Columbus Electronic Freight Management Evaluation

Introduction

Freight transportation is big business: it consumed 10.1 % of US GDP and about 60% of total logistics costs in 2007. Financially, transportation accounted for about $848 billion of the $1.357 trillion spent for total logistics. ¹

Although freight traffic has dropped as a result of the worldwide recession and previous traffic forecasts for 2020 are being scaled back, freight volume growth will still increase the stress on the US transportation network. This stress is likely to continue and traditional investments in port, terminal, highway and rail infrastructure will likely continue to struggle to keep up.

Effective innovation in information technology (IT) may be the most important tool for the private and public sectors to respond to capacity constraints and congestion. Both sectors have been investigating and implementing new IT applications to help manage freight transportation, improve supply chain management, enhance productivity and mitigate congestion; that is the essence of applying Intelligent Transportation Systems (ITS) to freight transportation.

With that in mind USDOT worked closely with the freight industry through a collaborative body called the Intermodal Freight Technology Working Group (IFTWG), operating as a committee within the Intermodal Association of North America (IANA). Together the USDOT and industry helped develop the Electronic Freight Management (EFM) initiative to address data-related problems inherent in complex supply chains with simultaneous connectivity needed among multiple partners. Many-to-many data relationships are a key characteristic of EFM, and hopefully will help advance the state-of-the-art to replace the more costly and incomplete one-to-one relationships that now exist. EFM has already provided strong evidence that it enables significant improvements in supply chain visibility, productivity and effectiveness through simultaneous data sharing. In fact, the USDOT Research and Innovative Technology Administration (RITA) and Federal Highway Administration (FHWA) have identified EFM as a major initiative because its success would reach beyond freight system efficiencies to help mitigate congestion and support growing freight transportation.

The Role of the EFM Program

A crucial role for IT is providing status information about supply chain events - improving supply chain visibility. Over the last decade, USDOT and the public-private IFTWG have done important work related to improving visibility of freight transportation operations.

That freight community learned that complex, intertwined global supply chains contribute two challenges for IT in improving supply chain visibility: first, a mix of one-to-one, one-to-many and many-to-many data transfer needs; and second, the need to exchange and translate information in multiple formats, including crude forms such as email. Uneven communications among supply chain partners often degrades data quality - its accuracy, timeliness and completeness. Poor data quality increases operating costs and can disrupt shipments with delays and lost goods. Happily, the converse is also true: improved data quality enhances efficiency and supply chain agility in responding to fuel and other economic impacts.

Acting on these accumulated lessons, USDOT's ITS program created the EFM initiative. EFM approaches freight transportation and supply chain issues from the demand-side, enabling benefits of supply chain visibility improvements for the shippers that are freight transportation's customers.

The Centrality of Supply Chain Visibility

The notion of "supply chain visibility" has drawn increasing attention from all public and private sectors as a means of improving supply chain efficiency. The scope of poor supply chain visibility has been well documented by survey organizations such as Capgemini, Aberdeen Group, and others over the last 5 years. Some of the research, particularly by MIT and Stanford, focuses on using improved supply chain visibility to mitigate supply chain disruptions and unanticipated events. These studies agree that either poor data quality or poor data sharing can delay shipments, disrupt assembly lines, and stress inventories.

Visibility remains such a problem in large part because in a global supply chain environment, there are many supply chain partners that must connect to provide timely, accurate and complete data. However, even one-to-one exchanges fall short on data quality. In a 2007 Aberdeen survey, only 13% of firms reported being satisfied with the efficiency of their supply chain event data collection. ² The sheer number of supply chain partners and the requirements for collaboration are key elements of the problem. As we noted earlier, the two important challenges which can impede the achievement of supply chain visibility are the mix of data transfer needs and the multiple format translations so often required. Another important reason visibility remains a problem is data timeliness. Fewer than 25% of companies have daily or more frequent visibility data. In Capgemini's 2006 survey, almost one-third of companies said they used email as their primary means of data exchange with partners. ³ EFM technologies can help with all of these actions.

Capturing high quality supply chain visibility data is a critical challenge, but it is not sufficient to fix visibility problems. Industry literature and our own analysis lead to an important conclusion: visibility itself isn't enough; information must become actionable intelligence and companies must use the intelligence to improve operations. As Aberdeen pointed out, financial value comes from using visibility information to identify and eliminate causes of delay and other supply chain issues. ⁴

Industry studies help explain the size of the data quality problem, for example:

• Data quality problems cost US industry $600 billion per year. ⁵
• US organizations spend $15 billion per year manually keying data from forms; for a mid-to-large sized company, this is about $8,000 per day. In addition, manual entry introduces a 2 to 4% error rate. ⁶
• Manual data entry introduces a 0.1 to 2.3% error rate in clinical studies. ⁷
• Most companies have data quality problems. An industry survey found only 16% of respondents reported data accuracy greater than 91%. ⁸

As we've described, the problem of supply chain visibility is complex; solving it is likely to require several tools. The challenge, however, begins with the ability of the supply chain partners to collect and distribute operational data. EFM technologies can facilitate the execution of this crucial first step by building the collaborative communications infrastructure that these real-time, paperless exchanges require. Although technologies such as Electronic Data Interchange (EDI), Enterprise Resource Planning (ERP) software, email, carrier and 3PL tracking systems etc. exist, in many cases they are expensive or difficult to implement, thus not readily available for everyone who would like to use them. EFM technologies can benefit companies of varying sizes and levels of technical sophistication by providing them the means to track cargo, connect with new and existing shipping partners, and expedite the paperwork process.

The Columbus EFM deployment test featured an independent evaluation that examined quantified and non-quantifiable benefits that would result from implementation of EFM for all shipments in the host supply chain. ⁹ A CEFM evaluation report documented the results, which are summarized in this report along with benefits found in industry surveys, articles, and reports. Table 1 below is a summary of benefits information contained later in this report.

Table 1. Comparison of CEFM Benefits and Documented Industry Benefits from Visibility Technologies

EFM Function	Benefits
	CEFM	Industry
Productivity:
Booking, Tendering, On-Demand Status Reports (Personnel Productivity)	Reduced manufacturer data entry by 75% Reduced forwarder data entry labor by 50-65% Increased # shipments/week processed by Customs broker by 18%	Reduced processing effort by 8-15% Large firms place a high importance on electronic tendering of shipments 78% of companies are able to easily access data needed for decision-making.
Robust XML messages with automated data for visibility	Improved data accuracy at CFS by 25%	44% of Aberdeen survey respondents do not have online visibility into trade documentation flow and 36% are planning to enhance their current capabilities
Automated messaging to reduce information exchange effort	10% improvement in data availability on warehouse floor (specifically, ASN); allows better staff planning and forecasting of workload
Data quality and availability:
Frequency of data updates	Near real-time data for all partners, eliminating rekeying	44% of Aberdeen survey respondents do not have online visibility into trade documentation flow
Data accuracy	Improved data accuracy at CFS by 25%	50% per shipment savings in administrative costs from improved visibility and improved data accuracy from reduced manual data entry
Data timeliness	Data received by supply chain partners 6-72 hours sooner	Increased timeliness of shipping information by 30%

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