Curious to learn how EDI and Blockchain technology can work together? You have landed on the right page. This article explains the concept of EDI and Blockchain and focusses on how both complement each other.
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- Introduction to EDI and Blockchain
- Blockchain with EDI- A Perfect Combination
- Blockchain as the Transmission Medium of EDI
- Will Blockchain Replace EDI?
Introduction to EDI and Blockchain
Blockchain is a decentralized, peer-to-peer, distributed ledger technology where “blocks” are made up of digital pieces of information linked with cryptography. Electronic Data Interchange or EDI, on the other hand, is the computer-to-computer exchange of business documents in a standard electronic that offers reduced cost, increased processing speed, reduced errors, and improved relationships with business partners.
All EDI transactions are defined by EDI message standards that are the basis of EDI conversations. EDI transmissions fall under two basic types:
- Point-to-point connections. Two systems connect directly with no intermediary over the internet with secure protocols.
- Value-added network (VAN). Type of transmission in which a third-party system manages data transmission with a mail boxing paradigm.
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Blockchain with EDI- A Perfect Combination
Blockchain has the potential to impact the supply chain, particularly as a potential successor to EDI for transmitting information between parties quickly and seamlessly. The technology can provide a disruptive approach in B2B information processing and is considered a foundational block for multi-enterprise business networks. EDI is a methodology of exchanging information that blockchain can store in its ledgers, process data with smart contracts functionalities, share, and exchange data through its consensual processes.
Since blockchain offers multiple trading partners a convenient way to access data, it might seem like it will overcome EDI. However, blockchain and EDI can coexist and can enhance each other as well.
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Blockchain as the Transmission Medium of EDI
EDI standards define a common format for all trading partners, enabling their independent systems to communicate with each other.
Now, as we have understood both the technologies, let’s understand how blockchain works as a transmission medium of EDI, or we can also say that how EDI works as a backbone for blockchain.
Single Version of Truth
As blockchain empowers more new business models, more and more organizations are leveraging blockchain to obtain better data for strengthening their services. Blockchain, a distributed, decentralized system, offers a single source of truth, ensures traceability throughout the entire supply chain. With blockchain adoption, EDI will continue to provide the underlying mechanism connecting to these networks.
Blockchain Prevents Fraud
Due to its end-to-end visibility, blockchain follows pro-active error monitoring. Organizations and industries are leveraging blockchain to take a stand against fraud in their business network. Moreover, it also eradicates information silos. Technology enables companies to be proactive about issues across the entire supply chain.
Apart from the above mentioned, blockchain with EDI enables:
- To derive insights and key performance indicators across the entire chain, thus, companies can optimize their efficiency and cut costs.
- Customers can benefit from prebuilt connected parties, processes, and integrations in these specialized supply chain processes.
- The technology offers real-time data, reduces errors, and synchronize changes to give unparalleled business agility.
Will Blockchain Replace EDI?
As the technology maintains its place in the B2B world, few believe that blockchain will eradicate EDIs. But this is definitely not the case. Blockchain and EDI will continue to complement each other. Global supply chain platforms are likely to use blockchain sitting on top of EDI networks to expand the exchange of information between enterprises to increase supply chain efficiencies. In the future, we will see the majority of organizations leveraging smarter contracts functionalities and follow an end-to-end approach. At the same time, EDI will continue to feed both blockchains and siloed databases containing only limited traceability.
Even if blockchain doesn’t replace EDI, the intimidation that might cause replacement leads to the advance in functionality in EDI. Forrester’s Peyret stated that “EDI will not disappear, but it will need to evolve to bring more agility while continuing to decrease license and operational costs due to a continuous increase of volume.”
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