For Art Anderson, electronic data interchange has been a burden from day one. Ten years ago, his company, Americana Inc., spent $5,000 on software and consulting fees to implement EDI and send electronic freight bills to its largest customer – at the customer’s request.
Besides paying transmission fees, Anderson, the company president, says he spends an additional $1,000 to set up or “map” new EDI transactions with customers.
When Americana, a 40-truck carrier in Wolcott, Ind., began using EDI, the Internet wasn’t the business tool that it is today. Although e-commerce did not begin with the Internet, more small and mid-size carriers now use Internet technologies to drive down the costs of traditional EDI and thrive in an arena once dominated by large carriers.
EDI is the electronic transfer of information among trading partners using pre-defined standard message formats. In the United States, nearly all shippers and carriers follow EDI standards set by the American National Standards Institute’s (ANSI) X12 Accredited Standards Committee. Industry consortiums, such as the Uniform Code Council, also define ANSI X12 standards for many different industries, such as retail, grocery and warehouse, says Doug Anderson, a sales manager for value-added network vendor Kleinschmidt, Deerfield, Ill., and chairman of the X12 transportation sub-committee.
The most widely used electronic documents in transportation cover load tenders; acceptance and rejection; shipment status updates; and electronic freight bills.
The top 150 carriers account for nearly all EDI traffic – and about 80 percent of the traffic is done by the top 10 carriers, says Craig Wilson, director of marketing for TranSettlements, an Atlanta-based company that provides value-added networks for EDI transactions. But even for smaller carriers, EDI capability has become a necessary – and now more affordable – business tool.
In most cases, trucking companies can’t avoid spending money on EDI, but the Internet and more user-friendly interfaces have taken some of the cost out of the process.
Blessing and curse
Like Americana Inc., you might implement an EDI system based on customer demand. Unfortunately, many carriers fail to realize the full potential of EDI because only a few of their customers do business that way. They must still maintain the usual labor-intensive systems for the others.
That’s not the case with Southeastern Services, however. The 160-truck carrier based in Oakwood, Ga., began trading EDI documents with one of its largest customers, Hershey’s Foods, at Hershey’s request. After beginning with Hershey’s, Southeastern Services convinced three other existing customers to implement EDI, says Cheryl Heflin, a customer service representative for Southeastern. The most compelling sales pitch, Heflin says, is being able to prove, electronically, that time-sensitive loads are picked up and delivered according to schedule.
Another advantage of EDI is faster bill collections, Heflin says. Before sending electronic invoices, the company’s days sales outstanding (DSO) lingered at 30 to 45 days. Now, collections average 14 days. “We can invoice quicker than before, and [customers] can take the data off EDI instead of waiting on the mail,” Heflin says. “We encourage customers to do EDI. The more I have, the better off I am.”
EDI can have big payoffs in productivity and cost savings, but the unique data requirements of each customer translate into a major expense.
“What’s so frustrating about it is EDI is supposed to have standards,” says Grant Doyle, treasurer of Houff Transfer, a 165-truck carrier in Weyer’s Cave, Va. “Each client has different standards though. You can’t take a base product and use it for everybody.” This results in “mapping” new EDI transaction sets for each customer. In addition, Doyle says that EDI is a three-step process: load tendering, delivery confirmation and electronic invoicing. “But many clients only want to use pieces of the puzzle, instead of the entire process.”
Richard Olszewski, director of IT at Exxact Express, a 100-truck carrier in Lakeland, Fla., has a similar complaint. Load tenders (204s) and freight bills (210s) are most beneficial to Exxact Express because they speed the billing process. “But we’ve found that very few shippers want 204s and 210s,” Olszewski says. “The main focus of shippers is 214s [shipment status updates], but that’s no benefit to us.”
The VAN guard
To manage the exchange of one or more of these documents, trading partners typically use a third-party service called a value-added network, or VAN. Often, a shipper or broker requires its carriers to set up an account with a specific VAN, such as Kleinschmidt or TranSettlements.
Trading partners can also exchange EDI documents with each other directly via the Internet with e-mail, file transfer protocol (FTP), or by entering data directly into a customer’s website. Indeed, in recent years, VANs have lost some business as some trading partners have gone to a direct file transfer. For example, Biagi Brothers Inc., a 250-truck nationwide carrier with corporate headquarters in Napa, Calif., transfers flat text files in Microsoft Notepad via e-mail to Barton Beers, one of its largest customers. In the text file, commas delimit values and the documents – load tenders, invoices, etc. – are delimited by position, says Nick Biagi, the carrier’s software implementation manager.
“It’s a totally customized module based on their original EDI module,” Biagi says. The company uses Maddocks Systems’ TM4Win enterprise system. A Maddocks programmer customized an integrated EDI module that downloads data from the Maddocks database into a flat text file in ANSI X12 standards to match Barton’s requirements.
“It was cheaper to buy than an EDI translator, but we can only use it for one customer,” Biagi says. “We switched to Internet-based EDI as opposed to using a VAN. In turn, we do not pay VAN charges, which are very, very costly.”
VANs may be expensive, but they remain the norm because they offer trading partners more than just relay centers for data, says Rebecca Empie, senior software engineer at Innovative Computing Corp. EDI depends on its absolute reliability, and VANs act as quality control managers.
“We monitor all the traffic, and if a message doesn’t reach its intended target within the prescribed period of time, we will automatically resend it or notify the appropriate parties,” says TranSettlement’s Wilson. “We [also] test the compliance and communications capabilities of new trading partners that our customer wishes to bring on-stream before granting them access to customers’ systems.”
VANs also simplify matters by ensuring a single, compatible communications method. “Although there are a variety of communication protocols that can be used over the Internet and a number of different encryption techniques to provide security, a customer does not need to worry about supporting multiple communication protocols or multiple encryption techniques,” says Keinschmidt’s Anderson.
Rather than posing a threat to the future existence of VANs, therefore, the Internet so far has been mostly a plus for VANs as well as their clients. Carriers and shippers can avoid long distance charges by transmitting EDI files via FTP to VANs through the Internet. That saves them nothing, however, on VAN charges – a fact that escaped many users who converted from dial-up connection to Internet-based FTP.
“Everybody thought that with the Internet you could send information for free,” Empie says. “But that’s not how it works. It may not cost you anything to send, but you have to manage it. That’s exactly what people pay a VAN for.”
Unless you are the supply-chain partner driving EDI, the decision of whether or not to use a VAN is usually made for you. One decision you can make is whether to purchase translation software to do EDI “mapping” yourself. Mapping identifies the relationship of the EDI standard data elements to your application software data elements. One customer, for example, may want a 214 (shipment status update) sent three times a day for each load – pickup, en-route, and delivery. Another may only want a delivery confirmation.
Many carriers without IT specialists on staff, and even many that do, outsource the mapping process. A VAN is one source to find scalable EDI solutions. TranSettlements, for example, has an Internet-based system called TransForms designed especially for small and medium-sized carriers. After users log onto TranSettlements’ website and enter their account number and password, they can complete on-screen forms to send data in proper EDI formats.
Anderson says that Kleinschmidt offers carriers several options to do EDI without purchasing translation software. A shipper may send Kleinschmidt an EDI document and Kleinschmidt can turn that into a spreadsheet for the carrier. The carrier completes the information and sends it back to the VAN and it gets translated back to an EDI document. Another option is to create and send a flat file directly to the VAN through the Internet, using FTP. For a fee, a VAN can reformat flat files into EDI standard formats, Anderson says.
Some trading partners, like Biagi Brothers and Barton Beers, eliminate VAN costs by transmitting flat files directly to each other through the Internet. Some shippers offer a similar way for carriers to do business with them while avoiding VAN charges. One of Biagi Brothers’ largest customers, Anheuser Busch, recently developed a website that will enable carriers like Biagi Brothers to execute the entire EDI process, from load tender to invoice, through a single web portal, Biagi says.
Dealing with 214s
Carriers that outsource EDI translation to Web-based services have to re-enter some data that’s already in their system. After receiving a load tender (204), for example, a user would send a load acceptance (990) and then manually enter the load information into its dispatch system. Fully integrated systems, on the other hand, translate EDI formatted data directly into the dispatch software and create a work order.
One specific area where an integrated EDI solution can pay big dividends is in load brokering. Maddocks Systems’ EDI module allows brokerage companies that use its TruckMate enterprise software to request inbound 214 status updates from their interlined carriers. The status updates from the interliners will update the order in the system that in turn will cause an outbound 214 to the trading partner, says Darryl Bloomer, senior programming analyst at Maddocks Systems.
“If the agents of the brokers phone in or fax in, the host trucking company or logistics company will enter the status updates themselves,” Bloomer says. “We can automate these steps.” Bloomer says that the integrated software enables a client to send status updates totally unattended, if wanted. Furthermore, with mobile communications interfaced with the dispatch system, companies can configure the EDI module to automatically send status updates as often as necessary.
Exxact Express’s Olszewski reaps great dividends from automating 214s – the most complex and widely varied document from customer to customer – with a fully integrated McLeod LoadMaster EDI package.
Some customers, Olszewski says, just want a status for the delivery appointment; others want a message for the pickup, arrival, any intermediate stops, the delivery appointment for final stop, and departure. Olszewski uses McLeod’s Template Editor to map 214s for each customer. Once mapped, the status updates are automatically transmitted – five times a day, or once a week – according to customers’ needs.
If a shipper wants automated shipment status updates but doesn’t need EDI, mobile communication providers offer alternatives. Qualcomm’s network management center, for example, gives carriers flexibility to re-route, copy and share position reports with customers, says Mike Segal, director of business development at Qualcomm Wireless Business Solutions. With PeopleNet’s system, carriers can provide an electronic form that mirrors the 214 standard to multiple receipients across the supply chain, says Brian McLaughlin, director of marketing for PeopleNet Communications.
No longer an exception
Despite claims that XML or some other technology would replace EDI, it has thrived. Everyone thought the Internet would recreate or reinvent EDI, says TransSettlement’s Wilson. What has actually happened, however, is that the Internet has allowed VANs and EDI in general to do more of what they were doing already, but faster and less expensively than before.
An uncertain successor
Lack of standards hamper XML
It’s a common quip that the only standard of electronic data interchange (EDI) is that there are no standards. Every trading partner has unique requirements for the information it exchanges. The development of standards, therefore, is central to the growth of new technologies for data interchange.
The stymied use of XML (eXtensible Markup Language), is a case in point. Using XML, trading partners can exchange data directly through web browsers, eliminating the need of expensive translation software. Despite the advantages this technology offers, however, carriers today use XML only for internal purposes, says Frank Napoli, research fellow at the Logistics Management Institute. That’s because shippers are not requesting it and no standards have emerged at this point, he says.
A number of groups are leading the development of XML standards, but the standards are merely proposals at this point, Napoli says. He believes it will take another 3 to 5 years before standards begin to emerge.
“XML, in my view, is EDI using a different data format than X12,” says Doug Anderson, sales manager for Kleinschmidt, a value-added network based in Deerfield, Ill. “Therefore, I think its impact on EDI will be a positive one, as more companies implement XML as a data format for exchanging business information.” But the same issues that make EDI difficult to implement are still present when you try to implement XML as a computer-to-computer method of exchanging data, Anderson says.
“For example, if you can’t send data via EDI because your system does not have the necessary data available, XML will not solve that problem. XML still requires a translator (called a parser for XML) and discussions with your trading partners on what data will be exchanged.” Basically, what you have with XML are the same issues in a different format, Anderson says.
A number of industry groups are working to establish XML standards for supply chain partners. One is ANSI’s X12, which for years has focused on setting EDI standards. Anderson chairs a transportation subcommittee for X12 standards.
“There are carriers out there experimenting with XML now,” Anderson says. “But XML is not replacing much business-critical exchange. There are a number of carriers that use XML to populate web applications as a means to communicate between their website and their back-end system, but XML is not being used to replace normal business-to-business application EDI.”
Until industry and supply-chain partners agree on data requirements – the first step to utilizing XML as a way to exchange data – the cost of supporting many different XML documents will be too expensive and burdensome for carriers, Napoli says.