Supply chain

Blockchain and EDI: Do they complement or compete with each other?

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light wavesToday’s multiplex supply chains need to be more transparent and efficient. End-to-end visibility with a single version of the truth in a supply chain is a nirvana which every business would like to achieve. With the evolution of electronic data interchange (EDI), companies went from everything manual to paperless transactions. EDI is the foundation of digital transformation in the supply chain of any business.

As technology matures with time, demands from business increases — more effectiveness, compliance and profitability. Blockchain has the potential to turbocharge and solve many of the problems plaguing today’s supply chains. Strong words, but how true are they? Will EDI be replaced? Do you have to replatform? Does blockchain technology apply to the supply chain world? Can it solve your supply chain problems and increase profitability? These are some of the common questions supply chain executives have asked us.

EDI and its standards are very much critical. It is crucial in transmitting industry-standard data over in a file format, one trading party to another via a common protocol. As the technology matured, value-added network (VAN) was replaced by FTP, AS2. I see history repeating itself with blockchain coming into the picture — industry-standard data (in EDI standards) will start getting synched with the blockchain network. The information your trading partners need is extracted out of local data sources and formatted according to these standards, then synched to the blockchain to make it a single source of truth.

Add greater visibility and efficiency across supply chains

Blockchain can provide a more straightforward, all-inclusive approach in business-to-business (B2B) information processing and is considered as a foundational block for the multi-enterprise business networks. EDI is a standardized methodology of exchanging information that blockchain can store in its ledgers as one or multiple blocks, process data with smart contracts, and share and exchange data via its consensual processes.

I want to give you a clearer understanding of what blockchain technology is all about, how it works with EDI, and to save you some time studying, testing, and assessing its value to your operations.

EDI serves as the backbone to blockchain

With EDI powering blockchain data, implementation will become more complex as more companies, organizations, and governments use the blockchain for supply chain management. On a positive note, this promises to abridge the complex supply chain for everyone involved once the dust has settled and standards are set. Organizations will sieve their current functioning of supply chains adopting a path to a more digitized and multi-enterprise version of data exchange, which blockchain technology is poised to deliver.

The use of blockchain in supply chain management can act as a fundamental factor, eliminating the weaknesses and inefficiencies of the current system. In a blockchain, all the processing, data, and communications in a business network are retrieved from one coherent system. That’s in contrast to a traditional B2B/EDI approach where data, processing and exchange are all managed by different systems.

Global supply chain platforms are likely to use blockchain technology sitting on top of EDI networks to augment the exchange of information between enterprises to increase supply chain efficacies.

Blockchain technology can revolutionize organizations in many ways, from production and processing to logistics and responsibility. Each event can be enumerated and corroborated to create transparent and immutable records. Therefore, the use of blockchain in supply chain networks can undoubtedly eliminate the areas of challenge that are so common in traditional management models. At the same time, when data needs to be transferred from one enterprise to another or from an enterprise to a blockchain, we may still be looking at tapping into EDI technology.

Single source of truth

Blockchain is also a way to thwart fraud or misuse of data. In other words, it can help increase the adeptness of your global trading operations, reducing the overhead of officialdom and formalities by introducing security and governance around data exchange.

Blockchain empowers new business models, and many industry players have already begun to use the power of blockchain to obtain better data to strengthen their services. Blockchain technology-powered logistics startups are hoping to change the subtleties of the industry and redefine their future.

With proper application, blockchain technology can ensure traceability throughout the entire supply chain. Blockchain technology provides an all-embracing approach to multi-enterprise business transaction processing. As the adoption of blockchain technology grows, EDI will continue to provide the underlying conduit mechanism connecting to these networks.

How EDI works with blockchain

The block in blockchain is only as secure as the software interacting with it. Supply chain orchestration platforms help their customers to connect with partners in two ways:

  1. By direct peer-to-peer connection with a customer’s chosen trading partner through their choice of network or direct integration.
  2. Through connecting specialized networks (multi-enterprise business networks). The onboarding of new trading partners with difficult collaboration potentials among every other party in the network, to provide intelligent automation and order/transaction orchestration within the network and the systems its parties use.

The metamorphosis from specialized partner networks (direct connection) to multi-enterprise business network solutions, injects considerable benefits including integration with a diverse set of partners, technologies and data across multiple processes in the end-to-end supply chain.

Customers can benefit from prebuilt connected parties, processes and integrations in these specialized supply chain processes. Essential characteristics of multi-party blockchain networks include a shared ledger and a single version of the truth. Also, near real-time data with multi-party and community master data that reduces errors and synchronizes changes to give unparalleled business agility, performance and security to reduce time to market for new solutions.

If an organization is on a path to adopt this, it would help that the underlying EDI platform connecting the multi-enterprise business network is not only embraced, but also primed for security, connectivity, and governance to maximize ROI and reduce the feeling of peril correlated with the embracing newer technologies.

EDI and blockchain will continue to complement each other

With EDI feeding data from siloed applications — from one organization to another — it will continue to play the role of the plumber. At the same time, EDI will start connecting those siloed applications to the network of networks — the blockchain — as well.

To improve trust and make a single pane of glass across multi-enterprise, blockchain will continue to act as a centralized database to serve as the trusted source across all parties.

In the coming days, we will see more organizations adopting smarter contracts and follow a truly end-to-end approach. At the same time, EDI will continue to feed both blockchain and siloed databases that contain data with only limited traceability. EDI will continue to solve its primary use case, data transformation across applications and enterprises, as it is suited to their high-volume transactions, either on their own or with partners.

Thus, blockchain and EDI will complement each other as we move into an Industry 4.0 transformation for organizations.

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Worldwide Growth Market Sales Leader for IBM Watson Supply Chain

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