The relationship between EDI and B2B e-commerce

Today, B2B businesses rely on their technology more than ever before. Forced digital transformation, rapidly changing market conditions, and shifting buyer preferences mean that modern e-commerce is a key strategy for B2B enterprises. 

In the past, when electronic sales was mentioned in the B2B space, many businesses would think of Electronic Data Interchange (EDI). But, as enterprises continued to grow and new revenue streams became necessary, B2B e-commerce adoption grew exponentially.

When we talk to enterprise customers, we often get questions about the difference between Electronic Data Interchange and B2B e-commerce. Typically, people wonder if EDI will be replaced by B2B commerce, and which is the right option for their business. 

The reality is that EDI and B2B E-commerce are not mutually exclusive. 

According to the 2020 B2B E-Commerce Market Report published by Digital Commerce 360 B2B, EDI accounted for 78.4%—$7.00 trillion—of all B2B electronic sales in 2019. It’s statistics like these that make it clear that EDI isn’t necessarily going anywhere. And, thoughtful enterprises that use EDI and B2B e-commerce strategically will be the ones to find success. 

It’s important to know that EDI and B2B e-commerce are different types of solutions that allow them to solve different types of problems within an organization. 

In this article we’ll explore the two questions we hear most in regards to EDI and B2B e-commerce:

• What is the difference between EDI and B2B e-commerce?
• Why are EDI-focused businesses adding B2B e-commerce to their sales and distribution strategies?

First, what is the difference between EDI and B2B e-commerce? 

 

What is EDI?

Electronic Data Interchange (EDI) is the electronic transmission of structured data by agreed message standards from one computer system to another without human intervention. In other words, EDI is simply the transfer of information from computer to computer, ideal for automating recurring transactions.

A lot of large enterprises and their suppliers have made significant investments over the years to set-up EDI, and the technology still does what it’s supposed to do. You see EDI used most for large, recurring orders in a supply chain where products are predefined and known with contracted pricing.

EDI allows organizations to transact with each other based on tightly defined standards. These standards define how business documents (invoices, purchase orders, ship confirmations) are transferred and keeps the flow of supplies moving steadily in the supply chain. 

Basically, an EDI simply sends business documents associated with a sale back and forth between businesses without paper or people. 

 

EDI benefits:

• Reduced customer churn by establishing critical system to system automation. 
• Increased speed and accuracy thanks to reduced order cycle time. EDI can speed up your business cycles by as much as 61%. 
• Cost savings due to reduced order errors. Automation leads to the elimination of costly and error-prone manual order processes.
• Enhanced inventory and supply chain visibility with a better look into transactions’ status.

EDI challenges:

There are two primary challenges with EDI:

1. EDI is a technology for only after the customer relationship has been established for a contracted set of products and pricing
2. EDI is not supported by all customers and new technology solutions, and you will need to supplement with other options for operational improvement 

Today, B2B businesses need to be hyper-focused on the customer experience during the ordering process. It’s important to note that an EDI doesn’t offer a modern interface. An EDI cannot be used as a sales portal to communicate with customers or sales teams to encourage new products, market, or cross-sell and upsell. 

Once the customer relationship is established, EDI takes your brand and sales people out of the process of placing an order. Companies that adopt EDI face the risk of creating their own buyer market. To buyers, sourcing the same product across multiple suppliers over EDI may simply come down to cost as opposed to an enterprise owning the buying decision in the commerce experience. 

What is B2B e-commerce?

Business to Business Electronic Commerce (B2B e-commerce) involves interactions and transactions between a company and its trading partners through a value-added network or proprietary connection such as an electronic marketplace. 

In recent years, the B2B market has exploded due in large part to changing buyer demands and evolving market pressures. The line between B2C and B2B buying experiences has blurred as large enterprises have shifted their focus to the customer experiences, convenience and self service. B2B e-commerce is key to differentiation and allows enterprises to expand to new markets, create efficiencies and new revenue streams. 

Unlike EDI, where orders are usually large and recurring, B2B commerce tends to deal with ad-hoc ordering scenarios, or where products and order management processes may be very complex.

More than just online ordering, B2B e-commerce provides a platform to communicate with your customers in an interactive way, online. It brings your product catalog to them, allowing them to browse and educate themselves. It offers a new vehicle to market to them, and keep them in the know on product news, business announcements, deals, and promotions. 

With B2B e-commerce, your customers are also able to keep track of orders and other data online, just like they’re able to with other orders they place outside of their business purchases.

B2B e-commerce capabilities:

As a B2B company, the ability to differentiate against competitors is key. The stringent standards of EDI may not allow an enterprise to take advantage of the levers necessary to develop competitive advantages in the market. On the other hand, the capabilities of B2B e-commerce give enterprises an edge over their competitors. 

• Customization: The ability to customize for individual customers is key to success. Features like product availability, pricing, and value-added services should all be bundled within a unified experience; something that is only possible with B2B e-commerce. The levers or inputs into those customizations are often much more comprehensive for B2B, which primarily center around the model of thousands of buyer-customer entities who expect their transactional workflows and product mix to reflect their operational requirements in doing business with you.
• Consistency: Growth through digital transformation and commerce creates some interesting problems for the enterprise. The biggest lift will be how enterprises can scale experiences to meet the demands of customers. This can literally take the form of lengthy cloud transformations for enterprises or be the result of each department or business unit acquiring siloed solutions to run their own digital evolution.
• Control: Enterprises that succeed in modernizing their e-commerce approach quickly see growth in the core B2B customer base. As a result, internal interest to formally pursue other markets like B2C or B2B2C typically follows. It becomes clear that once the B2B e-commerce strategy is established, the technology levers support your B2B customer base transfer extremely well to entering new markets.

Why are EDI-focused businesses adding B2B e-commerce to their sales and distribution strategies?

As you can see, both EDI and B2B e-commerce help to automate the ordering process and improve efficiencies across the business. And more often than not, one strategy is not necessarily better than the other.

However, in today’s digital age, companies who have historically had an EDI-focused strategy are realizing the advantages of B2B e-commerce channels to support the revenue and customer growth required.

It’s not surprising then that companies like Kellogg are expanding their B2B business with a stronger focused on e-commerce technology. Chris Hood, president of Kellogg North America, explained that they see a significant growth opportunity for brands like Kellogg’s Corn Flakes and Special K in B2B e-commerce.

“As part of our redesign within our North American structure, [Kellogg is] making an investment in e-commerce capability to really strengthen not only our ability to call on and serve omnichannel players but also pure-play as well as B2B. In B2B, in particular, we think there’s a huge opportunity for growth. We already have a pretty significant business there today, but there’s a big opportunity for us to continue to accelerate.” -Chris Hood, President of Kellogg North America

Traditional EDI can be supplemented with API-first on modern platforms

Incorporating B2B e-commerce strategies into growing channels allows enterprises to create a modern ordering experience for their customers. Modern, API-first e-commerce can be used to bridge the gaps that come with traditional EDI. Unlike with EDI, B2B e-commerce opens up the opportunities to provide more to customers:

• Real-time inventory and pricing to your customer’s own procurement systems
• Improved order status and tracking capabilities as APIs to customers
• Broad catalog access and search capabilities beyond what might already be configured in your customer’s EDI system

Thanks, in part, to digital experiences like Amazon, today’s buyers expect an excellent ordering experience, despite the fact that it is for “work” purchases. Companies who invest in their buyers’ demands today with modern, digital buying experiences, will surely pay-off as expectations become stronger every day.