Risk Management through EDI 4.0

Risk Management through EDI 4.0


‘Classic’ EDI, the more or less automated exchange of structured and often complex data sets directly between machines or systems, reduces risk in a number of ways. Most obviously, it removes human errors created by rekeying data, and it also reduces the risk of data being misinterpreted or misapplied. Further, it removes the risk, inherent in paper, phone, fax or email communications, that data will not be received, will be corrupted, will be lost, forgotten about, actioned late or not at all. 

Risk is the product of the likelihood and the impact of an event

Current and apparently irreversible trends in both B2C and B2B commerce towards smaller, more frequent orders, ever greater product variation and customisation, and the need to reduce lead and fulfilment times mean that the volume of data being exchanged is growing exponentially while the time available to identify and successfully recover from any errors is diminishing. Risk is the product of the likelihood and the impact of an event and so unless properly managed, the supply chain risk arising from inadequate data transmission must increase.

Industry 4.0, the digitalisation of industry including but not confined to the Internet of Things (IoT), autonomous operations and self-learning systems, has the potential to increase risk still further, but also offers new methods of identifying, managing and mitigating risk and EDI in some form will be central to many of these. 

The sheer volume of data being gathered across supply chains is skyrocketing. The information that is relevant is as always held across multiple supply chain partners. Without ways of automatically sharing the relevant data in a timely and structured way, which is what EDI does, business risks drowning in a sea of white noise. The more collaboration, information sharing and flow there is in a supply chain, the greater the chance of having effective supply chain risk management.

EDI formats will be handling whole new classes of data transfer

Beyond the traditional flows of orders, specifications, invoices, delivery advices and so on EDI formats will be handling whole new classes of data transfer. New automated analytic techniques and real time monitoring of KPIs will identify patterns, predict and assess risks, and often autonomously initiate appropriate actions. This will require automated real time collaboration between the systems of, for example, buyers and their suppliers at the various tiers.  Systems may ‘poll’ each other to build or negotiate a consensus, because having a ‘single version of the truth’ in data terms is not enough – systems will need to weighdiffering business logics and priorities.

Many systems will be ‘always on’ in communication terms – a supplier that needs to rerun a master schedule, for example, will simultaneously pull down the latest forecasts from all their customers, rather than combining some that are minutes old and some that are days old. Increasingly, ways of exchanging ‘unstructured’ data (ranging from business intelligence to analysis of visual images) between systems will be developed.

All this will give EDI, or ‘EDI 4.0’, a rather different feel to the current model, but as an add-on, not a replacement, to ‘classic’ EDI. ‘EDI 4.0’ capability for even small companies will need to be highly scaleable, as well as affordable, as Industry 4.0 rolls out. In addition, resilience and cyber-security in EDI is imperative. ‘EDI 4.0’, in other words, a managed, cloud-based service, is the obvious and proven approach.

For further information send us an e-mail at info@datainterchange.com or keep up-to-date on all the latest developments in EDI by following our Linkedin profile