Columbus Electronic Freight Management Evaluation

Electronic Freight Management Technologies

EFM and other visibility technologies include three functional capabilities:

• Connectivity with supply chain partners to obtain needed data
• Collaboration of business processes with partners
• Creation and use of actionable intelligence to improve the supply chain

EFM technologies move connectivity beyond phone calls, faxes and even EDI toward automated computer-to-computer information exchange. Technologies transform collaboration from the simple linkage of systems toward integrated business processes. Technologies that create actionable intelligence go beyond the creation of pretty charts and screen layouts and towards accessible tools that transform data into decision support information for both normal operations and unplanned disruptions, large and small.

EFM and visibility technologies provide the data and analysis capabilities for supply chain visibility, productivity and effectiveness. We created the table at the right from Capgemini's 15th and 16th Annual Reports on Trends and Issues in Logistics and Supply Chain Management, each of which drew on more than 1100 respondents. ^{12 13} While the table shows a sharp year-on-year decline, in 2007 more than 15% of respondents still managed their supply chains with manual processes including spreadsheets. The table also shows the penetration of some automated supply chain tools.

In its June 2005 survey of 200 logistics personnel in Fortune 500 companies, eyefortransport reported that almost all respondents identified better technologies as the principal way to overcome major supply chain issues. ¹⁴ The top three issues, each with more than 70% support, were data integration, lack of visibility, and lack of collaboration with partners.

Visibility Technologies in Industry

Increasingly complex global supply chains have about 60 data sources within and especially outside the company. ¹⁵ The objective, of course, is to have near-real-time information from each source entered once and in a timely manner so that all concerned parties can maintain accurate visibility, whether end-to-end or just those segments of particular interest. Integrating all of the information at the right time is not easy. An adaptive global supply chain is impossible without the access to accurate, timely and complete supply chain data. This requires electronic connectivity among supply chain partners and an ability to pull together and translate all of the data into usable information.

Connectivity in a supply chain may involve one-to-one communications between partners, say a shipper and its freight forwarder. Given multiple suppliers, service providers, and even customers, many-to-many communications is even more important and more difficult. Most companies, particularly large established shippers and most transportation carriers use EDI to exchange data. EDI is typically a batch process between two partners in an industry-accepted standard format. There are also many value added networks (VAN) that act as gateways. The advantage is that a partner need only communicate with the VAN which then sends the transaction on to its intended recipient(s). A disadvantage of the VAN is the transaction fee. VAN service is certainly cheaper than establishing individual one-to-one EDI interfaces, but can still represent a meaningful operating cost to a user. One of the words we often saw associated with EDI in industry literature was "expensive." Large companies may send EDI every hour or two and would usually batch together multiple EDI transactions, but this frequency may not be sufficient for rapid decision-making across a global supply chain.

Connectivity and Collaboration Networks

Enter the web or the Internet: connectivity and collaboration became easier and less expensive for companies. The Internet revolutionized electronic communications and made it much easier for relatively unsophisticated parties to communicate. Although email is part of the "manual/spreadsheet" category in the Capgemini table above, almost all companies use it to transfer virtually for free documents they used to send by regular mail or courier. In addition, a company wanting to receive supply chain data can provide a web portal that allows partners to input or view data with nothing more than an Internet browser.

Most companies lack the size or ability to create their own collaboration network, but there are a growing number of companies that provide web-based supply chain connectivity and collaboration tools. Often these third parties have networks to interconnect many shippers and other partners. An advantage of a network is the ability to add new partners quickly and easily, offering immediate connection with multiple partners to new users.

There are other examples of partner collaboration networks. Some, including GT Nexus, ClearTrack, GXS, and Descartes, are software and supply chain service providers that claim thousands of customers which are potential supply chain partners. Electrolux is an example of a shipper that established its own network to tie in its supply chain partners. Electrolux has a supply chain collaboration network that uses commercial software from Axway. Recently, Electrolux acknowledged that collaboration for improving processes is hard. ¹⁶ Their network ties its partners together by supporting multiple standards and communications protocols, rather than forcing partners to adapt to a single standard or protocol. The Electrolux network functions as a translator or gateway. They also offer WebEDI for partners that don't have traditional EDI.

GT Nexus' underlying network infrastructure communicates over the web, connecting partners with each other and with GT Nexus, using on-demand supply chain software. GT Nexus reports about 15,000 companies on its network and supports many different formats to facilitate data communications among the customers. The network involves minimal set-up costs and maximum flexibility which helps new customers to start quickly and cost effectively.

Service Oriented Architecture (SOA) and Web Services

EFM and some other logistics applications use both Web Services and SOA to take advantage of the power of the Internet and XML for data exchange:

A Web Service is a reusable computer application (like a subroutine) that transfers data via standard data and communications formats over the Internet. Web Services are self-describing components that client applications can recognize by look-up in a registry.

Service Oriented Architecture (SOA) is a software architecture approach where the basic elements of design and development are applications that communicate with each other through Web Services. The ultimate goal of the SOA is to facilitate information exchange.

Open architecture and Web Services allow supply chain partners to automate daily business interactions and streamline business processes by facilitating cross-agency messaging and by containing a Yellow Pages-like function that standardizes the directories of information on Web Services (listing their capabilities, location, input requirements, and expected output or service performed). Because direct partner connections via Web Services use the Internet, there is no transaction or network fee as there is when EDI is provided through a VAN. Collaboration networks described above charge a subscription fee or a lower per unit communications cost than VANs.

Many transportation companies now offer Web Services connectivity to their customers. Examples include Yellow Freight, UPS, and FedEx. The Web Services make it easier to get connected, which produces labor savings.

SOA architecture enables the integration of best practice processes within a supply chain. Standards-based SOA allows easier expansion of process and data integration throughout the supply chain.

Using SOA, staff within a company can view multiple databases simultaneously. SOA holds the pieces together and delivers a consolidated view of the supply chain. It enables a total view of the supply chain by making it easier for partners to provide data and then making that data more accessible to the user.

SOA-enabled systems allow end users to pick the parts - or services - they need from among all installed systems and to assemble them into a business process that meets specific requirements. It enables it without major integration efforts and the time and cost they entail.

Dow Chemical uses SOA and a Web Services-based portal to pull together and distribute their visibility information. A third party, Savi Technology, hosts the portal for them. The system does automated filtering and allows management by exception.

CEFM Deployment Test Technology

As noted earlier, one of the goals of the USDOT EFM program is to accelerate the deployment and use of high payoff electronic technologies to improve freight efficiency. The core architecture in EFM includes SOA and Web Services. The CEFM deployment test integrated multiple partners and networks using SOA and Web Services while exchanging and sharing data, maintaining security of the information exchanges, and protecting the integrity of individual partner systems. The tested supply chain included trading relationships among thirteen partners including four manufacturers and two freight forwarders; transport was primarily by air from China to Columbus, Ohio. The key aspects of the CEFM test were:

• Data was entered once and used many times.
• Information sharing was in near real-time, based on when data entered partners' back-office systems.
• Implementation of data standards - secure exchanges over an open architecture using XML messages written per Universal Business Language (UBL) schemas.
• Trading partner access to status reports via the Web - one partner integrated CEFM data into its back office system.

CEFM used 21 Web Services to obtain, store, and automatically send and receive shipment status information among supply chain partners; stored the data separately; and then exchanged the data with other trading partners. These Web Services provided a simplified means of communicating and sharing shipment information.

Building upon the success of the CEFM deployment test, DOT and the EFM integration contractors began working with Demdaco on the first EFM case study in Kansas City; a small importer and warehouse operator, Demdaco's business goal in applying EFM to their operation is to improve visibility of inbound ocean container shipments. The objective is to have complete status information in one place and to display most of the data on a web portal so that small and medium size partners will need little technology to participate. The several-month deployment will be bolstered by coordination with several other improvement initiatives in Kansas City.

Creating and Using Actionable Supply Chain Intelligence

Even accurate real-time information is of limited value to a supply chain user until that information is applied to manage the supply chain. In order to apply the information, it is as important to integrate supply chain information with back office systems as it is to automate input from external partners. This begins to create actionable intelligence - and it reduces data errors associated with re-keying.

Here are some examples of the use of actionable supply chain intelligence:

• View shipments by exception and provide alerts for action
• Track shipments and provide tracking data to customers
• Divert in-transit shipments to higher priority destinations
• Provide advanced customs clearance (import and export) data
• Provide alerts about data quality problems and notify users to investigate
• Provide dashboards of status information and operating statistics based on company-defined performance measurement

Visibility software pulls together information from all supply chain partners into one place and provides a mechanism to share information. This enables parties to a shipment to see "all the spokes in the wheel." Some software products have capabilities that provide the ability to look up multiple pickups and drops, and examine and develop distribution strategies. Software vendors provide tools for analyzing the data, generating reports, and highlighting exception information.

The types of software that can create and use actionable intelligence from visibility data include Transportation Management (TMS) and Global Trade Management (GTM) systems. As shown earlier, over a quarter of surveyed companies, particularly the larger shippers, develop their own transportation management software. Increasingly, companies are using on-demand software over the web or SaaS (software as a service). In fact, many TMS providers are transitioning to SaaS. SaaS suppliers tend to have the kind of SOA and Web Services-oriented networks and infrastructure which make for easier data exchanges. SaaS could be particularly useful to small and mid-sized companies because it requires only an Internet browser. In conversations with the authors, Aberdeen indicated that only a small percentage of small and mid-sized companies use visibility software. This may reflect a potential market for on-demand services. However, the point here is not the superiority of a particular software business model; the point is that actionable intelligence requires integrated logistics software.

The 2008 Logistics Management Survey of 422 respondents found that one-third of respondents (or 141 respondents) are planning to add an on-demand application in the coming year. ¹⁷ A contributor to the analysis of the survey results estimated that one third of the TMS market is for on-demand. One software supplier wrote recently that on-demand projects were the fastest growing segment of its business for large and mid-sized shippers as well as 3PLs. ¹⁸

As a specific industry example of actionable intelligence, Dow Chemical is integrating its visibility capability with its back office systems. Dow's system picks out problems related to high hazard shipments and links directly to the chemical industry's reporting system, CHEMTREC. In addition, Dow expects to allow their customers to tap their system and track the location and status of shipments. Also, Sterling Commerce reported on an August 2008 survey of over 400 logistics professionals that slightly more than half automatically check quantities and dates of advance shipments and commitments against purchase orders. ¹⁹ They also wrote that a majority of shippers currently track shipments through carriers' websites. Respondents identified ad hoc reporting as an important feature of software. Interestingly however, only one-third of respondents said their supply chain solution was "top notch" and one-fourth said their reporting capabilities were inadequate.

By design, CEFM was primarily a data exchange system and not a TMS. CEFM was not intended to provide more sophisticated TMS functionality aside from a supply chain events report about each shipment. However, users in the CEFM Deployment Test reported substantial opportunities for taking action based on CEFM data even as they acknowledged that the test only dealt with about 10% of shipments in a parallel testing environment that kept data on remaining shipments separate in existing systems and processes. CEFM used Web Services to exchange status information among partners and extracted information from partners' in-house developed software or visibility systems. One CEFM partner integrated CEFM data directly into their back office systems. That partner found numerous uses for acting on CEFM data. Even though other partners did not integrate, CEFM users identified opportunities including use of advanced information to plan and forecast arrival of shipments at downstream locations. The test evaluators found integration is crucial in order to achieve the full benefits of reduced data entry and increased data quality. Capgemini's 2008 survey (17th Annual) reinforced that finding when, for the first time, it highlighted the wide use of legacy software that is integrated through an automated process as a transportation tool. ²⁰ It is this integration that yields actionable intelligence.

In the EFM case study in Kansas City, Demdaco will conduct back office integration of the supply chain data into its system and will use EFM for managing all of its shipments; reports will be available through the EFM user interface to aid all of the partners in taking actions.

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