Transportation hits the information highway

Today's transportation companies can't just deliver the goods; they have to deliver the data.

by Karen D. Schwartz

You've just ordered a remote control car for your nephew's birthday. Although pondering everything involved in the toy's delivery is probably the furthest thing from your mind, the truth is that an array of sophisticated technology is being used to ensure its timely delivery and provide everyone involved—the retailer, international shipper, parcel-delivery service, consumer, perhaps even the manufacturer—the ability to see where the gadget's been, where it is now and when it will reach the next point on its journey.

Complex data and communications networks have led to faster delivery times and more efficient operations—a necessity in a time of increased competition and tighter margins. Corporate customers and even consumers are demanding constant status updates and more seamless information exchange. As a result, the business of transporting goods is being transformed into a highly streamlined, tightly controlled process fueled by state-of-the-art information technology.

"For truck, rail and even ocean transportation today, the ability to provide information as well as the movement of goods has become essential," says Greg Aimi, director of supply chain research at AMR Research of Boston, Mass. "More companies purchasing (transportation) services want an information flow as well as the actual service."

Data delivery
The growing use of information technology and enterprise-wide data management in the transportation industry indicates a drastic change from trends within the past decade. While small companies tended to rely on the old practice of keeping manual delivery records, large carriers moved into the digital age—and in the process amassed haphazard collections of individual data marts. To make matters worse, it would sometimes take days or weeks to receive reports based on the fragmented data.

The good news for transportation providers is that creating the infrastructure to deliver that information flow serves another important purpose: The data it generates can yield valuable insights that lead to cost reductions and greater productivity. Those are two goals that should be mantras for transportation companies, according to Andreas Aeppli, a principal at freight transportation and distribution consultancy Reebie Associates. "The transportation arena is extremely competitive, and if you can shave pennies or even tenths-of-cents off of your costs, it will help," he says. "So where technology can help, companies shouldn't hesitate to use it."

And no technology can help on as many different levels as an enterprise data warehouse (EDW):

• Expenses can be tracked daily rather than weekly or monthly.
• Travel times can be analyzed almost instantaneously to spot slowdowns or inefficiencies.
• Historical data can be utilized as the basis for everything from improved vehicle maintenance to determining seasonal pricing structures.

The ability of an EDW to provide lightning-fast access to both current and historical data is vitally important in the transportation industry. In the years ahead, one of the biggest challenges in this space will be how to handle the virtual tidal wave of real-time data generated by emerging technologies that will enhance operations while providing constantly heightened degrees of security.

To create further efficiencies, transportation companies have begun implementing a variety of tools including satellites, scanners and radio transmissions that provide real-time information on the location of vehicles, drivers, containers and inventory.

Location, location
Most carriers today utilize satellite-based Global Positioning System (GPS) technology, which helps identify where any vehicle or container is at any time. In addition, special sensors can inform carriers whether a container is full, partially full or empty, making it easier to maximize payloads or optimize vehicle routing. Satellite technologies are growing rapidly in the transportation sector and will continue to expand as prices drop, Aimi predicts. "For the cost of a cell-phone call, the dispatch office will know exactly where you are," he says.

Transportation companies also are beginning to affix radio frequency identification (RFID) tags to their trucks, rail cars, containers, pallets and even goods within a pallet. A RFID system consists of two basic components—a data-filled microchip and antenna (a combo also called a RFID transponder or RFID tag), and a reader consisting of an antenna and transceiver that reads data on the microchip. The tags most commonly used in transportation generally can transmit information in containers as far as 300 feet away and have a relatively large data capacity—enough to contain an entire bill of lading, a contract between a shipper and carrier under which freight is to be moved between specified points for a specified charge.

RFID technology has numerous benefits for transportation companies, especially those doing business overseas. In addition to being able to locate all assets at all times (depending on the number and location of readers, of course), it helps companies guarantee that items will reach their destination within the designated timeframe, measure transportation time and improve customer satisfaction.

"There is a real expectation that RFID will revolutionize management of inventory and conveyance of information between different modes and locations," Aeppli says. "It will not only allow you to pinpoint where your 40-foot container from China is, but where individual components of that 40-foot container are (during the entire transportation process)." Also enticing is the prospect of adding sensors to RFID tags capable of writing new data to the chip. A shipper could provide a client with detailed information on environmental conditions—such as temperature and humidity—that its products were exposed to, particularly useful for ensuring safe delivery of perishable items.

Digging deeper
But RFID tags can be used for much more than tracking the location of individual items or monitoring environmental conditions: They can also play a key role in slashing fleet maintenance costs. Tag the planes, trucks, trailers, vans and other vehicles in a fleet, storing the transmitted data in an EDW, and you automate a host of processes to remove the possibility of human error when recording things like fuel consumption, vehicle check-in and departure times, weight measurement, maintenance history and, of course, vehicle location.

Used in conjunction with sensors, RFID tags can even convey information on critical vehicle parts. A railroad company, for instance, can use a RFID/sensor combination that measures and relays the temperature of car axles at various points along the line. Since higher axle temperatures are a symptom of worn bearings, the car could be flagged for preventative maintenance rather than driving toward a costly and potentially dangerous breakdown.

RFID tags also are becoming increasingly important in addressing the growing list of security requirements promulgated by the U.S. Customs Service. One rule of particular interest to transportation companies is the Container Security Initiative, which requires shippers using all modes of transportation to submit electronic manifests to customs before cargo arrives at U.S. borders. For example, by using RFID technology that identifies the truck and driver and includes the manifest in electronic form, transportation companies can greatly speed their entry through customs.

A window into the enterprise
In the same way that RFID is improving inventory management for many transportation companies, implementing an EDW is an important step in creating greater visibility into the supply chain, achieving higher margins and making more efficient use of assets.

"(Transportation companies) need to be able to look at the data and find out who their most profitable customers are—which customers don't keep them waiting to unload or which customers pay on time," explains Adrian Gonzalez, director of the Logistics Executive Council at ARC Advisory Group of Dedham, Mass. "They have to leverage that kind of data to make sure they are aligning their resources and services with the clients that are their platinum customers."

By the same token, transportation companies must be able to identify which customers are less profitable. With that information, carriers can charge them higher rates or simply refuse to do business with them.

Other less quantifiable costs—such as loss and damage claims—can affect profitability as well. If a particular customer's freight is more likely to be damaged because it is packaged poorly or if it is highly susceptible to theft because of its value, an EDW would help decision makers decide how best to approach the situation.

This is even more critical if the merchandise belongs to a high-value customer. But how do you identify a high-value customer? "You may be spending as much or more time servicing clients (that don't generate much business), but if you peel back the onion and see the amount of time you are investing in them versus how much money they are bringing into your business and how profitable they are, you may have a mismatch," Gonzalez says. Indeed, it's the larger customers that typically cost the most to serve because transportation companies don't do enough business with small customers to incur large total losses.

There is research to back up this theory. A 2001 study performed under the auspices of Harvard Business School found that when large organizations analyze the profitability of their customers, they typically find that 20% of customers provide 300% of the profits, while 20% destroy 200% of the profits and 60% break even—and those numbers might be optimistic. In the 2003 book Angel Customers and Demon Customers, economic experts Geoffrey Colvin and Larry Selden argue that the bottom 20% of customers can generate losses equal to more than 100% of total company profits.

Transportation companies also can use data warehouses and associated supply chain management technology to create a single view of the entire supply chain. They can better assess available capacity across their carrier line, allowing them to evaluate which carrier and transport method makes the most sense and costs the least amount of money.

Greater focus
Visibility into the supply chain is particularly useful for third- and fourth-party logistics providers, which manage transportation concerns for manufacturers and retailers by running all transportation operations as well as contracting, outsourcing and other coordinated activities. Because these outsourced logistics providers must consolidate and analyze information from a wide variety of sources, software that integrates all data while optimizing the supply chain is critical.

Eventually, all the technologies used by the transportation sector will come together, combining the enterprise data warehouse not only with supply chain intelligence and profitability analysis tools, but also with GPS and RFID as the focus of even more forward-looking strategies. But the gigantic volumes of information created by these systems—and the speed at which they will be acquired—demand a data management solution not only capable of simply handling it, but also of acting upon well-thought-out business rules. Up-to-the-minute knowledge of the entire business is a wonderful thing—unless your IT infrastructure doesn't allow you to utilize it in time to gain the small advantages needed to survive in the fast-moving world of transportation. T

Karen D. Schwartz is a Washington, D.C.-based business and technology writer.