Shippers and carriers are dragging their feet to transition to an information-exchange standard that could help them deliver better performance than the traditional electronic data interchange (EDI) method, according to a recent report from the University of Tennessee.
The new approach uses application programming interface (API) technology to allow shippers, carriers, and third party logistics providers (3PLs) to swiftly exchange data about trucking transactions. This could help improve supply chain visibility and boost profits, since it would empower businesses to instantly request rates, dispatch shipments, track freight, and confirm deliveries, said the study's co-author, Karl Manrodt, a professor of logistics and supply chain management at Georgia Southern University.
However, many transportation companies are slow to change, citing reasons such as IT cost, the complexity of changing related platforms, a lack of trust in the new standard, and a reluctance to be the first to change, he said.
"Another reason for the delay in API adoption is that it will allow carriers to move toward dynamic pricing, and some shippers are concerned that their prices will go up," Manrodt said in an interview last week. He said, however, that the prevailing prices will more accurately reflect the realities of the marketplace, which will benefit all parties.
Shippers and providers may be dragged into API adoption by e-commerce retailers demanding rapid-fire delivery performance, said Manrodt. EDI was not designed to support that level of that quick agility, so many businesses are looking at new options like APIs, he said.
"Shippers and carriers who use EDI are acting on stale data," said Manrodt. "In a lot of ways, this is faux, or fake, visibility."
Similar to the technology that powers consumer smartphone apps, the API messaging format allows data to flow from one computer platform to another in seconds. That is much faster than the batch-processed and error-prone EDI standard, which was first developed at the end of World War II and grew to become the primary data-exchange technology for supply chain operations.
Most transportation companies that make the jump from EDI to API hire a technology provider to add the platform to their transportation management systems (TMS) or other platforms, since that option is less expensive than hiring programmers for the relatively simple task, Manrodt said.
Because the transition from EDI to API will take time, early adopters will have to be "bilingual" for a while, communicating data through both standards until their business partners also upgrade, said Mary Holcomb, associate professor of logistics at the University of Tennessee, and the report's co-author.
The March report is titled "The road to profitability is a web service connection."
Read editorial director Mitch Mac Donald's commentary on the study, "The other infrastructure problem."