Columbus Electronic Freight Management Evaluation

Conclusions and Summary of the Business Benefits

While the Internet makes it much easier for sophisticated and unsophisticated firms and agencies to communicate, glaring gaps remain in supply chain related data quality - its timeliness, accuracy and completeness - and data availability. For example, less than half the firms in a large industry survey update even half of their supply chain data in a very generous definition of "near real-time:" 24 hours or less. ³¹ Further, data update performance is worse near the beginning of the supply chain than near the end.

Still, some companies have found profits in providing supply chain connectivity and collaboration tools. Some third parties have established networks to interconnect partners. An advantage of a network is the ability to add new partners quickly and easily. Joining can mean immediate connection with multiple partners. There are software and supply chain service providers who claim thousands of customers who are potential supply chain partners. Service-oriented architecture and Web services also can interconnect partners.

Based on case studies and industry research, we believe effective implementation of these technologies yields significant quantitative and qualitative benefits.

The data from the September 2008 Aberdeen survey showed that 23% of those reporting benefits claimed more than $3 million of supply chain business benefits. ³² Aberdeen also reported that experience with a project makes a significant difference: firms report the greatest benefits on projects underway for more than two years. Aberdeen's data also support other conclusions that directly support the business case for EFM and other visibility technologies:

• Small and medium size companies may stand to achieve more benefits from visibility technologies like EFM - more than twice as many of these companies report benefits exceeding $100,000 compared to those reporting breakeven or a loss.
• Automated means of data exchange (Web Services, EDI) contribute to a higher level of payback. Of companies that achieved financial savings through visibility technology:
  • 58% use automated means of data exchange with their suppliers
  • 39% use automated means of data exchange with their logistics providers
  • 35% use automated means of data exchange with their warehouses

How industry quantified the savings as a result of visibility technologies is strikingly similar to the quantified metrics planned for in the EFM case study in Kansas City, including:

• Asset utilization
• Amount of penalties/demurrage
• Labor costs

Results in the EFM Program

The independent evaluation of the Columbus EFM (CEFM) deployment test documented meaningful dollar benefits, as reflected in Table 6. After computing individual savings, we normalized them based on the number of shipments that moved through the supply chain during the six month test period. This allowed us to calculate a total per-shipment labor savings of $5.94.

Since this savings per shipment total used Chinese (10.4% of the total savings) and Hong Kong (9.6% of the total) labor rates, we believe EFM savings per shipment would be higher for supply chains that originate in higher labor cost areas, such as Europe, the US or Japan.

Table 6. CEFM Quantitative Benefits

Partner	Metric	Shipment Activity	Quantitative Benefit	Savings Per day	Savings Per Shipment
Manufacturer	Productivity	Book consignment (Chinese labor rates)	75% reduction in data entry	$27	$0.61
Forwarder	Productivity	Shipment pre-alert (Hong Kong labor). Daily status report (U.S. labor). Airline status research (U.S. labor).	65% reduction in labor for forwarder in HK. 50% reduction in labor for forwarder in Columbus.	$187	$4.61
Customs Broker	Data quality/availability	Customs processing (US labor)	18% improvement in weekly shipments processed by the Customs Broker	Not determined
CFS	Data quality/availability	Error research Error correction (U.S. Labor)	6% reduction in errors at warehouse or $4/error. Reduction of EDI errors and time to correct them; savings of $3/error	$40	$0.92
Shipper	Service Quality	Research of priority shipments (U.S. Labor)	$11/day saved monitoring priority shipments	$11	$0.25
Total:				$259	$5.94

Source: Adapted from CEFM Final Evaluation Report, May 2008

Conclusions

• There is a need for EFM and other visibility technologies. Much of the literature we reviewed, especially annual surveys, reveal a gap in integration between supply chain partners. Although there has been progress over the last few years, many small and medium size companies still rely on fragmented, manual processes. Integration among multiple partners through EFM or other networks can directly impact the key supply chain business goal areas (productivity, service quality, shipment integrity). As Capgemini states in their 2008 survey, it is important to look at what 'major players' are doing that is significantly different from everyone else. Two of the key traits of major players are integration with their partners and greater visibility, both benefits of these technologies.
• Data quality and availability provide the foundation to achieve core supply chain business goals. Connectivity - one-to-one, many-to-many, and every variation in between - enables collaboration. Collaboration builds on connectivity and enables process integration which directly benefits all of the partners. EFM and related IT tools focus on data connectivity and collaboration by helping to improve data quality, especially in terms of accuracy and timeliness. Well-conceived and effectively employed EFM tools enable supply chain managers to convert data into useful information and then use it to enhance operational performance.
• EFM and other visibility technologies offer deployment options for partners of varying technical sophistication and enable many-to-many communications that reduces or eliminates manual data entry and re-keying. The range of technology solutions ensures there is a visibility tool that meets the needs of small, medium or large companies across a broad range of technical maturity. EDI can be expensive and complex to deploy, but larger companies may find it worthwhile. Web Services and SOA-based solutions can be deployed quickly, are easy to implement, and often rely on XML, which even 'non-techies' can work with and understand. Web Services are also compatible with EDI, making it a good solution for small companies looking to connect with their larger partners that may use EDI and for companies looking to quickly connect with multiple partners, some of whom may not use EDI. We found numerous web-based networks of commercial software providers that have hundreds or thousands of potential supply chain partners already interfaced with the network. This helps to add new partners to an automated supply chain information exchange.
• EFM and other visibility technologies provide lasting benefits, benefits which also impact companies' response to increasing regulatory requirements. As Aberdeen illustrated, the level of cost savings from visibility technologies increases the longer the solution is in place: they noted a marked increase after two years of a technology deployment. Another lasting benefit is the ease with which companies can respond to changing regulatory requirements, such as the upcoming Customs 10+2 rule. Many companies will not be able to provide the needed data on their own. The technologies discussed in this report can help provide this visibility without sacrificing operational efficiency in the process.

The bottom line of this report is broad industry research and reports and CEFM evaluation results reinforce each other and support the conclusion that EFM technologies and the EFM program can deliver significant business benefits.

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