Haslam College of Business - Transportation Communication Systems Requires Overhaul to Meet 21st Century Demands

On Monday, May 30, Target’s new policy penalizing transportation professionals for supply delays and inaccuracies went into effect. The United States’ sixth largest retailer by sales eliminated the two to 12-day grace period for deliveries and hiked fines on late shipments with incomplete or inaccurate information to 5 percent of the order cost.

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.

In their latest white paper on applications programming interfaces (API), Mary Holcomb, of the University of Tennessee, Knoxville, and Karl Manrodt, of Georgia College, note that fulfilling modern delivery expectations requires an overhaul to the transportation industry’s communication systems. The authors posit 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 Mary Holcomb, Gerald T. Niedert Supply Chain Fellow and Professor of Supply Chain Management at the Haslam College of Business. “The strategic move by Target is logical in order to remain competitive and meet the dynamic needs of consumers. However, EDI technology, the industry’s legacy communication system, will impede their supplier network from meeting these precise delivery requirements.”

Electronic data interchange, 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 API’s ability 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 carrier’s current efficiency in a particular lane, knowing for certain their best carrier option. This capacity, write Holcomb and Manrodt, allows shippers to make up time or cost from delivery disruptions, a necessity as more companies follow Target’s lead on supplier demands.

For more information, contact Katie Bahr, writer/publicist, at katiebahr@utk.edu or 865 974 3589.