Blockchain or EDI in the Supply Chain?

Will blockchain replace EDI? To get closer to an answer to this question, first of all further questions have to be asked, such as what are the advantages of blockchain over EDI? Does it make sense to integrate EDI with blockchain?  Which blockchain is the right one and which data should be stored there? Blockchain instead of EDI – is that the future?

EDI – the classic for data exchange between trading partners

EDI enables the digital data exchange between computer systems for the purpose of automating business processes using standardized and structured data. If two business partners use EDI for document exchange, for example, to process the trade in goods such as tea, coffee or cars, the information required by each trading partner is taken from the respective existing ERP system (or similar data sources) and converted into an EDI message standard that both partners have agreed upon. Only then can they automatically connect to each other and exchange their standardized EDI documents for processing the transactions via sFTP, AS2 or a VAN, for example.

An EDI transaction therefore consists of two stages:

• First standards are defined,
• then the exchange takes place.

Trading partners are usually part of a resilient supply chain to distribute their products by truck, train or ship. Within the supply chain, however, manual processes and freight exchanges are often involved, which can have disadvantages such as delays, fraud (falsification of documents or goods) or even theft of the goods. Finally, when containers with tea, coffee and cars arrive at the port of Hamburg for example, some logistics companies forward the collection code several times to different companies. It is often difficult to trace who receives the pick-up order and how they were awarded the contract. Transparency is also hard to maintain when it comes to proving the origin of the goods, the way they were produced and the routes they took through how many intermediaries.

In other words, EDI is very helpful for the regular automated and smooth exchange of data and documents between parties who maintain a long-term business relationship or who use EDI themselves and can therefore be integrated quickly. However, if many other parties are added to a supply chain, often only one-time in the course of a specific transaction and who may not yet be using EDI, the situation quickly becomes confusing. Not only because the documentation chain is interrupted, but also because data may not be standardized. Processing within the EDI system is therefore disproportionately costly for a single transaction.

This is where blockchain can help.

The Advantages of Blockchain vs. EDI:

Blockchain has been a trend for several years now. In simple terms, blockchain is a system of many individual nodes that communicate with each other for transactions between parties. Any change made by one of the parties involved is captured and recorded by all nodes.

The combination of data, distributed ledger technology and analytics allows new functions, such as:

• End-to-end traceability in real time,
• Transparency,
• Consensus,
• Smart Contracts,
• Decentralized peers with identical copies of data,
• Cryptography,
• Unchangeability
• and irreversibility.

This makes the technology extremely secure, both in terms of manipulation and resilience against cyber attacks, as well as delivery guarantee including proof of origin of documents. Thanks to the shared digital history approach, it is always possible to trace who made which changes and when. This guarantees complete, irreversible and unalterable documentation. These features are known to be particularly valuable in supply chain or identity management. For example, the origin of a tea can be traced back to the tea garden in which it was grown. The parts installed in a vehicle can be precisely allocated to each manufacturer via their batches (proof of the use of original parts) and all previous owners of a vehicle can be traced back completely without any fear of tampering. Neither product piracy, counterfeiting or illegal trade have a chance in this way.

The situation described above with the short-term connection of new (often just one-time trading partners) is much too complex and slow with EDI. Blockchains can be quickly extended with additional peers. In addition, blockchain frameworks bring about many system components that are relevant for the creation of distributed applications and marketplaces and go beyond simply storing data in blockchains. This leads directly to the next question:

Which Blockchain is the Right One?

There are different types of blockchain. Generally speaking they are related to each other like the Internet is related to an Intranet.

• The Public Blockchain is accessible to everyone (like the Internet). It is not controlled by any superordinate instance. Mechanisms such as the proof of work or proof of stake are used to verify every transaction that is made. The best known examples of a Public Blockchain are Bitcoin or Ethereum and Algorand.
• The Private Blockchain corresponds in the above analogy to the Intranet. It is only available to a predefined group and there are responsible persons who take care of the maintenance of the blockchain and manage actions and access rights. The responsible persons reach a consensus among themselves about granting mining rights to users. Ripple and Hyperledger Fabric are Private Blockchains.
• As a third variant, the Federated Blockchain (or consortium) should be mentioned at this point. It consists, for example, of a group of companies or financial institutions that are responsible for a private network (the federations or consortia). By means of defined codes, transactions or decisions within the network are verified. Fraud or wrong decisions can be prevented by a defined majority decision. R3 for companies, EWF for utilities or B3i for the insurance market are examples of Federated Blockchains.
• Mixed forms such as public-permissioned or private-permissioned blockchains are only marginally mentioned here for reasons of complexity.

Which Blockchain Does SEEBURGER Work With?

We use Hyperledger Fabric 2 to implement permissioned B2B networks. This belongs to the private blockchains categrory. It can handle multiple ledgers. Organizations can participate in different ledgers and realize different use cases and services in the industry. Business application developers benefit from the new chain code management and improved performance. Hyperledger Fabric enables private data collections and off-chain data. An organization can create the first peer that is already a fully functional blockchain. Additional peers can later join the growing network. Marketplaces, maintenance portals, delivery networks, platforms or web applications can be built on top of this blockchain, implicitly supporting a growing number of trading partners and use cases. They can also be integrated with other blockchain-enabled platforms such as Tradelens or WeTrade to work with banks and supply chain ecosystems.

What Type of Data should be Stored in a Blockchain?

In principle, EDI documents could be stored in one block of a blockchain and thus replace, for example, an AS2 connection. But does this make sense? EDI documents contain a lot of information, some of which should only be visible to a limited number of people. A possible solution would be to write the information into the blockchain based only on the requirements of the planned applications. In cases, for example, where the entire document is not required for an application, only the hash of this document need be sent to the blockchain. This way, the content of the document is combined in an unalterable and forgery-proof way. For most applications, a small number of data entries is suffice, e.g. a part number, a price and a quality value. We also distinguish between so-called on-chain and off-chain data.

Conclusion: EDI or Blockchain in the Supply Chain?

If you look at blockchains from the perspective of the complex applications and challenges that occur in supply chains, all the properties of a blockchain make sense. Supply chains always include partners that use EDI. In this case, only the data from the EDI documents that is relevant for the application and for solving the problems is written to ledgers.  All other information that is required and that does not occur in an EDI standard is also written to the blockchain.

EDI can therefore be simply reused as a starting point. At the same time, EDI acts as a catalyst for these blockchain applications, since an EDI participant can start the first blockchain peer, and part of the block chain data is automatically derived from EDI. However, if data has to be sent directly from one trading party to another via a common protocol, EDI technology will still be used.

Integration with SEEBURGER‘s BIS

SEEBURGER is an experienced expert for integration solutions. Our central, agile, scalable integration platform, the SEEBURGER Business Integration Suite (BIS), can be connected via APIs to a peer of a blockchain(s), and to many blockchain-enabled platforms. It can map, convert and generate the data required by the various ledgers. The partner management can be integrated with the different organizations of the blockchain. Data arriving from different adapters such as KAFKA or from digital twins, can also be sent to the blockchain peer. The blockchain peer can automatically store the off-chain data in a data lake such as HDFS and compare it with hash values from the blockchain. Additionally, it is possible to integrate the Peppol Access Point with the peer. The Business Integration Suite is ‘made by SEEBURGER’ and ‘made in Germany’. It includes B2B, EDI, MFT, EAI and API integration functions that are available in any cloud, hybrid or on-premises.

Do you have questions about SEEBURGER solutions for blockchain applications? Please feel free to contact us!