Columbus Electronic Freight Management Evaluation

Business Improvement Goals for Supply Chain Managers

The potent mixture of globalization, deregulation and advances in information technology has had two large impacts. First, supply chain efficiency and effectiveness improved significantly over two decades, dropping logistics costs from 16 percent of US GDP to as low as 8 percent. ¹⁰ Second, supply chain managers and their seniors continue to push for continuous improvements, their appetites whetted by past achievements and multiplied by increasing external pressures such as fuel volatility, security compliance requirements and financial upheaval.

Industry Approaches to Supply Chain Improvement Goals

Corporate success is measured in financial terms, such as Return on Investment (ROI) and operating margins. Other measures relate to competitive standing (market share) and the loyalty of good customers - the ability to attract and retain the most profitable accounts and relationships. The role of the supply chain and its managers is to support and contribute to those corporate goals.

Figure 1. Connections among Corporate Goals, Supply Chain Capabilities and EFM Technologies

Supply chain managers support corporate goals in three business domains under their control: Productivity, Service Quality, and Shipment Integrity, which most managers also know to be the major areas to achieve supply chain efficiencies and business benefits. EFM proved that data quality is the foundation for supply chain performance improvements; its components are data accuracy, timeliness, and completeness. Data availability, making quality data accessible to users, begins with connectivity - effective, robust one-to-one, one-to-many and many-to-many connections among supply chain partners, customers and public agencies. Connectivity enables collaboration, which includes process integration across partnerships, such as planning, forecasting and monitoring shipments. The top foundation layer in Figure 1 represents the critical leverage point: the conversion of available data into "actionable intelligence," information that can be and is used to control and improve supply chain operations and results.

All three layers in the foundation are necessary ingredients for producing excellent supply chain business results. Each of the three layers offers opportunities to enhance performance and deliver benefits such as greater productivity and shipment quality. The impacts of the EFM test in Columbus (CEFM) were primarily in the data availability layer of the foundation. EFM and related IT tools focus on data connectivity and collaboration, but they also reach down and up: the core features of EFM help improve data quality, especially in terms of accuracy and timeliness. And looking above, EFM enables supply chain managers to convert data into useful information and then use it to enhance operational performance.

EFM and related technologies are significant contributors to enhanced visibility and that makes visibility an important facet of any story about the business benefits of EFM. There are few public reports or case studies of visibility improvements that describe realized monetized benefits, but there are many confident reports about visibility and data improvement projects that describe non-monetized and qualitative indicators.

When evaluating EFM, we looked particularly for metrics related to or affected by data management and visibility systems. Table 2 shows the primary metrics clusters we gleaned from the literature: two relate to benefit columns in Figure 1 and one relates to the foundation layers of data quality and availability.

Table 2. Metrics Most Related to Benefits of Data Management and Visibility Systems

Productivity	Service Quality	Data Quality & Availability:
Transportation costs; transportation efficiency *	On-time delivery*	Frequency of data updates
Personnel productivity*	% of shipments expedited; time to resolve transit problems	Data accuracy
Asset utilization*	Lead time reliability	Data timeliness
Inventory days of supply	Variation in order cycle time*
End-to-end cycle time*	% of orders shipped on schedule
Supply chain costs as % of revenue (10)	% of orders not in stock
Administrative costs

* High visibility/high data accuracy firms use these metrics much more than low visibility firms

Simply using the six "starred" metrics is an indicator of supply chain sophistication. Capgemini's latest annual supply chain survey divided respondents into "high visibility" or "low visibility" groups. The high visibility/high data accuracy firms reported much more use of the starred metrics than the low visibility firms.

Data availability metrics offer insights into which firms are technology leaders, followers or laggards, and which firms have the greatest potential benefits to achieve from successful technology innovation. Other indicators of leading, lagging and benefit potential are methods of data exchange (such as web services, EDI, fax or voice) and sophistication of support tools (such as optimization models or spreadsheets).

Goals of the EFM Program

The core features of EFM provide a platform to exchange information among trading partners on a many-to-many basis over the web. The main goal of the USDOT EFM program is to enable greater supply chain productivity and service quality by improving the quality and availability of supply chain information without the deployment of private, proprietary services. The first step in assessing the achievement of this goal was the execution of the six-month CEFM deployment test.

Specific goals of the CEFM test included:

• Automate business interactions among multiple partners along a single international supply chain.
• Provide shipment status and documentation in near real-time.
• Improve data accuracy of information associated with freight management.
• Utilize standardized electronic data definitions and formats, especially those which businesses already have in place.
• Maintain confidentiality of partner data while allowing authorized partners to have access to sensitive business data.
• Demonstrate the ability to support small, medium and large businesses with non-proprietary tools using the Internet and standardized electronic information.

Following the completion of the CEFM test, the next step in the EFM program is the execution of the first EFM case study, which is taking place with a small supply chain based in Kansas City, MO. This case study involves a small-scale deployment and short-term use of the EFM core features. The case study went live on February 27, 2009.

In this test, the case study participants and deployment team will conduct a self-evaluation; the case study's supply chain owner has specific productivity and service quality goals to achieve through their use of EFM. The case study will look closely at the impact of improved data availability on some of the productivity and service quality metrics that they already collect, so there will be good "before" baseline data. The concept with the EFM case study in Kansas City is to focus on a small but effective number of metrics, particularly productivity measures in the warehouse. Industry partners, developers and case study sponsors have vetted these metrics. ¹¹

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