Long before the Internet grew into a common business tool, e-commerce in transportation meant electronic data interchange. Using standard protocols, closed communications networks and computer systems, EDI helps carriers and shippers reduce or eliminate phone calls, faxes and paperwork.
For Cullman, Ala.-based McGriff Industries, EDI cuts paperwork, saves time and speeds billing for the customers that use it, says Robert Colvard, manager of accounting and administration for the 200-truck carrier. But for McGriff and many other carriers, the benefits are beside the point. Shippers often mandate EDI as a condition of doing business. “They don’t give you a choice,” Colvard says. “You do it, or they find someone else who will.”
The benefits of EDI for carriers, beyond securing a particular customer, are in back-office efficiencies. But these benefits are limited to customers that use EDI. For those that don’t, you still need to maintain separate systems for load acceptance and billing, for example. And there’s the complexity of managing EDI. Each customer has different information requirements for the “standard” EDI transaction sets, such as load tenders (204s), load accept/reject forms (990s), shipment status updates (214s) and freight invoices (210s).
Each time McGriff Industries adds a new EDI customer, it pays its enterprise software vendor to “map” data in its system to match the EDI transactions required by the customer. EDI costs also include translation software as well as transmission costs. McGriff Industries pays a third-party value-added network (VAN) a per-character charge to manage the transmission of data to and from its customers.
VANs are the quality control managers of EDI. They test the compliance and communications capabilities of a shipper’s new carrier trading partners before granting access to their systems. They also manage the physical transport of data for one or more EDI documents and watch for errors or exceptions.
VANs aren’t necessary to conduct EDI transactions, but many companies insist that their trading partners use them to ensure maximum reliability with minimal intervention by company personnel. The expense of a VAN coupled with the hassle of EDI mapping has discouraged many smaller carriers from making the move to EDI.
Information technology is changing the landscape, however, by making EDI implementation easier and more affordable and by enabling next-generation alternatives to EDI.
The outsource is in
What makes EDI so daunting for many smaller carriers is the process of establishing and managing the EDI transaction sets to allow carrier and shipper systems to communicate on the same terms. The task requires purchase of EDI translation software and hours of programming for each customer to map EDI.
Instead of mapping EDI in-house or paying an enterprise software vendor to do it, carriers using a VAN can send a data file via e-mail or file transfer protocol (FTP) upload. The VAN can reformat the file into the proper EDI format in midstream for the carrier’s trading partners.
“There are quite a few third parties that provide translation in networks so you don’t have to buy and maintain EDI software,” says Doug Anderson, assistant vice president of sales for Kleinschmidt, a VAN based in Deerfield, Ill. “Just like a normal dispatch system generates a file, we take that and send it to the trading partner.”
A VAN might charge, for example, $500 to create a formatter that will convert flat files into 214 (shipment status) documents. Although there is a cost, by using a VAN you would not have to buy translation software and could re-use the same flat file format for any customer for no additional formatter fees, Anderson says.
VANs such as Kleinschmidt and TranSettlements host Web-based applications for some of their shipper clients. By logging into a website, carriers can retrieve load tenders and enter “accept” or “decline” as well as enter a date and time to update shipment status. The VAN then translates the information into EDI format for the shipper.
“The cost for using the Web applications is a business decision between the shipper and the carrier,” Anderson says. “Sometimes the carrier is required to pay part of the ongoing costs.”
A direct connect
While a number of shippers require their trading partners to use VANs, some carriers now use the Internet to exchange EDI transactions with their trading partners directly, eliminating the cost of the middleman.
Some shippers have Web-based applications for carriers to enter data directly into their website (see “Don’t Forget the Web”). For low volumes, such applications may be adequate. For more automated and timely communications, some trading partners are going direct by trading EDI transactions through secure FTP transactions.
“Trading partners are allowing their customers to come into their FTP site and drop data off and pick data up,” says Tracy Sayers, EDI manager for Birmingham, Ala.-based McLeod Software. “That’s the biggest trend we see happening.”
Asset Based Intermodal (ABI), a 45-truck carrier based in Dallas, uses EDI Direct, a new tool available from its transportation management software system, Profit Tools, to communicate directly with its largest customer via FTP.
ABI paid Profit Tools a fee to set up the data mapping to send and receive EDI transactions with the Hub Group. Using EDI Direct, the carrier now can send 204s, 210s and other EDI transactions to the customer through FTP, which saves ABI about $2,000 a month in VAN charges, says Craig Ingram, ABI’s vice president of operations.
If you aren’t comfortable with FTP, you can conduct EDI transactions through the Internet using a concept known – appropriately enough – as EDI for the Internet, or EDIINT. There are two approaches to EDIINT. AS1 is based on simple mail transfer protocol (SMTP), which is the Internet protocol for e-mail. AS2 uses hypertext transmission protocol (HTTP), which is used for hypertext files, like documents on the Web. Either allows the trading partners to use the Internet to support the connection, delivery, validation and receipt of EDI transactions, says Rick Battista, manager of customer information systems at Roadway Express.
For Roadway Express, the decision to use EDIINT was driven by several customers, but it has paid great dividends for the carrier as well. Roadway Express has reduced its overall VAN costs by 29 percent, Battista says. Other benefits include real-time, 24/7 communications as opposed to the “batch” processing of the traditional EDI model using VANs.
“But like all good things, EDIINT comes at a cost,” Battista says. Costs include maintaining software licenses, a communications support team, password and key expirations, and directories and file-naming issues, he says. For a small carrier, the technical burden may require the help of a third party.
EDIINT software typically costs about the same as translation software, Anderson says. But that’s not always the case. One of the shippers driving the use of EDIINT today is Wal-Mart. The mega-retailer is providing its carriers with a free single software license for AS2 communications, says McLeod Software’s Sayers.
A constant burden – or not
Software costs aside, the need to provide 24/7 monitoring and support can overwhelm smaller carriers, giving VANs some resiliency. While they have lost some business to Internet communications, they also have gained business from smaller carriers that are getting into EDI but lack the technical or staffing ability to do direct communications via the Internet, says Jeff Hill, vice president of network connectivity for DSG TranSettlements.
“[EDIINT] has increased the amount of direct connection between trading partners, but you have to keep the certificate up and monitor systems 24/7,” Anderson says. “If you’re doing business with Wal-Mart and they throw something at you in the middle of the night, you might have issues.”
And direct communications don’t necessarily eliminate the need for EDI translation – a cost and hassle that some carriers would rather outsource to a VAN. The simplicity can be appealing to carriers of all sizes. That’s the reason why Memphis, Tenn.-based Ozark Motor Lines, which operates 675 trucks, chooses to use a VAN to communicate with Wal-Mart via AS2, says Neil Aird, programming analyst.
The next generation
The solution for carriers and trading partners to connect directly with each other is not always in using Internet-based protocols. In some cases, trading partners are using Web-based tools to embed the business logic from one application into another through browser-to-browser communications.
Such is the case with an emerging technology known as Web services, which offers an alternative to the traditional format of EDI. Instead of using EDI translation software, companies can exchange data among their business systems in XML.
Short for extensible markup language, XML is related to HTML, which is used to build websites. Whereas EDI defines various standard forms in computer code, XML uses plain text to create “tags” that describe information fields such as name of consignee, delivery address, billing address, etc. The advantage of XML, experts say, is that one company can map its data in XML-based definitions on a secure website. Its trading partners then can go to its website and pick and choose what data they want to exchange.
The term Web services describes a framework to exchange data between businesses via the Internet instead of through a VAN. To set up a Web service between two companies, for example, Company A would embed an XML-based program into an application from Company B’s website. Company B’s application then would update company A’s application automatically.
In many ways, the Web services concept combines the best of EDI and the Internet. It has an edge over website-based e-commerce because the exchange of data is automated. Humans don’t have to visit websites to transact business. But Web services still use the universal – and free – functionality of the Internet as its communications backbone.
Fort Atkinson, Wis.-based W&A Distribution uses Web services to automate the flow of information between a customer’s systems and its own, including all the details of the bill of lading, such as piece numbers, weight, queue and declared value of each item. The 50-truck LTL carrier provides warehousing and transportation services for this particular customer, says W&A Distribution President Steve Wiesmann.
Previously, W&A Distribution’s customer printed and mailed its BOL and shipment information to the carrier. Now the information flows electronically to the company’s Maddocks TruckMate for Windows transportation management system. When the Maddocks system receives the data through Web services, it gives a notification of data entry. After a clerk opens, views and accepts orders, they are posted automatically into the system for dispatch, Wiesmann says.
“[Web services] is substantially cheaper than EDI,” Wiesmann says.
Although XML and Web services are a viable alternative to traditional EDI, they are not being adopted widely, mainly due to a lack of published standards.
“XML is no different than the EDI we use today,” Anderson says. “It is just a different way to format data, and trading partners will still communicate with EDI until all standards are settled with XML.”
A big question is how interested shippers are in converting to XML standards. Current EDI standards are already in place, so it remains to be seen whether companies are and will be embracing XML. Answering that question is a goal of the Technology Advancement Committee of the National Industrial Transportation League, an organization that represents shippers. The committee is finalizing a survey about XML use among shippers, says Candice Klein, a vice president with J.P Morgan and chair of NITL’s Technology Advancement Committee. “We have a perception that XML is not used as widely as we thought it would two years ago.”
So it may take time for XML and Web services to gain momentum through individual usage and, eventually, through published standards. The Internet may have set a new standard for EDI, but experts say it still will take years to get there. At least carriers now can take advantage of more options that make EDI a benefit and less a cost of doing business.
Don’t forget the Web
Owens Corning uses portal for two-way efficiency
In the past, electronic data interchange seemed the logical step for shippers to increase efficiency by reducing the cost of doing business with many different carriers. EDI was and still is a great way to eliminate routine phone calls and faxes, but trading partners have many types of communications that do not fit under a “transaction set.” And many good carriers simply weren’t going to invest in EDI.
Two years ago, Owens Corning, a manufacturer of glass fiber and building material systems, completed an online commerce site for its carrier partners called Carrier Portal. In the beginning, the main reason for designing Carrier Portal was to eliminate the use of the fax machine, which accounted for about 40 percent of its load tenders to carriers, says Kirk Ulrich, supply chain leader for Owens Corning. The Web-based portal allowed Owens Corning to transact business electronically without demanding that carriers use EDI. Now, load tenders go out through both EDI and the Web portal.
“We can get in the system anytime to check on load tenders and accept them right then and there with no extra costs to our company,” says Jerry Stahl, vice president of national accounts for Osterkamp Truck Group in Pomona, Calif., which operates more than 500 trucks in its four divisions.
Since launching its Web portal, Owens Corning has developed various tools to help the company and its carrier partners manage communications online. Features include Web-based applications for carriers to monitor their customer service performance.
“It’s a good way to do business and a real benefit,” Stahl says. “Since I oversee what we do, I can go back and see if we have any issues such as a late delivery, past-due billing or any outstanding loads or claims out there that I need to be aware of. It helps us to provide better customer service.”
With Carrier Portal, carriers use web-based tools that link directly to Owens Corning’s supply chain management system called SAP and its bolt-on warehouse management system called Provia, Ulrich says. For more information on Carrier Portal, visit this site and click on training and education.
EDI at a glance
Electronic data interchange is a data format specification for computer-to-computer communication between two or more companies. In the transportation context, EDI is used to generate bills of lading, invoices, load tendering/acceptance transactions, shipment status updates and so on. Below are some of the terms often used in discussing EDI.
ASC X12 – Accredited Standards Committee X12. The U.S. standards body for the cross-industry development, maintenance and publication of electronic data exchange standards.
EDI over the Internet (EDIINT) – A broad industry initiative to define the necessary technologies to replace the value-added network (VAN) with the Internet for two or more businesses to exchange data. Currently, two protocols have been developed:
- Applicability Statement 1 (AS1) – AS1 is designed as EDI over simple mail transfer protocol (SMTP).
- Applicability Statement 2 (AS2) – AS2 is designed as EDI over hypertext transfer protocol (HTTP).
Extensible Markup Language (XML) – A flexible method for creating standard information formats and sharing both the format and the data on the World Wide Web.
Flat file – A text document file that has no formatting, i.e., no structured interrelationship between its data records.
Format(ting) – A specific arrangement of data (or to determine the arrangement of data).
Mapping – The process of matching one set of data elements to their closest equivalents in another set. For example, mapping the data from a general ledger database to its equivalent in a 210 EDI transaction set (freight invoice).
Protocol – A method to communicate data between software applications on one or more computer systems. The basic communication language or protocol of the Internet is Transmission Control Protocol / Internet Protocol (TCP/IP). The following protocols are built on top of TCP/IP:
- Hypertext transfer protocol (HTTP) – The protocol for moving hypertext files, such as webpages, over the Internet.
- Simple mail transfer protocol (SMTP) – A protocol for sending e-mail messages among servers. Most e-mail systems that send mail over the Internet use SMTP to send messages from one server to another.
- File transfer protocol (FTP) – A method used to transfer files between computers, across a network or over the Internet.
Translation – The conversion of application data to and from an EDI standard format.
Value-added network (VAN) – A third-party network that transmits data between trading partners.
Web services – A Web-based application that can interact dynamically with other Web applications using an XML message protocol. A Web service allows a program executing on one machine to allow remote programs, even websites, to access (or consume) parts of it.