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Transportation Communication Systems Need Overhaul

June 7, 2016
Electronic data interchange technology, the industry's legacy communication system, will impede  supplier networks from meeting retailers expected delivery requirements.

The transportation system is under a lot of pressure from retailers who are demanding faster service.

For example on May 30 Target's new policy penalizing transportation professionals for supply delays and inaccuracies went into effect. The United States' sixth largest retailer by sales eliminated the two to 12-day grace period for deliveries and hiked fines on late shipments with incomplete or inaccurate information to 5% of the order cost.

In order to fulfill modern delivery expectations, Mary Holcomb, professor of supply chain management at the University of Tennessee, Knoxville, and Karl Manrodt, professor of logistics and supply chain management at Georgia Southern University, recommend  an overhaul of the transportation industry's communication systems. 

The authors suggest that while this overhaul would be costly, not completing it might cost shippers and carriers more. 

"Corporations have recently struggled to address complexities in their supply chain as they respond to a significant shift in consumer purchasing behavior," said Holcomb, who also serves as the Gerald T. Niedert Supply Chain Fellow in UT's Haslam College of Business. "The strategic move by Target is logical in order to remain competitive and meet the dynamic needs of consumers.

"However, electronic data interchange technology, the industry's legacy communication system, will impede their supplier network from meeting these precise delivery requirements," she added.  

Electronic data interchange, developed during the 1948 Berlin airlift, has undergone decades of refinement in the transportation industry but still breaks down between shippers and suppliers and creates hours of delay in information exchange. 

Holcomb and Manrodt describe API's ability to bridge these issues, in turn driving down pricing and making shipping more efficient. With API, carriers are able to follow through on the expectations of dynamic pricing. Using real-time capacity metrics and historical network data, carriers can adjust their pricing to fit market demands and optimize capacity — a skill that will likely become increasingly important as the truck driver shortage expands. EDI causes weeks of delay in information exchange, often resulting in freight shipment increases.    

API offers shippers the capacity to find the most efficient carriers for their particular route using predictive analytics. Instead of depending on a carrier's historic performance as the primary determinant, shippers can witness carriers' current efficiency in a particular lane, knowing for certain their best carrier option.

According to Holcomb and Manrodt, this capacity allows shippers to make up time or cost from delivery disruptions, a necessity as more companies follow Target's lead on supplier demands. Target's policy is a reality of the modern business climate, the authors points out. Disruptions often are unavoidable in a supply chain, but Target sets the expectation that its suppliers should be able to anticipate the possibilities and have the agility to work around them. 

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