Ditch EDI to Overhaul Transportation Communication Systems: Report
On May 30, the retailing giant Target’s new policy of penalizing transportation professionals for supply delays and inaccuracies went into effect. The sixth largest retailer in the United States eliminated the two to 12-day grace period for deliveries and hiked fines on late shipments with incomplete or inaccurate information to five percent of the order cost.
A new report from professors University of Tennessee, Knoxville, and Georgia Southern University, concludes that fulfilling modern delivery expectations requires an overhaul of the transportation industry’s communication systems. And that means getting rid of electronic data interchange (EDI), the industry’s legacy communications system in favor of application programming interfaces to eliminate delays in information exchanges.
The authors, Mary Holcomb, professor of supply chain management at UT, and Karl Manrodt, professor of logistics and supply chain management at GSU, 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. “The strategic move by Target is logical in order to remain competitive and meet the dynamic needs of consumers. However, EDI will impede their supplier network from meeting these precise delivery requirements.”
EDI, 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 the ability of application programming interfaces (APIs) 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. 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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