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|Federal Highway Administration > Publications > Public Roads > Vol. 69 · No. 6 > A High-Tech Route for Freight Efficiency|
Publication Number: FHWA-HRT-2006-004
A High-Tech Route for Freight Efficiency
by Joanne Sedor and Michael Onder
FHWA turns to the information highway to help reduce truck congestion on the Nation's roadways.
According to the Federal Highway Administration's (FHWA) recently released report Freight Facts and Figures 2005 (FHWA-HOP-05-071), international trade is growing faster than the overall U.S. economy. Between 1980 and 2003, the U.S. economy, measured by gross domestic product (GDP), doubled, while foreign trade quadrupled in real value, reflecting unprecedented global connectivity. Ocean, rail, and air carriers use trucks and highways for some component of almost every shipment. Already tight infrastructure capacity will be stressed further by limited new construction and the growing demand from freight transportation. In fact, the FHWA Freight Analysis Framework indicates that by 2020 freight volumes will increase by 70 percent from 1998 totals, and freight volumes through the Nation's primary gateway ports could more than double. Finding ways to improve the operational efficiency of moving this freight is critical to the Nation's economic vitality and global connectivity.
Officials at the U.S. Department of Transportation (USDOT) recognize that moving freight involves moving information as well as the goods themselves. Although excellent information management can increase freight efficiency, poor information management can add costs, slow handoffs, open security gaps, create delays at gates, and even lead to erroneous freight movements.
Given the important and growing role that goods movement plays in the U.S. economy and the impact that it has on the transportation network, USDOT's ITS Joint Program Office and FHWA recently launched the Electronic Freight Management (EFM) project. EFM aims to improve the "information highway" that moves critical business information and facilitates the multimodal movement of airfreight, generating benefits for both private and public stakeholders. In particular, the project addresses weaknesses in freight data exchange processes that add costs, create security gaps, and, over time, contribute to congestion.
"It is well accepted that technology systems and electronic data represent one of the few remaining tools for improving both productivity and security," says Margaret Irwin, director of customs and cross-border operations for the American Trucking Associations. "In addition, regulatory costs can be successfully managed in the long term only by replacing labor-intensive paperwork with electronic systems. Given that international trade now represents 25 percent of our country's GDP, it is particularly important for ports and borders to operate more efficiently."
EFM advances several concepts, but the single key concept is to promote electronic data exchanges along a supply chain in an end-to-end manner more robustly than is currently being done. Typically, freight movements are supported by point-to-point communications, either paper-based or electronic, between parties who agree to such communications. Using the Internet to make data available broadly to any authorized and authenticated user in near real time is key to enabling freight transportation networks to operate more efficiently and securely. This type of data exchange provides buyers and other authorized parties with open visibility into supply chains. Program officials expect that these improvements will help to reduce unnecessary traffic on the transportation network and mitigate congestion.
Defining the Approach
The EFM project builds on previous USDOT and industry-sponsored operational tests that used biometric smart cards and electronic data exchange to move freight more efficiently and securely.
Earlier tests were limited to domestic freight data, but the EFM project will be broader, covering international data standardization and offering more robust Web services to support the information highway for airfreight shipments. (See "Brief History of Freight Management Initiatives" and "Intermodal Freight Technology Working Group".)
One goal is to address known shortcomings in managing freight information, such as incompatible data standards or having to retype data from one electronic system to another. Other goals include testing new approaches and processes and facilitating the real-world deployment of best practices.
The EFM project also includes a separately funded independent assessment to ensure that test objectives are credible and that the results are measurable. "Independent assessments are a critical part of every USDOT field operational test," says Kate Hartman freight coordinator in USDOT's ITS Joint Program Office. "By policy and design, USDOT funds and supervises assessments outside the project channels to ensure that the results are not only independently verified but also are perceived as credible and useful to public and private stakeholders."
An independent assessment also will help document the successes and shortcomings of the project and provide a framework for replicating similar tests in other locations and with other supply chains.
Through the EFM project, USDOT is partnering with business and industry to conduct operational tests in international airfreight movement. Industry partners are Limited Brands, a shipper of apparel and personal care items based in Columbus, OH; freight forwarders Hellmann Worldwide Logistics and StarTrans International, Ltd.; customs broker Barthco International, Inc.; trucking company ODW Logistics, Inc.; and several airlines that deliver goods from China to the United States, including Evergreen and Atlas Air. All of these partners support the use of information technologies to improve productivity. Other stakeholders supporting the project and providing advice and guidance are the American Trucking Association, the Air Transport Association, and the International Air Transport Association (IATA).
Striving for International Data Standards
Another component of the EFM project involves working with national and international standards organizations to ensure that data exchanged between trading partners and government agencies are interoperable in all systems. Several years ago the world's standards community—the International Organization for Standardization, the International Electrotechnical Commission, the International Telecommunication Union, and the United Nations Economic Commission for Europe—formed a consortium for electronic business and signed a memorandum of understanding to cooperate in, among other things, the development of "message and interoperability standards for business transactions."
At the IATA e-Freight Conference in November 2005, IATA Director General and CEO Giovanni Bisignani echoed the need for standards for exchanging data in a worldwide marketplace. "I urge the industry to develop plans, set aside funds, and identify the resources needed to realize e-freight in your companies," Bisignani said in his keynote address. "I urge governments and customs authorities to harmonize requirements we desperately need for a global solution. Most important, we must work together as a team. And we must move fast."
The early development of standards for universal business language (UBL) focused on business processes related to purchasing and finance. The latest standards include transportation data messages that could help eliminate the expensive translation costs that the U.S. freight industry incurs in order to interact with industries in Europe and Asia.
"The EFM project is recognized as a helpful catalyst in developing data standards and moving development and implementation along the path of adoption," says Jon Bosak, chairman of the UBLTechnical Committee of the Organization for the Advancement of Structured Information Standards (OASIS).
Public Sector Benefits
USDOT officials recognize that an efficient freight sector is not only vital to the prosperity and competitiveness of the United States in the global marketplace, but it also relates directly to public concerns about mobility, congestion, and security. "The public benefits of an efficient freight sector have a direct link to the cost of goods, less vehicle emissions, and less congestion" says Michael Wolfe, a freight transportation consultant with the North River Consulting Group.
Adopting EFM best practices also promises to help mitigate congestion and reduce air emissions typically associated with idling trucks and passenger vehicles. Currently, most physical handoffs of freight goods from one mode to another, or within modes, occur at terminal yards and seaports near major metropolitan areas. Traffic congestion already is a major problem in many of these urban areas, and freight movement is both affected by and affects that congestion. "That's an important reason to pursue EFM technologies and best practices, which not only address private sector business issues but also help mitigate the congestion issues that continually perplex public officials" says Wolfe.
To the extent that better data translate into better shipment visibility and control, EFM technologies can enable tighter planning for intermodal exchanges. That, in turn, could enable tighter handoff windows for goods, reducing engine idling at gates and during wait times and decreasing unnecessary vehicle trips. This reduces energy consumption and engine emissions.
Accurate shipping data also enhance transportation security. From the public sector's perspective, accurate and timely data enable effective prescreening of import shipments for security-related anomalies. Datasets that include linkage of cargo, truck, and driver information provide more effective terminal access controls, as shown in previous FHWA studies such as the Electronic Supply Chain Manifest (ESCM) operational test. The ESCM test involved integrating biometric smart cards with a secured Internet-based cargo transaction system at selected U.S. airports. More accurate data help to reduce security risks by providing a more accurate audit trail to help public and private sector security personnel answer questions, track down anomalies, and respond to incidents, thereby instilling greater confidence in the transportation network.
There is another, indirect security benefit. Security experts generally agree that "freight at rest is freight at risk " and that congested or disorganized operations are more susceptible to security incidents than well-organized and efficient operations. To the degree that better data—such as that generated by EFM—enhance efficiency and improve operational control, they also reduce security risks.
According to Mike Sherman, vice president of global transportation for Limited Logistics Services, Inc., "The EFM initiative is interesting because its objective is to enhance supply chain security by leveraging new technology and creating standard industry protocols for information exchange that capture all relevant information about events in the supply chain lifecycle. If our compelling need for enhanced supply chain security can drive to a common standard for comprehensive and flexible information exchange, not only will security compliance be greatly enhanced, but also the operational and administrative efficiency and flexibility of the supply chain."
He adds, "This is a daunting challenge given the number of traders in the global supply chain, not to mention the number of regulatory authorities with an interest in the solution—each, perhaps, with their own point of view. I believe shippers, carriers, and other supply chain partners want to do everything necessary to be secure and compliant, but they will not invest in a solution unless they are certain it will satisfy the future requirements of regulatory agencies. A consensus view on requirements from the U.S. Customs Service, the Transportation Security Administration, the U.S. Department of Homeland Security—and perhaps international authorities, since this should be addressed with a global perspective—will be an important element of commercializing EFM as a long-term solution."
Benefits for the Private Sector
Shifting focus to the private sector, the benefits are more easily quantifiable. An independent assessment of the earlier operational test, the ESCM project, reported results that helped generate industry enthusiasm for the EFM initiative. As reported in the Electronic Intermodal Supply Chain Manifest, Freight ITS Operational Test Evaluation, Final Report in December 2002, ESCM delivered meaningful labor cost savings and time-on-task reductions in manifest preparation, paperwork handling, communication with up- and downstream partners, as well as the actual load transfer times. Much of the cost savings in labor were related to eliminating the need for inputting data late in the shipping process, as critical data are entered early on.
The ESCM project reported a potential time and labor savings of $16.20 per nonexpress airfreight shipment. This figure includes two components: (1) measured cost savings based on data collected for the pickup side of the supply chain ($11.77 per shipment) and (2) estimated cost savings for the delivery side of the supply chain. "Given the relatively small size of most airfreight shipments, especially when compared to truckload highway shipments, $16.20 per shipment is a meaningful savings," says Dan Murray, vice president of research for the American Transportation Research Institute.
Recent conversations with freight forwarders and third-party logistics providers indicate that enhanced access to freight data from electronic information exchange could improve operations themselves via better preplanning of cargo handling and also could enable shippers to improve customer satisfaction with more accurate and timely handling of tracking and tracing requests.
Jeff Clark, vice president of sales and marketing at ODW Logistics, Inc., says that participation in the EFM project has enhanced his company's focus on customer satisfaction. "In an international trading world that is very paper intensive, this electronic system is more visible, creating a more efficient, highly accessible, and expeditious outcome," he says. "We have the information when we need it to be proactive with our customers in planning for both people and equipment resources, which will shorten the supply chain—and ultimately reduce costs in the long run."
Moving Forward with EFM
Design for the EFM deployment test began in January 2006, and FHWA expects to begin building out the design by the fall of 2006. Deployment is expected to start in January 2007 and will be completed by the summer of 2007. An independent evaluation conducted in parallel with the test will be completed by the summer of 2007. Pending the results of this test, supply chains involving other modes, for example, truck-rail and truck-ship, also could be included in future deployment tests.
First, however, it is critical that EFM concepts and best practices reach airfreight stakeholders in order to realize maximum benefits and to continue on without direct Government collaboration. "Without a doubt, the success of the project is measured by the Government's ability to facilitate the adoption of EFM best practices and the airfreight industry's implementation of them," says Tony Furst, director of FHWA's Office of Freight Management and Operations.
FHWA officials believe that it is critical to collaborate with industry to move toward the goal of adopting EFM concepts and best practices, even before the test is concluded and the results are in. Waiting to publish measured benefits before discussing why market leaders should already be involved in the test may unnecessarily delay adoption for other industries. Therefore, in parallel to the EFM test, FHWA's Office of Freight Management and Operations is developing a phased marketing plan to promote adoption of EFM candidate best practices.
Critical to this marketing plan is raising awareness within segments of the industry that may have an interest in adopting EFM concepts and best practices to allow them sufficient time to prepare business plans and organize partners. Another FHWA goal is to facilitate adoption of best practices and to guide implementation. FHWA will gauge interest based on the awareness campaign and the number of companies signing up for guidance. If the interest is positive, which would indicate the potential for significant market penetration, then the next deployment test would involve maritime and rail interests. This collaboration between government and industry could then signify a sea change in how intermodal freight is handled domestically and globally in the future.
Joanne Sedor is a transportation specialist in FHWA's Office of Freight Management and Operations. As a member of the Freight Policy and Communications teams, she analyzes freight issues and trends and writes about them in publications. Prior to joining FHWA in 2001, Sedor was a senior analyst and project manager at the Congressional Office of Technology Assessment.
Mike Onder is the FHWA team leader for freight operations and technology. He oversees industry partnerships that conduct intermodal freight operational tests to determine the effectiveness of technology and information standards in freight mobility. Before joining the Office of Freight Management and Operations, he served as the intelligent transportation systems (ITS) program manager for commercial vehicle operations and intermodal freight with USDOT's ITS Joint Program
FHWA's Office of Freight Management and Operations, in coordination with USDOT's ITS Joint Program Office, manages the EFM project. For more information, please contact Michael Onder at 202-366-2639, firstname.lastname@example.org, or Kate Hartman at 202-366-2742 , email@example.com.
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