What is the future of EDI and how to handle it

October 22, 2018
Beth Ruby

What do Morse Code, emojis and EDI have in common? They are all examples of using a standard language to represent complex ideas. Whether it’s dots and dashes, winky faces or an 850 purchase order, for more than 100 years, humans have been trying to simplify our communications so it can be more easily and universally understood.

Electronic data interchange (EDI) is the process of businesses electronically communicating information that was traditionally communicated on paper, such as purchase orders and invoices. But what does this actually mean?

Let’s say you run a business, and that business sells paper clips. Your business is connected to customers and vendors all over the place. Your vendors give you products and you give them money. You, in turn, give your customers products and they give you money. 

But how do you know which paperclips to buy from your vendor and in what quantity? How do you know which paperclips your customers want from you? For that matter, would anyone know about availability and when they’d need to pay? These and many other questions are answered by the exchange of standardized documents. 

EDI uses widely accepted standards, which are basically a really long list of rules and codes for all of that information that appears on all of those documents. If you and all your customers and vendors, and all their customers and vendors and so on, use electronic documents based on an identical list of available information, it is much easier for everyone to understand each other. It’s also, based on popular opinion, incredibly complex, and nobody actually enjoys using it. 

Like Morse Code, EDI has its origins in wartime communications. During the Berlin Airlift in June 1948, Edward A. Guilbert, “the father of EDI,” developed a standard manifest system that could be transmitted by telex, radio-teletype or telephone. Many years after the end of the war, Guilbert built upon this initial concept while working for DuPont Co., where he developed a standard set of electronic messages for sending cargo information.

By 1968, so many railroads, airlines, truckers and ocean shipping companies were using electronic manifests that they formed the Transportation Data Coordinating Committee (TDCC) to create cross-industry standards − and in 1975, the TDCC published its first electronic data interchange (EDI) specifications.

But also like Morse Code, as technology evolved, the basic form of communication became obsolete. EDI quickly became foundational technology for many industries, starting with the grocery and food industries and then the automotive industries. Through the 1980s and 90s, with many of North America’s largest retailers, like Walmart and Sears, adopting EDI technology, the standards started to become confused. In some ways, this is when EDI started to become more like emojis than Morse Code. Emojis were designed to represent complex emotions or ideas with a simple image but not everyone agrees on what each image should represent

While EDI was meant to clarify communications, the more companies that started to use it,  more different standard languages were created. By 1990, there were 100 different standards for X12 alone. X12 was one of a number of key standards including EDIFACT and GS1.The result was that this technology that was designed to clarify communications was becoming incredibly complex.

In many ways, today’s EDI industry is predicated on using old requirements that no longer exist. As this older technology has allowed EDI to evolve into chaos, modern companies have started to innovate beyond the basic standards that have been used over the past few decades. Platforms like Amazon are slowly moving away from old EDI mechanisms towards using API technology.

Today, over 90% of the Fortune 500 are EDI capable. Large companies in Europe have similar adoption levels. Over 100,000 companies in the United States use an EDI solution to communicate with their business partners. Companies like CovalentWorks make it easier to connect to all of those companies and speak in their unique language. 

So what does the future hold for EDI? Will it outlive the emoji? The reality is, EDI isn’t going anywhere in the near term. Too many companies have invested billions of dollars into using this technology as it exists right now. But, as is the case with most older technology, it is getting assailed by alternative options and solutions all the time. Mid-sized vendors and retailers and ecommerce portals particularly dislike EDI technology so there is significant pressure to move away from it sooner than later. That means that the best way we can approach this complex technology is to handle, and, when possible, simplify the current requirements and to be prepared for the future. 

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