PART 2: EDI – The Platypus of B2B?
In Part 1 of this blog I described the parallels between the unique mammal that is the Platypus and EDI. Now let’s look at how blockchain will finally evolve EDI.
Blockchain was invented in 2008 by Satoshi Nakamoto. The first use case of blockchain was to serve as the public ledger of record for all Bitcoin cryptocurrency transactions. This initial usage may have distorted the perception of what blockchain is and how it can be used as a value add for enterprise.
Blockchain is a register of data records whose integrity is secured by cryptographic hashes. This means that every record of data written to a blockchain network has its integrity secured by a mathematical algorithm. All data entered to blockchain will be instantaneously voided if tampered with by any party attempting to modify any element of the transaction. Blockchain instantly creates a “single source of truth” for all transactions recorded by being a decentralized place where data integrity can be trusted, regardless of the number of parties involved.
Could Blockchain replace EDI altogether? It’s not likely. Current blockchain technology lacks the ability to effectively translate and communicate data between businesses. Blockchain posting time, while continuously improving, does not nearly meet the speed of EDI. Having blockchain replace EDI also relies on all parties involved leveraging the same blockchain ledger of data. Doing this would result in companies abandoning their own systems of record and relying solely on a decentralized source of data instead. It is an unrealistic expectation that all companies will replace their own databases with blockchain. But it’s certainly possible to supplement and complement databases with blockchain integrated systems.
The primary advantage of blockchain in today’s EDI world is the ability to proactively resolve disputes between businesses. Let’s take a very typical supplier scenario. Your company orders 100 units of a raw material from a supplier. They receive the order and begin working on fulfillment in the timeframe required. Meanwhile your company updates their forecast of demand for the finished good related to this raw material and decides to request 50 additional units from the same supplier. While the initial order to the supplier occurred via EDI transaction, the order change resulting in 50 additional units somehow was not recorded via EDI. The vendor then fulfills the 100 units originally requested, ships the goods, and invoices based on what was delivered. You as the customer are still expecting 150 units even though the vendor was never aware of this expectation. This mismatch results in a dispute between customer and supplier which needs to be addressed and resolved.
Typical dispute resolution in a scenario such as this involves many parties from both the business side who requested and fulfilled the order, as well as from the technical side since the data was electronically submitted via EDI. Disparate systems come into play since the ordering company’s system is a completely different application and database from the supplier. Each party will have their own system of record on which to rely.
At this point, even the best customer/vender relationships become strained. Not to mention the sheer amount of time spent on non-revenue driving tasks.
How does blockchain improve this standard scenario of dispute resolution which has existed since the birth of EDI? Quite easily, it turns out. But more on that later this week, in the final part of the EDI Platypus Series.
Mike Kersels is a former SAP employee and the founder of several EDI companies, Highview being the most recent. He has a proven track record of helping businesses improve process, identify productivity gaps, and implement user-focused EDI solutions, of which blockchain-powered EDI is the newest offering.