or seller, you’re building your own custom points of integration, and that’s a challenge,“ he told PYMNTS in a recent interview. “Building that integration environment [is] really tough.”
What can be the most difficult about this process is the actual human communication between buyer and supplier, often required to establish those connections.
“The technology isn’t that hard,” he added. “What’s really challenging is the communication between two organizations, and lining up schedules so that the company and supplier can actually start trading data.”
Organizations and their IT teams need to coordinate to test and go live with these data integrations. Orderful is deploying an API platform that enables B2B suppliers to connect with companies in real time by consolidating each firm’s individual connectivity requirements in one place. In today’s fast-paced environment, reducing the time it takes to coordinate that data connectivity — days or weeks — down to real-time connection can be extremely valuable.
Establishing an API platform to facilitate these EDI integrations can also address some of the biggest problems of EDI today, noted Kiser.
Traditionally, EDI data is sent via communication channels that support the standardization of the way data is presented — one of the largest benefits of EDI. Yet, data often isn’t validated until it is picked up by the receiving party, meaning any issues in the data can take hours or days to resolve. Even value-added networks that sit in the middle of that EDI data exchange and validate the data can take time to do so.
However, Kiser noted that APIs enable real-time validation of data, and real-time responses of any issues with that information.
Boosting the speed and validation of information as it moves between buyer and supplier is essential to B2B trade today, as the movement of data becomes an integral part of the movement of money. Kiser said the order-to-cash cycle is the most common scenario of an EDI interaction — and faster EDI connectivity means less friction when vendors receive a purchase order, when buyers receive an invoice and when vendors ultimately receive payment (and data to reconcile that transaction).
In the FinTech community, APIs are quickly expanding beyond the use of bank-FinTech platform connections. Using API technology to facilitate data exchange between the buyer and supplier means seamless trade and faster data. However, with technology exploring new ways to exchange data, data security quickly moves into the focus of innovation.
One of the biggest benefits of APIs, Kiser said, is that traditional EDI data is often not encrypted when moving through communication protocols like a file transfer protocol (FTP) or a value added network (VAN). When organizations communicate with that FTP site, they usually only need a username and password to log in. The ability for a third party to facilitate EDI and API connectivity also enables encryption of that information.
Today, both sides of a B2B transaction do not need to be part of Orderful’s API network for it to be beneficial. For the B2B vendor, the platform automatically converts information into EDI files required by each third-party corporate customer, allowing that vendor to more quickly share data with clients. As the company grows, though, it hopes to gain adoption with the corporate buyers, too, and explore more applications for APIs in the supply chain and buyer-supplier relationship.
“Eventually, where [we] want to go is have both sides of the supply chain connect to our API,” said Kiser. “The value in that is that if both buyer and seller are connected, they can immediately take supply chain data, [and] give each other data immediately — a buyer can receive an invoice in real time, and receivers get notified that the event is done and the invoice is in the right hands. There are a ton of benefits for the entire supply chain to connect to an API.”