International freight forwarder perspectives on electronic data interchange and information management issues

Journal of Business Logistics, 1996 by Murphy, Paul R, Daley, James M

A well-run electronic data interchange (EDI) system will result in timely and accurate information, at a lower cost, than other types (e.g., paper-oriented, telephone-oriented) of information systems. EDI can be defined as "the computerto-computer exchange of business information electronically, in a structured format, between business trading partners."1

Although EDI usage is growing rapidly, implementation among transportation companies appears to lag behind the U.S. business community as a whole.2 Perhaps the relative infancy of EDI implementation in transportation is best illustrated by the limited number of empirical studies among transportation carriers and transportation service providers. Indeed, a literature review reveals only six empirical pieces concerned with EDI usage among transportation companies. Four of the six are devoted to EDI utilization by motor carriers. Each of the six studies will be briefly summarized below.

A Council of Logistics Management (CLM) study conducted by LaLonde and Cooper is the most comprehensive in terms of responses from different modes and various forms (e.g., common, contract) within the modes.3 The CLM study found approximately 80% of the 88 transportation respondents participating in EDI, with 54% indicating at least one EDI project fully operational.

Crum and Allen surveyed 266 Class I and II motor carriers and found nearly 30% using EDI.4 The users indicated that EDI was helpful in meeting shipper requirements and improving customer service. In contrast, non-users avoided EDI because shippers have not demanded it and costs are too great. Allen, Crum, and Braunschweig, using the same database as Crum and Allen, suggested that EDI implementation is largely based on marketing-as opposed to operatingconsiderations.5

Hellberg and Sannes reported the experiences of three Norwegian freight forwarders using EDI for customs clearance.6 The three forwarders experienced dramatic reductions in both time needed for customs clearance, and number of processing errors, coupled with improved information services for customers.

Johnson, Allen, and Crum surveyed 78 Class I and II motor carriers reporting EDI usage to the Management System Council of the American Trucking Associations.7 According to respondents, EDI was implemented to meet customer requirements, improve customer service, and gain competitive advantage. The major reason for not expanding EDI usage was lack of customer demand.

Millen's study used the same sampling frame as Johnson and colleagues. Millen, however, focused only on Class I carriers (33 respondents), and reported that EDI was most beneficial in making individual firms more competitive in the marketplace.8 Senior management acceptance and support were viewed as the major hurdles to EDI implementation.

CURRENT STUDY

All but one of the studies previously described focused on EDI usage for domestic business decisions. However, Ferguson and colleagues point out that EDI may be most useful in global trade due, in part, to the magnitude of documentation requirements for many cross-border shipments.9 For one international shipment to require over 100 separate documents is not unheard of.10 And, cross-border shipments cannot clear customs unless all pieces of documentation are in order. International shipments with incomplete documentation sit at port facilities, adding to business costs and negatively impacting upon customer service.

Most firms employ international trade specialists to assist with documentation requirements and other vagaries of cross-border commerce. One of the most popular logistical specialists is the international freight forwarder (IFF). IFFs provide a variety of functions to their customers, including, but not limited to, the securing of vessel space, the payment of freight charges, shipment consolidation, and the preparation of documentation.ll Recent research has suggested that dramatic changes are occurring among IFFs, due in large part to the increasing strategic importance of global trade.12 Because traditional business practices have proven insufficient for dealing with the highly competitive global marketplace, international trade participants have adopted new ways of doing business.

Many IFFs have chosen to differentiate themselves through development of sophisticated information management systems, particularly with respect to EDI. The development of these information management systems is crucial to the future existence of many IFFs. Indeed, recent research suggested that IFFs who are laggards in information systems may be forced to leave the industry.l3

Because good information systems are critical to the survival of many IFFs, an empirical study was developed to learn about selected EDI and information management issues. Specific questions addressed include:

1. What is the current usage of EDI among IFFs? How important is EDI perceived to be to successful forwarding operations?

2. What do IFFs view as the major benefits to the implementation of EDI systems?