Electronic Freight Management

The Case for Adopting EFM Technologies

Information is increasingly being used as the “glue” to synchronize service-sensitive supply chains. As distribution networks have evolved to become “flow-oriented” instead of “storage-oriented”, as cross-docking and merge-in-transit have become operational necessities, and as elements of the network are increasingly outsourced to third parties, the information sharing requirements among increasing numbers of partners along the supply chain have grown more complex. Legacy information sharing models, such as faxed paper documents and Electronic Data Interchange (EDI) transactions are insufficient to handle today’s requirements.

The Electronic Freight Management (EFM) initiative’s basic focus is making shipment information better and more easily available, from which organizations can operate more effectively and successfully in today’s complex operating environment. That information can be more easily accessed; more available in electronic rather than paper formats; represented in standardized ways so that it can be shared and understood by recipients (human or machine) more easily; and available when it is needed by an authorized party in a supply chain, rather than delayed by the shortcomings of existing common practices and information technologies (as discussed throughout the subsections below). The EFM is a concept and an architecture for information sharing; however it is not a transportation management system. The full value of EFM can only be realized when integrated into the application layer of organizations’ complete IT architectures.

EFM includes an IT architecture design that adopters can implement in varying degrees. Participating organizations have the flexibility of deciding which business functions to link to the EFM, whether they will leverage EFM’s service-oriented architecture to coordinate business processes with other trading partners, whether they will migrate legacy systems to natively support the prescribed Universal Business Language data standards and web services versus simply use a transformation layer that the architecture design supports. Decisions that adopters make will affect the nature and extent of benefits that they receive in return for their investment. The range of benefits that U.S. DOT believes are possible through EFM are discussed below. There are undoubtedly other benefits that have not been uncovered to date, and that adopters will realize as they understand how best to take advantage of the capability.

Much of the information presented here is based on the experiences of organizations that have tested EFM, including the Columbus deployment test CEFM. It also includes the efforts of the U.S. Department of Transportation (DOT) to document the experiences of these organizations in the form of EFM case studies

1. Strategic Value

For corporate managers of business and IT functions, EFM can be a strategically deployed asset, used for a variety of benefits. Its focus is open source solutions, the development and adoption of data standards, and use of web services technologies in an inter-enterprise service-oriented architecture environment. These are the catalysts to provide these benefits, particularly when organizations choose to integrate EFM into their legacy IT environments.

Implementing a Service-Oriented Architecture (SOA)

SOA is maturing as an architecture of choice within a wide range of organizations and supply chain environments, and though there is no requirement that an EFM user must adopt SOA within their operation, the ability to interact with EFM web services will create value for those organizations. There is tangible evidence in industry [see, for example, Reference 1 as well as the EFM business benefits report included in the Program Documents tab] that SOA adoption has a positive effect on supply chain operations. There are four general areas of benefit for organizations that adopt SOA within their enterprises: the reduction of operational costs, for example by reducing the burden of integration, operation and maintenance through open industry standards; increased responsiveness and agility; efficiently enhancing or extending existing IT solutions (assuming EFM is integrated into existing systems), effectively increasing an organization's competitive influences; and creating conformity through establishment of a federated, standardized enterprise based on open technologies.

Leveraging Open Source Solutions

With small exceptions to the internal workings of the EFM architecture, most parts of EFM use open source solutions. Central to EFM is a set of public web services used cross-organizationally in a service-oriented architecture (SOA), that generally define key business functions transacted in supply chains. (The EFM Package at the Program Documents tab includes web services developed and used to date and can be downloaded at no cost.) Further, the EFM adoption package encourages organizations operating EFM to update the source material, such as expanded web services, that can organically “grow” the EFM. The EFM Package is based on the CEFM deployment and is being updated based on the Kansas City case study.

In addition to the open source, it is also open across all industries. Some commercially available products address certain industries. EFM might be adopted and used to bolster those commercial products or it might be used by the trade to provide a more industry-neutral solution.

Adopting XML Messaging

The EFM architecture is most supportive of organizations using standardized XML messaging. Many organizations have already adopted XML for various information exchanges either within or across their trading partners. However, many more have not. In a 2005 survey of a variety of buyers, sellers and transport service providers commissioned by the U.S. DOT, the American Transportation Research Institute found that 64 percent of respondents use EDI messaging, but that 80 percent preferred to receive electronic documents in XML format. Among companies that were not using XML at the time, 55 percent believed they would be using it within the next five years. A primary barrier for these organizations is the lack of technical capability. EFM can mitigate, though not eliminate, this barrier, by providing a technology solution for the less tech-savvy adopters to connect into with less cost, cultural impact, or IT expertise required.

Adopting Interoperable Data Standards

Data standards are important in facilitating the orderly exchange of information. The EFM architecture follows Universal Business Language (UBL 2.0) as a basis for event messages. The UBL is managed by the Organization for the Advancement of Structured Information Standards (OASIS) as an open source of standard electronic XML documents and component data libraries. The UBL messages employed by EFM include:

Receive order consignment
Book service
Confirm booking
Load shipment
Consignment partners
Subscription
Receive status
Query status
Divert shipment
Request clearance
Receive clearance

The XML messages used as part of the CEFM deployment test were harmonized with UBL. In fact, the transportation status message successfully used in the test was submitted to OASIS and has been incorporated into the latest release of UBL standards. Using UBL in XML-based documents and messages has been shown to lower integration costs and speed the learning curve for XML business schemas. UBL is available for use without cost and the various XML schemas and message definitions in EFM are available at no cost in the EFM Package. Users would need to map their legacy system formats to UBL and a Governance Agreement amongst trading partners would be needed.

The adoption of UBL in EFM permits adopters to more easily transact data with semantically precise definitions. Trading with potential partners who have adopted the same standards greatly eases the connection process. Another advantage of XML is that even ‘non-techies’ can work with and understand the content of the messages, something that has not been the case with traditionally-used EDI.

Positioning for Global Trade

The trend toward globalized trade, which affects the scale and complexity of freight supply chains, places new burdens on those organizations involved in freight movement. EFM addresses, in particular, three aspects of this trade facilitation challenge :

The interoperable data standards, mentioned above, are an important component because of the traditional lack of data standardization between businesses, and between business and governments, across the globe. With emerging initiatives among organizations such as the World Customs Organization and the United Nations Centre for Trade Facilitation and Electronic Business that EFM has adopted, the promise of interoperable data standards across the globe is coming closer to fruition.

“Anywhere-to-anywhere” supply chains require nimble connectivity solutions to permit organizations to quickly begin conducting business together; EFM presents a solution to this challenge. It might be used by trade communities to promote economic development.

Global supply chains with more partners require better coordination and timely flow of accurate information and visibility into those flows.

2. Transactional Value

From a transactional perspective, that is, the operations associated with each supply chain shipment, EFM offers benefits that can improve cost structures, cash-to-cash cycles, competitive positioning, and opportunities for new revenue sources.

Improved Data Quality

In a more integrated information sharing environment, there is increased importance in having data quality standards and data accuracy to meet diverse requirements for its use. The use of the data may be less well known to the producers of the data, so there is an underlying requirement that data quality be improved.

Quality encompasses a variety of elements; when used with transportation management system applications the EFM reduces the amount of manual rekeying of data along the supply chain, which is a well-documented source of quality problems due to manual errors. There are other elements of quality that the EFM design does not explicitly address; however the U.S. DOT has found in its field tests that supply chain partners have incentive to improve data quality, and the consumers of that data are substantial beneficiaries. The CEFM deployment test revealed few errors in data entry because of reduced occasions for data entry and no rekeying of data on the supply chain, making it easier for partners to respond to discrepancies. The system proved to be more accurate than existing systems, requiring fewer corrections of errors.

Administrative Cost Reduction

Many organizations expend significant clerical staff hours acquiring shipment-related data that exists somewhere in electronic form, but is inaccessible to the organization. For example, a buyer may make phone calls, or check a carrier’s web portal to record a shipment’s location or status. A shipment, particularly one crossing international borders, can involve over a dozen organizations with requirements to create or consume data. Today, many of the same data items that have already been represented electronically are recreated anew at a later point in the supply chain. With a solution such as EFM, clerical staff can spend time on more productive, value-added activities, because a greater range of data are available to the organization in a form that is understandable and accessible for more automated, electronic use. The CEFM deployment test system provided near real-time automated status reports containing all supply chain events. Previously, the reports required significant manual effort to prepare and were unavailable to some partners. The freight forwarder in this test, who prepared the report, found a labor savings of 50% or nearly 3 hours per day from automated preparation of one status report.

More Efficient Operations

Clerical labor savings, noted above, perhaps forms the largest element of operational efficiency through use of the EFM. There are other efficiencies that some adopters, depending on their role and particular use of EFM, can gain. There may be synergies from having a common set of data definitions that can span multiple parts of a business; there may be better scheduling of resources possible from having better advance workload information; or there may be simplified processes for handling exceptions, again because better information is available sooner. The CEFM test provided downstream partners earlier access to data on purchases, booking, and tendering. Users could access status data on demand that previously were available only from manually prepared daily pre-alerts and status reports. The advance shipment notice was available from 6 hours up to 1 day earlier than current practices allow. Shipment status information was available to the broker 4 to 6 hours earlier.

When integrated into an IT environment that can take advantage of web services and linked to value-added applications, EFM promotes efficiencies in the transportation portion of the supply chain. Organizations might consider adapting the basic EFM architecture to expand from transportation and distribution operations, to include the other business functions associated in the complete order-to-cash lifecycle, thus accruing efficiencies in other parts of the supply chain.

Better Supply Chain Agility

Many factors in today’s business environment have made agility a key driver of improved performance of the supply chain. Agility depicts the supply chain’s ability to efficiently adapt to external events. Increased customer demands, and the tight competitive landscape require that supply chains be quite flexible. EFM addresses one aspect of this required agility: the ability to connect to trading partners more easily than is possible with the processes most often in use today. Instead of integration concerns with new partners, the EFM concept minimizes the level and extent of the integration required.

Extended Supply Chain Visibility

By creating the infrastructure to make available the data describing the various milestone events in a shipment’s lifecycle – events that might include departures and arrivals of transport journeys, processing of critical documents, processing through distribution facilities – EFM enables participating organizations to have a more complete, timely, and easily attainable view of shipment status. For those larger organizations that are operating Supply Chain Event Management (SCEM) class application software, EFM offers the promise of extending deeper into the supply chain, from original consignor to the final delivery party, to provide a richer base of information from which the SCEM applications can provide value. For organizations not running SCEM software, EFM provides new data not before available. In both instances, EFM is best leveraged by integrating the data into the organization’s decision making processes. Thus, raw visibility into shipment data can be harnessed to provide demonstrable value, such as improved management of expected late shipments, and better resource planning.

Improved Supply Chain Security and Resiliency

Freight security is not directly addressed by the EFM solution. However, to the extent that the inherent improvements in data availability can contribute to the prevention and/or forensic abilities of freight that is at risk at some point along its routing, then adopters may consider this to be of value, for promoting the security of supply chains, and for improving their resiliency. Freight at rest is freight at risk. EFM provides the connectivity between trading partners that maximizes the mobility of freight and minimizes its risk. Also, a lasting benefit of EFM 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. EFM can help provide this visibility without sacrificing operational efficiency in the process.

Though not explicitly designed into the final EFM architecture, an early precursor test of EFM, sponsored by U.S. DOT in 2000-1, included biometric identification technology deployed at the points of freight handoffs, thus establishing a “chain of possession” of shipments throughout the supply chain. The architecture is well-suited to support this kind of application that adopters might choose to implement. Click here to view a copy of the final report of the evaluation of this test that included “chain of possession”.

Coordinating Business Processes Across Organizations

In today’s environment, many supply chains exchange information in a batched, document-centric process, whether in paper or electronic form. There are many industry initiatives aiming to develop new models, generally standards-based, to allow orgs to coordinate better to support their business functions that are consuming the information.

In that EFM uses international data standards in the data model, data dictionaries and data messaging of the United Nations Centre for Trade Facilitation and Electronic Business and the Organization for the Advancement of Structured Information Standards; and in that it uses W3C standards for the technology layers of the FIH architecture, EFM is generally consistent and supportive of the various service collaboration models, such as business process orchestration, that organizations can use to coordinate business processes in a way that information exchanges are made in support of process functions (as opposed to today’s document-centric “pushes” of batched information). Also, because EFM defines a series of publicly available web service templates of common supply chain functions, EFM contributes to the existing initiatives that will gain adopters in the commercial market.

3. Benefits Specific to Particular Types of Organizations

Freight Buyers and Shippers

Data keying errors along the way can cause misdirected shipments. This can greatly increase the variance of shipment durations. For most industries, operating with lean inventories and buffer stocks, the risk of delayed shipments can force higher inventory carrying costs, backorder costs, lost sales, etc. Because EFM permits improved access to data describing a shipment that was previously entered in any upstream process, the need for one partner to rekey data that another had already entered is minimized or eliminated altogether. In the CEFM deployment test, automated purchase order information allowed manufacturers to reduce their shipment data entry by 75%. This saved data entry costs and improved data accuracy. The supply chain owner was able to reduce manual monitoring of priority shipments because of automated EFM data.

The adoption of EFM can improve shipment transit cycles. There are many factors affecting the duration of a shipment from its origin to receipt by the delivery party. Many of these factors relate to the availability of information: receipt of documents necessary to accompany or to permit release of a shipment; needed for Customs clearance; useful for load planning by a transport provider that can facilitate the soonest possible movement of the shipment; etc. When the parties involved in the supply chain are able to use the improved information from FIH, these obstacles to the quick and predictable movement of the shipment are reduced. Therefore, shipment durations can be reduced and unexpected variances in those durations can be shortened. This provides the buyer with added degrees of freedom with which to plan their operations. When sustained and assured, these improvements can help both buyers and shippers to carry less buffer stock, therefore reducing inventory carrying costs.

Trading patterns often include cross-border shipments, where Export and Import requirements must be fulfilled. The EFM is believed to be consistent with requirements in the U.S., in that EFM could be another input mechanism. This has not been verified nor tested at this time with U.S. Customs and Border Protection, although there may be a chance for testing it in case studies expected to be conducted in 2009 and 2010.

From a global perspective, Customs administrations are now advancing (through the World Customs Organization) the concept of a Unique Consignment Reference (UCR), which is a reference number to be used for international goods movements for which Customs control is required. Though borne out of Customs administrations’ interest in binding together goods-related data with manifest-related data about consignments, it is perceived by many as having broader applicability within global trade. EFM has been designed to be consistent with the June 2004 specification of how UCRs are created and managed [see Reference 2].

Those organizations involved in trade that adopt EFM will be investing in reusable web services that are publicly available and usable by a variety of partners. The use of this piece of architecture holds a promise, mature and proven in many industry sectors, of lowering systems integration costs because the organization is not constantly customizing integration development for each new situation (customer, partner, etc) that arises

Transportation Service Providers Including Carriers

Asset-based carriers have the opportunity of using EFM to improve their cost and asset performance. By using the improved information (quality and timeliness) from EFM in their resource management processes, their planning process should be able to employ fewer resources to process given workloads. Examples of this might include better aligning human resources to distribution operations at, say, a cross-docking operation and trucking companies that can load level better to reduce their fleet size through better utilization rates of existing assets. Many providers today rely on some form of an advance shipment notice (ASN) to gain visibility to inbound shipment loads. Experience from the CEFM deployment test showed that EFM could provide ASNs 6 to 8 hours earlier than with EDI. The more timely ASN resulted in a 10% improvement in data availability in the warehouse, which allowed better staff planning and forecasting of workload.

Carriers operating under service agreements that include penalties due to late shipments might minimize these penalties, thanks to the increased visibility and to fewer in-transit delays that are attributable to information bottlenecks within the EFM domain.

For organizations such as freight forwarders whose customers might span multiple market segments that today do not use common data standards, EFM presents a pathway to better interoperability between these market segments. Forwarders often are forced to support numerous data formats, with implications on their systems investments and labor staffing. Though EFM does not eliminate these factors, it is a step toward minimizing it, which forwarders might take advantage of.

EFM Operators

Organizations that choose to host an implementation of EFM (see the ConOps and Deployment Guide in the Program Documents tab) may be supply chain owners, such as large buyers that are able to define the nature of information exchanges for their shipments, or it may be third parties that operate EFM on behalf of one or many supply chains and partners. Battelle served the third party role in the CEFM deployment test and is also playing the role in Kansas City. Both projects involved financial support from DOT. Though a self-sustaining EFM operator has not been tested by U.S. DOT, it is believed that third parties may develop a business model to profitably operate EFM through subscription and implementation fees.

References

[1] http://csdl2.computer.org/comp/proceedings/hicss/2007/2755/00/27550171b.pdf

[2] World Customs Organization Unique Consignment Reference, June 2004. Document available on the WCO web site, http://www.wcoomd.org .