3PL Perspectives
Eric Rempel | REDWOOD LOGISTICS
In the logistics world, real-time information provides the ultimate advantage. This is especially true for third party logistics (3PL) providers who specialize in improving efficiencies across the supply chain. The demand for granular supply chain visibility, from the moment a shipment leaves a warehouse until it’s placed on the shelf at a local store, continues to increase. Providing this real-time data means 3PLs must be able to both accept and offer fast and accurate communication.
As technology has advanced and competition to win and retain customers has grown across all technology-based markets, the use of application programming interfaces (APIs) has gained tremendous popularity due to their flexibility, scalability and speed. For the logistics industry, API technology offers real-time, two-way connectivity and communication, which is a game-changer for an industry whose strength relies on accurate, insightful and actionable data.
The Established Industry Standard: Electronic Data Interchange
Electronic Data Interchange (EDI), a communication technology inspired by the complexities of 1940s post-war military logistics, is the most widely used data communication format in the logistics market today. EDI has made it possible to exchange standardized electronic messages, including multiple documents in a single transfer, and has improved supply chain efficiency since its introduction to the business market in the late 1960s.
As an electronic replacement for paper communication, EDI is used all over the world in retail, medical, pharmaceutical, finance, high-tech and construction markets. Ninety percent of today’s Fortune 500 companies use some form of EDI messaging, including retail giants like Walmart. At its core, EDI gives businesses a secure method for exchanging computer-to-computer information electronically, while minimizing human intervention and, as a result, is responsible for reducing human inaccuracies and errors.
APIs can make certain that carriers, shippers and 3PLs have access to the same real-time data through the entire lifecycle of a shipment, providing true visibility across the supply chain.
Over the past 50+ years, EDI technology has provided manufacturers a mechanism for adjusting their production and distribution schedules based on inventory demand. It’s also facilitated automatic invoicing, payments, shipment tracking, smoother and faster business transactions, and a reduction in labor compared with traditional paper communications. Generally speaking, EDI has made us collectively better at managing product supply, distribution and delivery – from the factory line to the point of sale.
As an 80-year-old foundational technology, the EDI protocol handles amazingly well, but it also has its inherent limitations. EDI employs several different standards and each standard has its own subset of standards, which inevitably makes data exchange more complicated. An EDI communication is a coded message and is not in plain English; it’s often cryptic, segmented and filled with unrecognizable values. As a result, learning what the transmitted EDI codes mean and training IT staff to understand what actions are required can be expensive and time-intensive. Companies often need to have a dedicated IT staff member assigned exclusively to EDI communications, which increases staffing requirements. Also, there are a finite number of EDI codes available for use, which truly limits the variety of information that can be communicated between two businesses.
Time is a major factor with EDI. When an EDI transmission is initiated, there is a time delay between when it’s sent and when it’s received, which may have a ripple effect across the supply chain. The delay of communication can lead to multiple phone calls and emails to address a delay, eating up staff member time. EDI implementation and training are often costly and time-consuming. EDI testing also requires a human party on the other end of the communication to respond in a timely manner, which is inefficient.
API Technology
An application programming interface (API) is a set of programming methods used to build and integrate disparate software applications. It often functions as a third-party software that facilitates communication between different software platforms or servers via the internet. An API plugs one application directly into the data and services of another application by granting the caller access to specific functions and data on the queried server.
Each time you use an application like eBay or the New York Times app on your smart phone, you’re using an API. Every time you use it, the application sends a request to an API via the internet. The server behind the API then finds the data you’ve requested and sends it back to your phone. Your phone then converts the answer from the API into a visual format that you can understand. In short, an API serves the function of a data translator between different servers, platforms and user interfaces.
REST (Representational State Transfer) and SOAP (Simple Object Access Protocol) are two well-known, frequently used web service communication protocols used by APIs. REST architecture is especially relevant to the logistics industry because it works with almost any data format, including TXT, HTML, XML and JSON. With the REST protocol, multiple and different processes can utilize the same communication channel, whereas SOAP interfaces are typically one method to one channel. REST adoption also takes less time to implement than SOAP because it’s the primary communication method for all modern internet browsers/internet user interfaces. REST APIs utilize a single, uniform interface that defines how applications interact by requiring that they all “talk” to each other in the same way.
Benefits of API-led Connectivity in Logistics
API technology is poised to have a significant impact on the logistics market, serving as a complement to EDI, rather than as its replacement. With its real-time data exchange, human readable interface and infinite scalability, the API has a lot to offer. APIs can make certain that carriers, shippers and 3PLs have access to the same real-time data through the entire lifecycle of a shipment, providing true visibility across the supply chain.
One of the greatest benefits of using API technology in a 3PL business is that APIs are capable of transmitting data back and forth across the supply chain in milliseconds, making real-time supply chain management a reality. Instead of waiting several minutes or hours to receive requests that must then be manually interpreted by staff, you can automate responses and actions based on the information received, such as automatically adding pickup requests to a carrier partner’s system. These automated responses and actions increase efficiency and ultimately improve delivery times and customer service.
Real-time communication is particularly important when it comes to rate shopping. We all know that manually shopping for the best freight rate can be extremely time-consuming. Freight rates also change constantly, which adds a level of frustration to time-consuming, manual rate shopping. With API electronic transmissions, you can retrieve and update shipping rates in real-time, and you can transact and render freight against that pricing immediately. On the flip side, carriers can send rate quotes instantaneously, further reducing the time required for rate shopping.
API communications don’t require the human being on the other end of the transmission to possess a knowledge of transmission codes in order to interpret them. This is huge. It means that an employee with a modest technical background easily can understand how to interact with an API and, in an ideal scenario, doesn’t need to interact with the API-based transmission at all. This can reduce staff costs, reduce time spent working on the issue, and may eliminate the potential for human error all together.
What that means for 3PL providers is that in order to compete in a world that demands speed, accuracy and data, embracing API technology can’t be optional. If you want to retain and gain new customers, and we most certainly all want to do both as 3PL providers, then we have to be willing to adapt. Right now, that means we need to use API-led connectivity to its fullest where it makes the most sense. The judicious use of a transformative API technology can only make us collectively better. API-led connectivity provides a pathway forward toward a smarter and more adaptable logistics market in the future.
Eric Rempel is Chief Innovation Officer for Redwood Logistics, based in Chicago, IL. He cam be reached at [email protected]
