Wasn’t the EDI problem solved 20 years ago?
In the industry of B2B automation, it’s easy to talk about disruption. Companies have been trading documents the same way since inception. Companies not adopting new technology isn’t news. It’s easy to poke fun at the old school methods like email, fax and trading flat files. We need to understand why this industry hasn’t changed if we are going to make a difference.
There are four main reasons for limited to no progression. (1) Understanding transaction data with EDI requires an expert. (2) Experts have no incentive to change their customer’s behavior. (3) EDI solution providers offer toolboxes to trade flat files — basically a new way of doing the old. (4) The buyer dominates the EDI relationship, making it very difficult for suppliers to transact.
Experts are Required
I’m still reading about the history of EDI and from what Wikipedia tells us, the process of sending data for communication was driven by military requirements which date back to 1948. This communication was done over a 300 baud teletype modem. I don’t actually know what that is but it sounds slow and when I look at .edi files today it’s clear they’re meant to be compact. Experts were used to intercept the data and read the files. EDI is the gift that keeps on giving because the need for experts has remained. Experts are used to decode the elements and their positions, translating the value into something useful for their ERP (Enterprise Resource Planning) system.
Although the title of this article implies that nothing has changed with EDI, there have been improvements along the way. The main change has been with the advancements of the schemas of the files traded. The introduction of new standards like X12 and EDIFACT have improved the readability, portability, and the bane of all data systems: naming. But even with standards the files are still so cryptic that most companies opt for an on-site expert or a consultant that they rely on to decrypt the messages. Once cryptic, still cryptic.
Experts are Not Incentivized
EDI professionals are paid, pretty well, in fact. Scarcity bids up prices in any market. Consulting firms are driven by billable time. Billable time means dollars. I once heard from another consultant (not on our team) that they would rather rebuild than reuse. Makes sense if you are incentivized by the hour. Compare it to going to a shady auto mechanic. You drop your car off and when you pick it up he’s added 10 more repairs than expected. He’s got you by the axles. Why would anyone actively work to kill off their golden goose?
Integration Tools Have Not Been Influential
The shiny new tools from Mulesoft, Informatica, Oracle’s Cloud Integration Offering, and Infor’s Cloud EDI Offering won’t fix your EDI woes. Unfortunately these products add to the problem by squandering budget and hiding the real problem. Even with the best tool, you still need expert knowledge of EDI. See points 1 and 2 about experts above. This doesn’t help business because you are relying on a human with expertise to provide direction. Secondly, these systems require you or a service to maintain and manage the environment for you.
Buyer’s Built-in Advantage
When you work with EDI, you quickly understand that the buyer has all the power. In systems we’ve built for customers we’ve stretched to meet some pretty crazy requirements from the retailers. EDI is not a standard when you are dealing with EDI as a supplier. Every retailer has a unique flavor on EDI. Different versions, different fields, different documents, different semantics, different business philosophies. EDI requirements from retailers/buyers are complex.
Like the experts I mentioned above, the retailers are incentivized financially. EDI is a profit center for most retailers. When a supplier makes a mistake, the retailer has a right to charge a penalty. Walmart charges up to 3% in some cases. In defense of the retail industry, they receive thousands of packages a day at hundreds of locations. If the electronic data isn’t transmitted, manually handling these packages cripples their supply chain. Therefore the power of the retailer cripples the hungry, mistake-riddled supplier trying to enter a new retail chain.
This eco-system of retailers calling the shots and keeping the suppliers down is like an action movie where the hero dies. When the retailer can be better at making EDI more difficult for their suppliers they have potential to earn more revenues. These are corporations with the opportunity to influence and improve commerce, yet it appears that everyone is still being held down.