How an API Economy Helps Supply Chains Deliver Strategic Value

Application programmable interface (API) is not only improving supply chain connectivity and visibility on a global scale, but it’s also creating tremendous strategic value.

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Many supply chain executives avoid the technical intricacies of back-end technology. However, it’s worthwhile to make an exception for the now-omnipresent application programmable interface (API). That’s because this humble software innovation is not only improving supply chain connectivity and visibility on a global scale, but it’s also creating tremendous strategic value.

Non-technical API understanding

An API is a piece of code serving as an intermediary between programs and digital environments, enabling the access of data and functions. In many ways, APIs act as interpreters between systems. Say, for instance as a purchaser, you want to order a blue box from your supplier. Well, your supplier categorizes that blue box as a “light blue box,” the API knows that when you say “blue box” you mean “light blue box”; translating the information and ensuring the right item is ordered.

These seemingly simple connections and interpretations, at scale, ensure that data can be shared, order processing can be streamlined and thousands of emails can be avoided.

APIs: Behind the scenes

There are around 50,000 publicly available APIs. Some shipping notifications come via API—as do videos embedded in websites, the weather forecast on a car’s digital display or stock prices on the phone. Gartner estimates APIs perform 25% of all B2B interactions. And, their growth rate is increasing. APIs can be written in any programming language, and either be made available publicly or used exclusively within one organization.

API providers concept, create and manage these digital intermediaries. API consumers make web and mobile apps, server interfaces, IoT-enabled devices and other applications that need data from external sources. And, others act in both capacities, creating custom APIs and implementing them to connect client enterprise resource planning (ERP) systems with those of their suppliers and partners. Since APIs are machine-to-machine, end users never see them, instead these APIs continuously communicate in the background, silently streamlining processes between organizations.

APIs and the supply chain

APIs enable a digital supply chain in which everything from inventory levels to the location of a specific shipment on a truck to the status of a specific order or payment can be accessed in real-time. Enterprise stakeholders use APIs to ensure that supply chain data and actions are available to the systems and people who need them, at the right time, to make the best possible business decisions and reduce manual data handling along the entire supply chain.

Consider a company in search of greater supply chain efficiency. APIs can be used to connect their ERP system with that of their suppliers, carriers and other data sources, pulling together inventory and location data with weather, fleet status and anticipated fulfillment requirements to help streamline transportation logistics. This sort of effort could employ hundreds of APIs connecting several disparate applications, places, objects, environments and systems.

It’s best to generally deploy four different classes of proprietary APIs on behalf of clients: 

●       Order management APIs, which enable processes by connecting trading partners, exchanging orders, ship notices, invoices and other perfunctory business transactions.

●        “Control Tower” APIs designed around status-related criteria such as road shipment visibility, shipment deviation and invoice payment status.

●        Master data APIs, which help build and manage core data for the purposes of co-innovation across functions and organizations.

●        Specification APIs that help transfer data and integrate services.

Countless APIs fall into each of these categories and support a variety of data connections to improve efficiency and gain visibility at every step of the supply chain across a broad set of suppliers, customers and partners.

Delivering value through APIs

APIs provide a way to link digital ecosystems and technologies that goes beyond simplifying communication—improving business performance in a number of ways. APIs allow you to execute on business strategies more quickly, responsively, efficiently and cost-effectively. By sharing digital services with external organizations in a plug-and-play manner, growth rates are accelerated, scalability is streamlined and technical infrastructure costs are fractionalized. From a balance sheet perceptive, strategic implementation of APIs can help you:

●        Grow and scale quickly

●        Optimize capital allocation

●        Lower selling, general and administrative expenses costs

●        Streamline change management

●        Avoid certain technical liabilities

Of course, APIs must be maintained and organized responsibly like any other tool. That means building out management infrastructure that secures, controls and maintains programs in a systematic and strategic way. From concept to delivery to keeping up with changing security demands, many aspects of each API must be kept current. But, these commitments are a small price for such a powerful and flexible way to deliver on strategy and better meet customer demands.

The API economy’s perfect storm

Why is this exciting now? After all, the API is 20 years old as of this year. The current excitement stems from a number of factors converging to create ideal conditions for API-enabled supply chain optimization. These factors include the maturation and propagation of a number of complementary “Industry 4.0” technologies such as artificial intelligence and machine learning, extensive global application development, increased financial pressure, continuity directives, better understanding of API optimization and a new generation of digital natives eager to empower the world through greater connectivity.

As a technology, the API’s time has come. And, supply chains need them more than ever as stakeholders seek more reliability, flexibility and transparency. Now the question is, which enterprises and industries will be the next to leverage it at scale and change the game?