How Blockchain-Led Technologies are Turbocharging EDI to enable truly-seamless Supply Chain Management
End-to-end visibility across different points of the supply chain with a single source of truth available to all parties remains the holy grail for businesses of every stripe. Now, EDI (Electronic Data Interchange), has remained the de facto technological standard used to make B2B communications more seamless since the 1960s. But recent blockchain advances are helping companies go beyond information exchange to unlock more effectiveness, compliance, and profitability.
In this article, we will look at how EDI provides the building blocks for near-real-time updates and how evolving technology like blockchain is leveraging the power of EDI to help companies improve their bottom line.
What is EDI?
Until a few decades ago, businesses relied exclusively on paper-based communication (think purchase orders, invoices, receipts, bills of materials, shipping updates, and customs clearance documents), sent via post, fax, or even email. But the coming of EDI or Electronic Data Interchange as a commonly accepted protocol helped facilitate computer-to-computer exchange of such information, entirely electronically, without needing any human intervention — causing a big shift in day-to-day operations.
With EDI, trading partners could use a secure connection to send 1000s of documents in just hours using globally-accepted standards, which eliminated variations across companies and allowed different entities to speak a common language. EDI standards vary by industry sector and region, for instance, ANSI X12 is popular in the U.S, HIPAA is used exclusively by healthcare providers, UN/EDIFACT is another globally accepted standard in use today, whereas GS1 EDI is used by the Supply Chain industry. EDI partners must use the same standard and version for parity purposes, or work with an outsourced solution provider to streamline communication.
Let’s illustrate this with a specific use case. Once a company receives an EDI purchase order, the logistic system can immediately generate a task for warehouse staff to move goods from inventory to shipping without having to wait for an employee to action this task, which translates into savings of thousands of man hours, reduces manual errors and cuts down the cost of printing, storing, archiving and retrieving documents manually, each time. Because documents follow a strict format depending on the use case, when implemented across touchpoints, EDI systems can parse and extract relevant information (e.g. mm-dd-yy, type of document, parties involved) and determine the next action to take.
However, there are still many need gaps EDI fails to address.
EDI Solves only a part of the problem necessitating a need to scale and integrate
While EDI solves for better communication across individual nodes in the network, it still fails to address the larger issue of process-wide visibility. For instance, there can be a problem of ghost inventory in the supply chain where a shipment can appear to be at two different places at the same time or the inventory count of the same product could be different in an OEM’s ERP system and its 3PL’s ERP system. These are expensive issues to account for because information continues to reside in silos. The coming of blockchain technologies that build on existing capabilities helps promote a consistent version of the truth across all tiers of the supply chain. Because blockchain is a distributed ledger, all participating organizations in a value chain have end-to-end visibility, removing barriers that come along with point-to-point transfer supported by EDI over AS2, FTP, or VAN. Such a distributed, decentralized system can help orchestrate transactions in a much more effective manner, helping businesses serve their customers better.
EDI can be expensive and time-consuming to implement
While EDI can help you achieve cost savings by streamlining logistics and supply chain relationships by delivering process and workflow efficiencies, getting started can be expensive and time-consuming. Successful implementation needs businesses to investigate their organization structure, offer training to internal teams, develop new processes, build EDI infrastructure or find a trustworthy EDI partner, and handhold the process of rolling out EDI to all trading partners.
Moreover, EDI can take anywhere upwards of three months to implement. Experts cite the high cost of EDI maintenance as one of the biggest reasons companies are evaluating more options, with 95% of EDI software custom built, its deployment increases the need for consultants and other costly resources.
Reasons like these explain why very few enterprises choose to go the EDI way. In fact, statistics show that while EDI integration continues to be popular within the supply chain industries, particularly with behemoths like Walmart, Target, and P&G, 41% of smaller-sized firms still choose to transact the manual, non-EDI way. This translates into a fragmented process, with standalone firms following a discrete model of work, and only big box retailers or large corporations, managing to reap the benefits of digitalization offered by EDI on a large scale. Even within these larger retail chains, many processes continue to be manual. This lack of a one-size-fits-all solution presents a bottleneck to enterprises looking to modernize operations bottom-up.
Other limitations of EDI
EDI does not equally support all kinds of data sharing and its protocols need specialized training to decipher, like the EDIFACT protocol, uses formats purpose-built for computers and not people to understand, which makes identifying and troubleshooting errors a challenge as experts with EDI knowledge are hard to find and train.
What’s more, EDI does not lend itself to the extraction of business intelligence which is best visualized and tracked using dashboards. EDI’s limitations mean that stakeholders cannot monitor performance and compliance at a glance translating into missed opportunities. For instance, if updated delivery schedules information is shared dynamically and made visible to teams across the value chain, this can have a cascade effect, helping storefront managers offer dynamic discounts or plan inventory in line with a change in supply.
Blockchain Benefits
Blockchain offers a decentralized way of sharing data and is a way to address some of the problems of integration posed by traditional EDI-only implementation, by creating more democratic ways to exchange information.
For instance, a technology partner like ParamNetwork reduces the burden on enterprises to handhold trading partners, by offering a one-time API or App-based integration, across multi-tier suppliers with various data sources (EDI/API/Manual). This solution is scalable for any kind of integration with enterprises of any size and can be deployed in a matter of days and weeks as opposed to the months required to set up an EDI-led solution from scratch.
We enable large enterprises to better manage and cascade change across partners in the ecosystem by providing lifetime free access to an app-based platform onboarding service, to drastically improve adoption and use. At ParamNetwork we support organizations to meet specific needs no matter where they are on this journey, by natively integrating with existing EDI solutions, which have been built over time.
Strategic impact
A new way of supply chain collaboration for multi-tier enterprises is upon us. Blockchain-driven interventions offer a number of strategic benefits to companies looking to promote a culture of automation within their supply chain while keeping cost-of-implementation low and promoting a consistent, uniform view for stakeholders. What’s more, the enhanced data encryption and EDI-grade data security offered by these innovatively designed solutions offer greater traceability, for smoother auditing and compliance.
We hope that you found this post useful in creating a roadmap for modernizing and democratizing information flows across your value chain and partner ecosystem. Watch this space for more industry and sector-specific use cases and let us know if you are working on a business transformation along these lines, within your space.
