Shippers, Amazon pushing supply chain toward automation

William B. Cassidy, Senior Editor | Oct 13, 2017 4:22PM EDT

CHICAGO — The transportation business is on the cusp of significant technological change, but “legacy” technologies may take years to dislodge, hampering gains in efficiency, speakers at the first annual projectAUTOMATE conference here said this week. In effect, technology is developing faster than many shippers, logistics providers, and transport companies can adopt and deploy it.

“We’re not the fastest-moving industry,” Mitch Weseley, CEO of transportation software provider 3Gtms, said at the conference. “Something that works is hard to displace. If something works, you need a big business reason to change to something new,” he said during a panel discussion at the conference, organized by Chicago-based technology company project44.

That slow pace will not stop a push toward end-to-end supply chain automation, from order to invoice to payment, that project44 and other technology firms at the conference this Tuesday and Wednesday are backing. They were joined by shippers, carriers, and logistics service providers seeking ways to automate more processes and move freight at a faster pace.

“The problem for us all is solving the lack of efficiency and productivity,” Tommy Barnes, president of project44, said. “Automation is how we eventually solve that problem. My biggest fear is that companies either don’t recognize the need to change or how to change.”

Behind all discussions at the conference loomed the role of Amazon in redefining and setting consumer and industrial fulfillment standards. Many of the companies at the conference sell products or move goods on Amazon’s platforms, but even those with little or no exposure to the company said they have to meet customer expectations raised by Amazon’s offerings.

“The whole concept of how customers interact is fundamentally changing, and it’s all being driven by the iPhone and Amazon,” said Mike Seneski, director of corporate strategy at Ford Motor Company. He pointed to Carvana.com, the online marketplace for cars that enables consumers to shop “from their couch” and buy from “vehicle vending machines.”

“This is a serious race for complete and total disruption of the automotive industry over the next five to seven years,” Seneski said. A few years ago, Ford drew up a list of 47 assumptions about how its business and market would look in 2030. “All those assumptions we had about 2030, a lot of them are coming more quickly than we thought,” Seneski said.

Weseley referred specifically to electronic data interchange (EDI), the technology developed in the 1970s to transmit messages or transaction sets between computers and companies. Project44 wants to replace EDI with communications channels connected by APIs, or application programming interfaces, which it says would enable near-real-time data exchange.

That would enable greater automation, driven by machine learning fed by real-time data, speakers at the conference said. “Machine learning is getting more powerful day by day,” said Bart De Muynck, research director, supply chain at Gartner. “There’s a lot of opportunity for augmented intelligence, not to replace humans, but to help them do their jobs better and faster.”

Imagine, for example, a truck that automatically calculates the safest, most fuel-efficient route to a delivery point and feeds that information to its “pilot,” perhaps through a two-way voice-user interface similar to Amazon’s Alexa. That truck, a vehicle that learns from information fed to it by its fleet and its driver, is not in production, but it is not far from the drawing board either.

Translating such concepts to reality will require large amounts of real-time data transferred over a ubiquitous network of APIs — in other words, an infrastructure. That network is perhaps in its toddler phase, but it is growing. “The good news is companies are investing in technology,” De Muynck said. “The interest in acquiring and investing in transportation technology is high.”

Even so, convincing businesses to uproot EDI networks in place for decades is a steep challenge. That is especially the case with large corporations that have invested millions of dollars in EDI and send and receive high volumes of messages or transaction sets daily. For them, EDI is not a “legacy” technology, it is a backbone for daily transactional operations.

The catalyst for change exists, however, in customer expectations that have been reset by Amazon Prime and by down-to-the-minute delivery expectations of big box retailers competing with Amazon. The “Amazon effect” is a rip tide beneath the surface of commerce that seems to be inexorably pulling businesses toward faster deliveries and faster exchange of data.

“The first company that came to us asking for APIs instead of EDI said, ‘Look, I just can’t wait that long anymore when I tender to my carriers,’” Weseley said during a panel on business analytics. “He had a very specific business reason that drove adoption of APIs,” Weseley said. Most companies send and process EDI in batches, which adds time to transactions.

The need for speed, along with real-time visibility, is driving more shippers, carriers, and third-party logistics (3PL) providers toward API-based data communications. But the transition probably will take three to five years, Weseley said. Having launched the first transportation management software program in the 1980s, Weseley has insight into the pace of technological change.

“We’re rapidly proving this [APIs] is a good technology, but it’s going to take years” to overtake EDI, he said, which is nearly ubiquitous, and used beyond transportation. “I think we’re early in the curve, that we’re going to see an evolutionary year. When we talk about APIs replacing EDI, that is a longer-term process. We’ll get more clarity as more people start using [APIs],” he said.

“EDI is still a necessary evil at this point,” said Justin Belcher, chief information officer at BlueGrace Logistics, a Tampa, Florida-based 3PL. However, “there are opportunities to automate. We’ve seen an increase in automating dispatch notifications. The more you find gaps where EDI is lacking and apply [APIs], the more carriers are going to put money into it.”

Some attendees believed the transition to APIs will be more rapid. “I think the transition to APIs will take place quicker than some think, based on the number of carriers already using” APIs, Rob Estes, president and CEO of less-than-truckload carrier Estes Express Lines, said. As an industry, he said, “We have to get better at not kicking that technology can down the road.”

APIs are at the heart of the technologies that companies at the projectAUTOMATE conference believed are necessary to drive shipping automation in the Amazon era. They are not new. APIs have been used for decades to enable communications between software programs and software and hardware of all types. They are what makes printers print a word processing document.

As e-commerce and the use of mobile phones expanded over the past decade, APIs took on a new purpose, linking mobile apps to remote applications and databases. Increasingly, companies such as Google and Visa are offering APIs to software developers so they can embed functions in mobile apps and create links to larger networks and services.

The interfaces are sometimes compared to “neurons” transferring data in a mobile Internet of Things. APIs exchanging data in real-time can also be used to execute processes that currently require a human decision. That is where project44 and other companies at the conference see their greatest potential value. The data exchanged via APIs, they say, will support machine learning.

“Never in our history have we had the opportunity to collect so much data,” Dan Kirsche, vice president of engineering at project44, said. Analysis of that data will lead to more proactive and predictive supply chain management. With “big data” flowing into systems, future software programs will “learn” as much as Amazon’s Alexa does by analyzing voice commands.

“People overestimate what they can do in a day, but underestimate what they can do in a year,” said Ben Rhee, managing director for life sciences at Accenture Partners. “Eventually, you hit a pivot point with technology, where everyone starts adopting it and change happens quickly. We’re at the cusp of that pivot right now, with all the cloud technologies coming together.”

When that pivot point arrives, “We’re going to be shocked at how every industry starts changing,” Rhee said. “The kind of analysis I do now eventually can be taken over by artificial intelligence and machine learning.” Sentient computer systems may still be the stuff of science fiction, but they are getting closer to reality. “Skynet is real,” one executive quipped.

The direction technology will take the supply chain will be determined by shippers, and ultimately by shippers’ customers, said Doug Waggoner, chairman and CEO of Echo Global Logistics. “We’re in an era where you have to be predictive,” he said. “I’ve been working with shippers for 30 years, and the one thing they say they don’t get is proactive customer service.”

Being proactive will require the development of the types of systems other speakers at the conference envisioned, grounded in real-time data with strong analytical capabilities. “With electronic logging devices coming, we’re going to have data” on truck utilization that can be combined with other data to calculate “predictive” estimated times of arrival, he said.

“In the old days, shippers didn’t hear that their goods were lost or damaged from their carrier, they heard about it from their customer,” Waggoner said. “Now they want to hear about any problems  from the carrier or the 3PL. The big box retailers are putting pressure on their suppliers, and that ultimately translates to us. So we’re working on more predictive systems.”

In the meantime, the industry should expect “legacy” systems and new technology to work side-by-side but be prepared for the “pivot.” Apple introduced the iPhone only 10 years ago, said Kurt Cavano, president of GT Nexus. The revolution in mobile technology that invention sparked has transformed not only business but how people shop, communicate, and live.

“What are you doing now to look at what’s going to be changing in the future and how it can affect you?” Cavano asked. “Disrupting yourself is painful. Getting disrupted by somebody else is more so. We’re going to have to either change, or be prepared to be changed.”