Technology in Trucking - Duke's Fuqua School of Business · Technology in Trucking ... use of...

Technology in Trucking

Anuradha Nagarajan

Enrique Canessa

Maciek Nowak

Will Mitchell

C. C. White III Published in In “Trucking in the age of information” (Dale Belman, Chelsea White

III, ed.), Ashgate Publishing Ltd. Burlington VT, pp. 147-182, 2005. Introduction Due to increasing globalization, businesses are managing global supply chains. Information technology and the internet have introduced new market opportunities. Increases in productivity and increasing cost pressures from global competition have introduced just-in-time manufacturing and assembly. The trucking industry, which moves over three-quarters of the country’s freight, has had to adapt to and fulfill the demands to move freight on time, reliably, and with greater visibility. According to Lahsene, sophisticated product offerings, globalization, and increased customer expectations make logistics, the managed movement of goods, key to competitiveness of companies and regions1. Advances in technology have enabled the trucking industry to respond to the imperatives of the new competitive environment. Technology in Trucking

Throughout history, transportation has worked on moving goods farther and faster. In the 1980s, U.S. industries started to adopt just-in-time manufacturing to reduce inventory to decrease costs and spoilage and increase profits. In the mid-1990s, supply chain management, or flow management, was introduced to help increase profits for companies by again reducing inventory and by purchasing only what was needed when it was needed. After 9-11-2001 and other recent disruptions, companies are starting to look at just-in-case policies that allow for little extra

1 Lahsene, Susie. New Economy, New Vision for Transportation. TR News. September 2001. Pages 9-11

Technology in Trucking 2

inventory just in case something unforeseen or unavoidable happens2. “Just in case” and “just in time” have critical implications for the trucking industry since the success of these policies depends to a large extent on the trucking industry’s response to these initiatives.

Carriers have to be an active part of the optimization in the just-in-time process. Many carriers have become “warehouse on wheels” (WOW). Instead of warehousing goods close to the factory, WOW actually warehouses them on the trailers bringing the goods into the plant eliminating the need for extra buildings, additional loading and unloading. Most importantly, excess inventory wasn’t being held that could go out-of-date or otherwise become obsolete or suitable for sale. In the “just in time” environment, it is critical that carriers avoid as many delays as possible. Trucks can be delayed by accidents, snarled traffic, bad weather, breakdowns, or even some of the new security procedures being introduced since 9-11. Many of these delays can be prevented with information. In-cab devices can help provide instant communication and information, including traffic alerts that can be used to help avoid traffic problems in major metropolitan areas. This information can be used to re-route trucks and to alert shippers and receivers of potential delays. Technologies that address internal efficiencies such as route optimization, fuel optimization, driver scheduling, electronic document development, and better integration with shippers’ systems are gaining popularity.

This chapter presents the prevailing leading edge technologies that are being offered and will be available to trucking firms in the near future. We supplement survey data with case studies of implementations to provide a glimpse into the key role that technology plays in the trucking industry. We begin Section A with a discussion of the six technologies identified by the American Trucking Associations as the most promising technologies for the industry3. We follow with a discussion on the impact of the changes created by the Internet on the industry in Section B. Section C presents the current state of technology applications as they relate to security and safety. Section D discusses advances in truck technology. We conclude with a discussion of technologies that are likely to have a significant impact in the future in Section E. Overall, this chapter attempts to capture the technological revolution in the trucking industry.

A. Information Technologies in Trucking

2 Farrell, Diana, Terra Terwilliger, and Allen P. Webb. Getting IT spending right this time. The McKinsey Quarterly, 2003 Number 2 available at http://www.mckinseyquarterly.com/article_page.asp?ar=1285&L2=13&L3=13&srid=27&gp=0 3 American Trucking Associations (1999). Understanding the Trucking Industry: Technology in Trucking series. Alexandria, Va

http://www.mckinseyquarterly.com/article_page.asp?ar=1285&L2=13&L3=13&srid=27&gp=0

http://www.mckinseyquarterly.com/article_page.asp?ar=1285&L2=13&L3=13&srid=27&gp=0


The American Trucking Associations identified six technologies that have become critical to success in the trucking industry4. The technologies that are becoming ubiquitous in the industry are Mobile Communication Systems (MCS), Decision Support Systems (DSS), Automatic Vehicle / Equipment Identification Systems (AVEIS), Electronic Data Interchange (EDI), Bar Coding (BAR) and, Imaging Systems (IMG). These technologies have altered business processes and enabled adopting firms to achieve significant improvements in efficiency and productivity. We begin with a brief description of each of these technologies along with some instances of implementation. We follow the descriptions with case studies of technology implementation focusing on the successful integration of technology products. Finally we present the results of a survey on technology use in the trucking industry. A. 1. a. Mobile Communication Systems (MCS) An MCS is an interactive communication tool that links fleet vehicles to dispatch centers. This is essentially achieved by sending positioning information and messages to a central facility which acts as the communication hub between the various dispatch centers and the fleet vehicles. Besides cellular communication technologies, MCS can be implemented by Specialized Mobile Radio Systems (SMRS) and Satellite Communication Systems (SATCOMM). SMRS utilizes radio to communicate with fleet vehicles. THE SMRS are networked through a Packet Switched Data Network (PSDN) that carries the radio messages between the fleet vehicles and the dispatch centers via the central hub. All message switching, database management, resource allocation and other functions occur at the central hub. MCS can also be implemented through satellite communications. Each fleet vehicle has a mobile unit that directly communicates to a satellite through a mobile radio. Satellite data is down linked to a Network Management Center which in turn is connected to all the dispatch offices. The various components required to implement MCS could vary by the technology deployed and the sophistication of the functionality desired. Some basic system components are mobile terminals, on-board computers, voice communications, network infrastructure, peripheral devices, and software interfaces.

MCS installations have many different applications in conjunction with the use of global positioning system. MCS assists in position reporting by presenting data that indicates the geographical position (latitude and longitude) of where the mobile vehicle is operating at the time of reporting. This often is an important element of the overall status information exchanged between customer and carrier. Also, estimated time of arrival (ETA) calculations are now possible with position information and algorithms for determining time and distance left from the present position to the destination. MCS provides the Out of route (OOR) function that warns the driver and/or dispatcher and records instances when the truck is out of

4 American Trucking Associations (1999). Understanding the Trucking Industry: Technology in Trucking. Alexandria, Va


the prescribed route. MCS coupled with automatic vehicle locator can provide the necessary data to support fuel tax mileage calculations and through data provided by MCS, businesses can deploy related applications to dynamically optimize several parameters such as maximization of contribution per truck per day, driver productivity, etc.

Data gathered and information flow enabled through MCS implementations have several benefits. Real time position and dispatch data leads to increased load opportunities, minimized delays, and reduced costs to facilitate better equipment utilization. Through route optimization it is possible to dynamically correct out of route situations for drivers and save time and money. In today’s lean supply chain model, real time data allows for accurate dispatch and arrival time windows to be communicated to customers enhancing customer service. Finally, MCS implementations allow carriers to plan around driver convenience – safety, legal aspects, productivity etc – that in turn enhances overall personnel productivity.

Implementation Different kinds of MCS have been widely deployed in the trucking industry. PeopleNet Communications, for example, recently introduced PACOS automated driver messaging. It works by assigning GPS-generated "geo fences" around, say, a shipper's location. Geo fences can be established at desired distances from the location. For example, when a truck crosses a geo fence a half mile from the destination, the system can generate an automated message ("Arrived") to the dispatcher or to any e-mail address that has been entered in the system. A customized message could be created around a business process. Consider for example, a dispatcher who has a load to assign to a driver. If the dispatcher wants to know immediately whether the driver is accepting the load, he or she would create a message in which the load information would automatically be included. The dispatcher can send the message with a "forced reply" - meaning that until the driver responds, the communications system will otherwise remain closed to the driver. Once the driver replies to the message, the system will again be accessible to the driver5.

In contrast to the Satellite based systems from Qualcomm and PeopleNet, e-trace from Gearworks functions over a digital and analog cellular telephone network. The system consists of etrace software, a palm pilot and cradle for each truck, and a global satellite adapter. etrace automates messaging between dispatchers and drivers, has real-time map views of the fleet for dispatchers over the Internet, and can capture signatures, proof of delivery and bills of lading. Truckers can also obtain “real time” driving directions which incorporate congestion and construction information. J&B Wholesale, an etrace customer, uses the system not only for tracking its trucks and drivers but also for registering pick-ups, letting drivers know of potential backhaul opportunities, and location based

5 Stephen Bennett. Automated information systems: The key to trucking intelligence. Transport Topics. January 13, 2003. Iss. 3519; pg. S4 -10


messaging. Location based messaging permits a driver to send a message to all drivers within a certain radius about important information such as traffic jams and delays. e-trace and other similar cellular solutions are low cost alternatives, often using off the shelf hardware, to more expensive and more comprehensive satellite communications systems such as Qualcomm which are often the cost efficient solution for larger fleets.6 A. 1. b. Decision Support Systems (DSS) DSS are computer systems designed to assist decision-makers by synthesizing data to create information and recommendations for action. Most of these systems are interactive, helping employees solve difficult, data-intensive problems. While expert systems and artificial intelligence based systems are becoming more familiar to the trucking firms, operations research based systems are most frequently used. In particular, dispatch operations including routing and the matching of drivers and loads which have been the most challenging task prior to decision support systems, have been gaining popularity. The advantage of computer based decision support systems can be illustrated with a simple example. A firm with three trucks and three loads to haul faces six different dispatch options. If the firm doubles its size, it faces 720 choices with six trucks and six loads. The number of possible combinations increases into the millions with just 10 trucks and as many loads. Today’s load matching and routing software is capable of providing near optimum outcomes given a variety of situations, in a reasonable time. Appendix 1 provides an overview of current routing software, related issues and available products.

Various technology based systems are interconnected to provide the ability to significantly improve overall fleet operations. Through sensing/transmitting technologies, voice/data communication systems, electronic data interchange capabilities, bar coding and imaging systems there is a tremendous flow of real time information across various entities utilizing and operating the fleet business. However, to perform various analysis and plans in order to make business decisions, transactional information from multiple sources needs to be synthesized and aggregated with the results presented in a pre-defined and useful format. Application system tools that enable this are generally referred to as decision support systems (DSS). For example, in order to make optimized driver-load assignment decision information about customer trips, driver performance and utilization, driver seniority and request locations, equipment utilization, etc. needs to be collated and aggregated quickly, effectively, and automatically.

There are various types of DSS. DSS can rely on a range of different mathematical and computer programming algorithms to make their evaluation. Simple DSS simply aggregates information from one or more (generally more than one) sources based on common attribute dependencies and present the information

6 Hickey, Kathleen (2001). Keeping in touch. TrafficWorld. July 9. Pgs 11-12


in a useful format. The actual decisions based on this are made by responsible personnel who can interpret the trends etc. specific to their area of expertise. Expert systems apply a set of rules to the decision. The rules are usually in the form of questions in a tree-structure that are progressively answered based on the data. Artificial intelligence-based systems try to ‘learn’ to make decisions using the same methodology as humans. Essentially, the system incorporates predicated events, based on the outcome of hypothetical decisions, to make the present decision. Over time, the system will use what information it has gained to extrapolate a solution to an unrelated problem. Additionally, some systems are based on Artificial Neural Networks (ANN). These systems mimic the learning capability of the human brain. The ANN is trained by presenting it with situations and known correct responses. After that learning process, the ANN can make good decisions by recognizing similar patterns of previous known situations and extrapolating to find answers for the new situation. Operations research-based systems use sophisticated mathematical models and heuristics to analyze the data and determine solutions. By quantifying the factors which go into a decision, these systems make tradeoffs of the costs and benefits of the possible outcomes to determine near optimal solution. Implementation In the past 22 years, two out of every three companies that carried less-than-full loads of freight across the country on trailers have disappeared7. Roadway Corporation using DSS enabled Activity Based Costing (ABC) is working to assign costs to a package and a particular customer. The costing analysis traces activities across departmental boundaries in search of the total cost per product or per customer. The cost of the activity starts with direct labor—the number of dock workers involved and the time it takes them to complete the activity, factored against their salary and benefits. Interviewing workers gets a foreman's-eye view of what they actually do. Then, information systems can crunch the data obtained by observing operations closely, such as how much time it takes to load scattered boxes from one manufacturer as opposed to well-packaged pallets. This defines how activities on behalf of individual companies affect the overall work of the company—and how costs differ by an individual customer's requirements. Thus, the data-collection terminals used by workers at the dock produce time-stamped records, as the goods associated with a particular waybill move through a breakbulk facility. Roadway analyzes this data, along with studies of the time required to perform each activity that must be completed to move a shipment. The crucial activities revolve around movement across the dock—unloading a trailer, sorting shipments and loading onto outbound trucks. The freight handling-cost difference is typically 25% to 35% between freight shipped on skids that can be moved with a forklift, rather than as loose cartons that have to be handled individually.

7 David F. Carr and Edward Cone. How Roadway Outmaneuvers Competition. October 10, 2002 http://www.baselinemag.com/article2/0,3959,941602,00.asp

http://www.baselinemag.com/article2/0,3959,941602,00.asp


Roadway focuses its attention on the labor-intensive process of moving freight across its docks, since labor and associated expenses account for about 60% of operating expenses. Before a trailer is pulled up to a breakbulk dock, managers consult the QuikStrip Trailer-Door Optimizer, an application that analyzes the assortment of shipments on that particular trailer to determine which doors those shipments will be re-sent from. Applications such as QuikStrip, rely on Informix databases at each location. Important information about trailer arrivals and departures is then transmitted to headquarters over a wide-area network of frame relay circuits. The master schedule of shipments and delivery guarantees is maintained on the mainframe, which runs applications to help operations managers decide whether they need to take action to speed delivery of a shipment. For example, they might assign a trailer to a two-man "sleeper team" of drivers who will take turns driving, rather than use the default pattern of single drivers who change off, pony express-style, at relay stops, or by slower but cheaper rail. Roadway has committed itself to analyzing everything from the size, number and content of shipments, to each step in moving a pallet of toasters from factory, to truck, to retailer, and the time each step takes. What Roadway gets is a clear, statistically based view of every activity serving a customer that is performed by Roadway workers. And with the backing of a huge warehouse of this data, Roadway can put a number on how much each activity costs and how effective the result is for each customer.

Key activities are not just "move shipment across dock" and "load shipment on truck," but also indirect ones such as "settle claims for damaged freight." Instead of spreading the cost of freight claims across all shipments, Roadway works to identify which customers and shipment types are associated with the most claims. In fact, since beginning a concerted effort to reduce freight claims in 1998, Roadway has cut the ratio of claims to revenue by 33%—a savings worth "tens of millions of dollars" a year, according to the company. One of the main areas where Roadway has benefited from the decision support data is in pricing. Since implementing technology based ABC costing, Roadway has shown a consistent improvement in revenue per ton. The system, by identifying activity level costs for each load, helps managers decline unprofitable loads. This clear understanding of its own business helps Roadway reduce fixed costs, identify profitable customers and price its services to maximize operating margins.8 A. 1. c. Automatic Vehicle / Equipment Identification Systems (AVEIS)

AVEIS are communication systems made up of a transponder programmed with identification, authorization, and any other types of information unique to the user, equipment, or the application. There are three common types of transponders which dominate the industry: Type I transponders contains fixed data for read only applications, Type II transponders are capable of read and write operations, Type III transponders provide an external interface with on-board devices or smart cards.

8 ibid


The automatic vehicle/equipment identification system is a basic communication system that communicates key identification and related information about the vehicle using radio signals to a remote reader. Applications The automatic vehicle/equipment identification can be applied to identify equipment entering or exiting a yard, equipment available within a yard, trucks passing through toll collection lanes, trucks passing through a weigh station, trucks passing through a border checkpoint, and fuel use and authorization. The automatic vehicle/equipment identification system used in conjunction with vehicle to roadside communication system can provide additional applications to track maintenance histories, service schedules, cargo information, and real time tractor performance characteristics. Implementation

The problems of trailer tracking and the technology solution used are well represented by the case of Associated Food Stores9. The co-operatively owned wholesale food distributor in Salt Lake City had outdated, difficult-to-use software for checking in vehicles at the gate of each yard. As many as 127 people including receiving clerks, drivers and security personnel entered data into the system at various times. Inconsistencies naturally resulted, requiring frequent forays to establish exactly what equipment was on site. Trailers were often incorrectly represented in the system as being available when they needed repairs or needed washing out.

The company recognized the need for an automated solution to the problem of trailer tracking. The company created a firm specific solution by combining complementary technologies. The automated system solution began with WhereNet, a system that monitors mobile assets via a local area network. Its components include low-powered radio frequency (RF) transmitters and antennas installed throughout a yard. The tags can be programmed to send signals to the antennas at set intervals according to the user's needs. The WhereNet system is closely integrated with logistics software and a warehouse-management program to provide a complete solution to the company. Associated credits WhereNet system with providing benefits including a significant reduction in fleet size. In contrast to the nearly 130 people engaged in data entry previously, Associated now assigns two part-time people a day to the task of monitoring the system, because it's all automated. The turn time has been reduced and order fulfillment has improved. A unique challenge faced by Associated was that, being a co-op and having grown in fits and starts over the years, the company had a fleet that features 33 different

9 Stephen Bennett. Automated information systems: The key to trucking intelligence. Transport Topics. January 13, 2003. Iss. 3519; pg. S4 -10


trailer types. When a master scheduler, at the very beginning of the process builds a load, a specific trailer type is matched to that load. The scheduler needed to determine whether that type of trailer was on the yard and, secondly, whether it was available to be loaded. With the new automated system, the assessment is done in seconds instead of half-hour or more. Trucking executives and IT vendors are continuously working to integrate systems the way Associated did, so that information processes can be automated to achieve greater efficiency and productivity. A. 1. d. Electronic Data Interchange (EDI)

EDI is a system that provides inter-company computer-to-computer communication of data. EDI is used to transmit formatted data that would otherwise be maintained and transferred in a printed standard business document such as a freight bill or bill of lading. EDI is used for communicating business information in a standard format between companies. Benefits EDI evolved primarily to eliminate manual paperwork based processes for routine business transactions between companies and for leveraging the speed and timeliness of information exchange between companies. Some of the specific advantages of EDI are reduction in paperwork, telephone calls, postage and handling charges, and manual data entry (duplication). EDI can also increase speed of communication of essential business information, and improve data accuracy, customer satisfaction and business effectiveness.

Some common examples of business information that are typically exchanged via EDI between companies are shipment information (bill of lading), shipment status and tracking information, freight information and charges, freight payment including remittance advice, bank payment etc. and loading and route guides

The competing, diverse, and non-compatible standards in EDI have often required each shipper to have a distinct connection with each carrier. Internet based XML technology could soon replace traditional EDI. XML (for Extensible Markup Language) is a computer language that is well suited for exchanging electronic documents and for integrating applications running on different operating systems or hardware by using an internet connection. As the use of the internet increases, XML is being improved and standardized to encourage widespread adoption. A. 1. e. Bar Coding Bar coding is a system that consists of an automated reader as an alternative to manual (keyboard) entry of data into a database for further processing. Bar codes symbols are simply a machine-readable form of keyed data. Scanners use a laser


beam of light to read the bar code. Historically bar codes have been used in the motor carrier industry since the 1970s. Over the years, lot of work has been done to standardize bar code placement on bills of lading and freight bills. Additionally, the motor carrier industry has been very active in working with other industry associations to develop common standards for shipping labels. This work has led to benefits across industries and today bar codes in the motor carrier industry are used for a wide variety of applications.

There are two types of bar codes: linear or one dimensional and stacked or two dimensional. A linear bar code is a code representing characters by sets of parallel bars of varying thickness and separation that are read optically by scanning. The arrangement of the bars and spaces are in a predetermined pattern which follows specific rules to represent elements of data that are referred to as characters. A stacked bar code is high density, high capacity, write once read many memory based. These bar codes can be encoded, produced, read, and decoded using the same technologies and media as linear bar codes. Scanners (hand held or fixed) use a laser beam of light to read the bar code. The light is reflected off the bar code. That light is bounced back via a series of mirrors to a photo-detector where the width of each bar (either black or white) causes the light to vary in intensity. The photo-detector changes the light into an electrical signal that is then translated into the number or letter that is represented by the bar code. The translated bar code information is then passed to the appropriate carrier application.

An application of EDI is shipment tracking where bar codes are commonly used to track multiple carton shipments. The scanned information is used to provide updated shipment status information which is transmitted to the carriers’ customers via EDI. EDI is also used for package tracking. Tracking single packages or cartons is similar to shipment tracking although it is more common in the small package segment of the industry. Again the carrier uses this scanned data to provide the customer updated shipment status information via EDI. Further, using bar codes and EDI, small package carriers and some LTL carriers are able to automate the handling of freight at the terminal with conveyer systems. EDI enables the automation of data input applications based on bar coded bills of lading and freight bills.

Technology advances in Radio Frequency Ids or “smart tags” are likely to replace barcodes in the near future. These tiny chips send out signals that help monitor shipments in real time unlike barcodes that need to be scanned through a reader. As adoption increases, both in the trucking industry and among the shippers, the cost of the smart tags is likely to decrease rapidly, spurring adoption and making barcodes obsolete. A. 1. f. Imaging Systems Imaging systems enable document imaging and provides an electronic means to store reams of paper. Historically businesses have stored paperwork in rows and rows of filing cabinets. These require physical space and are highly inefficient to


handle in terms of retrieving and utilizing the information. While the advent of microfiche in the 1960s helped cut down the storage space it did not make a dent in the efficiency category. With electronic storage becoming cheaper and smaller by the day, imaging systems for the use of electronic document management is becoming a business necessity. The functionality of an imaging system is to allow for easy scanning, storage, and retrieval of all business information – trip sheets, bills of lading, fuel receipts, bill payments, proof of delivery, claims, etc. For example, a shipper might call to say he/she never received a bill. Someone in the billing department could call up the bill on their PC from the imaging system and fax it electronically to the customer without ever having to leave their desk.

Imaging systems either use a scanner (usually connected to a PC) to create an electronic image of the document or can transpose the information available from a computer system (received either via an EDI or generated internally) to an electronic document. Once the electronic document is generated it is indexed appropriately. This index information is critical in the retrieval and utilization of the information through its life cycle.

In addition to the standard functionality offered by various imaging systems, there are additional features that can enhance the benefits and cost effectiveness. Computer output to laser disk (COLD) allows all reports that are produced by a computer application to be automatically indexed by category and date and stored on disk for later use by personnel. This avoids cluttering the office with all kinds of paper reports. Additionally, since it is electronically stored, it is also easy for sending portions of the report directly to someone via electronic fax or email. Optical character recognition (OCR) picks off key information while scanning for indexing.

In the near future, one technology that may provide imaged/electronic documents with a status equivalent to original paperwork is digital signatures. A digital signature is attached to an electronic document and serves the same purpose as a normal “ink signature”. A digital signature provides features including the authentication of the sender of the document. The digital signature serves as a proof for the receiver that the sender actually sent the document and ensures the integrity of the document. The digital signature assures that the content of the document has not been altered in any way by a third party. Additionally, some digital signature systems preserve the privacy of the document by encrypting its content. The system scrambles the content of the message, so that a third party cannot read it. Only the receiver who has the appropriate decryption key can unscramble the document. Implementation Many vendors offer imaging systems. Factors that need to be considered in choosing the right vendor include cost (initial and ongoing), interfacing capability to other application systems, support offered by vendor, market penetration of the vendor’s system, quality of images, scalability, and functionality.


As digital imaging scanning becomes an increasingly popular tool for cost reduction and business process enhancement, trucking firms are being offered a variety of products to suit different requirements. For example, Pegasus TransTech provides carriers with affordable in-house and out-sourced imaging systems that streamline billing, collections, payroll, A/P, driver qualifications and other paper-intensive processes. Fleets can choose either a complete in-house system, or an out-sourced service. These services are complemented by TRANSFLO Express, a document scanning service now available at nearly 300 truck stops nationwide. Drivers simply hand their documents to a fuel desk attendant for scanning. In seconds, these documents are delivered electronically to the fleet for immediate billing and payroll processing. Drivers keep the original documents. All fleets, regardless of size, can receive their trip documents via TRANSFLO Express. Trucking firms cite driver and owner operator satisfaction as the primary reason for using digital scanning. According to Jim Richards, senior vice president at KLLM, “The positive thing for our drivers is they're now able to get paid quicker and get resolution to their trips earlier. Drivers can now have their documents scanned at a truck stop up until the payroll cutoff and still be paid that same week for that trip, which is a huge advantage. TRANSFLO Express has also given us the ability to offer next-day pay to our owner operators. They have their bills scanned at a truck stop and upon receipt of those documents, we load the money for that trip on to their payroll."10 The widespread availability of digital imaging provides an opportunity for companies to improve customer service, control headcount and improve customer satisfaction.

While firms attribute many advantages to the use of digital imaging technology, the government still requires the paper trail for verifying vehicle mileage and fuel use. Although the federal government has been looking into electronic documents and digital signature since 1998, the deployment of the imaging systems has been slow because of federal government’s reluctance to adopt the technology11. Since Americans were spending over $ 600 billion a year in filling out, documenting and handling government paperwork, some Congress members have been pressing for passing the laws required to put imaging technology in widespread use. Per the paper-elimination act, it is expected that by the year 2004, 59 percent of all government document transactions will be electronic12. With the expansion of scanning, some states — but not all — will accept scanned documents as originals. So before throwing away original paperwork, carrier executives need to know whether the state will accept scanned documents as originals and whether they treat documents that have been scanned internally differently from those scanned by a third party.

Currently, all 48 contiguous states and the Canadian provinces are members of the International Fuel Tax Agreement (IFTA), and they rely upon 10 http://www.ttnews.com/members/topNews/0010209.html#story1 Business Wire - Wednesday, May 21, 2003 11 Jonathan Seff. Congress looks at Digital Document Processing. PC World Online San Francisco: July 15, 1998 pg. 1 12 Tony Kontzer. Federal agencies aim to cut paperwork. Information Week. October 27, 2003, pg. 30


documents such as proof of delivery, fuel purchase receipts, toll tickets, weight scale receipts, driver logbooks and other records to verify a carrier’s fuel tax compliance. The IFTA Procedures Manual indicates these “records may be kept on microfilm, microfiche, or other computerized or condensed record storage system acceptable to the base jurisdiction.”13 According to a study conducted by Lana Bates, as of May 2003, 17 states had indicated they would accept scanned documents for purposes of IFTA audits. Generally this means that as long as a scanned document is legible and the information is retained and reconcilable, the state will accept it. However, these states retain the authority to reject any illegible document and demand an original. Also, very few of these states have any legislative or regulatory guidance on scanning. If there were a management change in the state auditor’s office, a new chief auditor could change the state’s position and no longer accept the scanned document as an original. Twelve other states accept scanning with some preconditions. Idaho, for example, accepts scanned documents, but has outlined 13 separate and substantial conditions, such as a written explanation of the procedures governing the establishing of the system and the individuals responsible for maintaining and operating the system. Ohio is interested in the scanning and identifying methodology. Indiana calls for original document retention for the previous six months. Vermont wants to compare scanned documents with original documents the first time it does a “paperless” audit. And while Kansas accepts scanning, it leaves the final determination to accept or reject scanning to the individual auditor. Four states — California, Nevada, North Dakota and Wisconsin — indicated they simply will not accept scanned documents. The auditors want to “feel the paper” to assure that the original document has not been altered. Receiving a fuel tax refund may also depend upon an original receipt14.

Digital signatures are gaining popularity. Utah has led the effort of providing the legal support to use digital signatures. Utah passed quite detailed laws regarding which technology to use and how to exactly employ digital signatures, whereas states such as California, Florida and Texas defined a broader legal framework15. The banking industry led the introduction of digital signatures followed by industries such as health care 16, 17. In the trucking industry, electronic documents and digital signatures will most probably be part of the mandatory electronic reporting for pre-notification of exports to the U.S., as required by the U.S. Customs Service18. This will require that all trans-border carriers notify Customs of shipments 30 or 60 minutes in advance of their arrival at the border.

13 Lana R. Batts. Opinion: Don't Throw That Paper Away Just Yet. Transport Topics Issue June 2 2003 pg.7 14 ibid 15 Robert Moskowitz. The complicated world of digital signatures. Network Computing. October 15, 1997, Vol. 8 , No. 19, pg. 39. 16 Mike Ryan. Get ready for secure web-based delivery; e-mailing “sensitive” documents is next breakthrough. Bank Technology News. New York: October 3, 2003, pg. 65 17 Paper-plagued to paperless. Health Managemnet Technology. October 24, 2003, pg. 52 18 Ingrid Phaneuf. It’s “survival of the fittest” as new pre-notification rules make electronic reporting mandatory. Motor Truck, July/August 2003, Vol. 72, No. 4, pg. 18


Although some carriers might use existing EDI systems to comply with that requirement, trucking firms will need to implement digital signatures to certify the pre-arrival notification documents. The necessary adoption of that technology might then diffuse to other sensitive areas, such as the ones described in previous paragraphs (scanned logbooks, toll tickets, records related to traffic accidents, inspection forms, citations and traffic violations). Since carriers will already have incurred the costs of initial set-up and adoption, they might obtain economies of scales if they expand digital signatures to other areas. Furthermore, the legal support for the use of digital signatures for trans-border pre-notification of shipments might also spread out to other areas, providing the necessary legal support for other applications of electronic documentation.

In the safety department, carriers continue to need original documents. Like IFTA, the Commercial Vehicle Safety Alliance has indicated that it is up to the individual states and localities whether to accept scanned logbooks, toll tickets, records related to traffic accidents, inspection forms, citations and traffic violations. Some enforcement tickets specifically require the original ticket be sent back with payment. The need for standards for acceptable digital documentation and uniform legislation is an imperative for the continued diffusion of these advanced technologies in the trucking industry.

A.2. Innovation, Adoption, and Diffusion of technologies based on case studies

The complex business processes involved in managing trucking have been a fertile ground for new information and communication technology applications. Over the last decade, products have moved from focusing on a single functionality to providing compatible technology solutions using multiple technologies. The systems in the market range from simple, cheap solutions to complex, expensive deployments, catering to the diverse needs of the trucking market.

The case studies below show that firms are increasingly using technology to improve and enhance business processes. The virtuous cycle of information technology innovation and deployment is evident in the industry. The cases represent in-depth applications of information technology beginning with an example of a owner operator at the forefront of technology adoption. The case studies that follow represent firms from different cross sections of the industry. Since technology is applied primarily to improve processes, the direct impact on the bottom line is hard to measure. The adoption of technology begins for some firms as a means for competitive advantage. Soon, market pressures force other firms to adopt the technology for competitive parity. These case studies illustrate the spectrum of technology adoption in the trucking industry without directly attributing enhanced performance to the phenomenon. A.2.a. A technology pioneer among owner operators

Owner operator, Tim Brady, is a pioneer in technology use among owner operators. Tim Brady has set up his own home-based company, Driver4PROFITS,


in Kenton, Tenn. He contracts with Baystate Moving Systems, a Massachusetts based agent for United Van lines. Brady and his 77.7 foot tractor-trailer primarily haul exhibits and electronic manufacturing equipment all over the United States for trade shows. Two cubic feet of Tim Brady’s cab are filled with some of his most precious cargo. His in-cab technology center provides the essential communications that keep him in business. The less-than-truckload long hauler has a Pentium computer with a DVD drive, a monitor, scanner, and printer. Brady’s set-up also includes a global positioning system and routing software. An 8.5 kilowatt generator runs the computer so that the battery of the truck does not get drained. 19

Brady uses multiple technologies to co-ordinate and to improve business and personal communications. With wireless internet access capability, Brady is able to access loads, get directions, communicate with suppliers and shippers, keep books and stay in touch with family, all from his cab. Brady also uses a cell phone to keep in touch and for some e-mail. While the cell phone and Internet are powerful tools, Brady relies on one other mode of communication that he says is well worth the price tag. His truck sports a Qualcomm satellite communications system that connects him to VanStar, a system used by United Van Lines. United Van Lines paid for the cost of the initial equipment installation, and the company pays half the monthly service fee. Brady clearly lists what space he has available and the system only notifies him when a load fits the available proportions and his equipment capabilities. All the details about the load – what, where, when, contact information and say special instructions such as required pads, straps or a lift gate are provided and Brady decides whether to accept or deny the load. Then, once the load is picked up, Brady can document who signed for it. Customers can know where their shipment is and when they can expect it to be delivered. United Van Lines customers can go to the company’s Web site to bring up the location of the truck with their load. The information is updated every half-hour. The truck’s TracStar System connects him to Dish Network and transmits instant weather, road conditions and current news.

An in cab system alerts Brady when a shipper makes a change in a load while he is en route to make a delivery. Brady also has an 800 number that shippers can call which forwards to his cell phone. With constantly updated information, Brady does not waste time going to a pickup or delivery site unprepared. With advance notice, the proper paperwork can be initiated and processed over the Internet, before Brady ever appears at the dock. Brady’s technology toolbox also has routing software, Rand McNally’s Route Tools, to list every truck stop along the way and to determine up to date construction information from the internet. Technology has allowed this owner operator to efficiently manage his business and has removed many communication constraints traditionally faced by owner operators.20

19 Howells-Tierney, Janet. The Connected Man. Transport Topics. Alexandria: August/September, 2002, pg. S12- 13 20 ibid


A.2.b. Managing a fleet of owner operators with technology

Southern Pride Trucking specializes in the transportation of critical time sensitive, high value airline, aviation, and aerospace related inventories. Satellite communications technology has allowed the company to grow from one owner operator to 70 owner operator teams while enhancing service quality for customers and improving quality of life for employees. The firm is close to virtual thanks to advances in communication technologies. With no storage facility, no warehouses, no maintenance garages, the firm has a handful of employees to manage all administrative functions. A handful of dispatchers use the Qualcomm satellite communication and tracking system to manage owner operator teams all over the country. The system tracks the location of the truck, whether the truck is in service, and whether the truck has a load. In the particular niche that Southern Pride has carved out, delays can be expensive. For example, when there is an engine failure, it costs the airlines a quarter of million dollars a day while the plane is grounded. The ability to communicate instantaneously with customers and drivers twenty-four hours a day helps the firm to respond to customer needs promptly and in a flexible manner. According to the firm’s management team and employees, technology has been the cornerstone of the company’s success.21 A.2.c. Process transparency at Fedex

A variety of technologies have been recently implemented at Fedex as part of the company’s drive to use technology for process improvement and increased customer satisfaction. In June 2000, Viking, a division of Fedex, completed a rollout of wireless handheld computer devices to approximately 1,200 of its pickup and delivery drivers. The advantage of the handheld devices is in advance planning. Viking dispatchers no longer have to wait until the end of their pickup day to see exact freight volumes. Instead, loads can be planned in advance as pickup drivers enter package specifications throughout their day. Dispatchers monitor pickups and deliveries all day without ever talking to a driver. Given the fluctuating seasonal and even weekly freight volumes, this enables Viking to allocate its equipment accurately achieving an industry leading 99% on-time record. The handheld computers work with modeling software which automatically assigns loads to the most efficient truck and driver in the system22.

The case studies illustrate how firms in the trucking industry are integrating technology into their business processes. However, as the next section shows, these firms are not the exception rather the rule in the industry. We show that information technology use is becoming widespread in the industry.

21 DeMarco, Tony. Technology drives the growth of Southern Pride Trucking. Owner Operator. March 1998. 32-36 22 Schulz John. D. ‘Brand' new system Traffic World. Washington: June 12, 2000. Vol. 262, Iss. 11; pg. 25 - 26


A.3. Adoption and Diffusion of technologies based on survey data

The usefulness and cost-benefit tradeoff of a technology determines its rate of diffusion. Several studies have been examining the rate at which technology is being diffused in the trucking industry. A paper by Regan et al. (1995) briefly describes a 1992 survey of about 300 companies, which attempted to determine carriers' propensity to use new technologies, particularly two-way communication and automatic vehicle location/identification technologies. Primary findings were that interest in technology implementation was closely linked to company size and that carriers believe that the use of communication and information technologies could improve the efficiency of their operations23. A report by Hall and Intihar (1997) presents a series of interviews with trucking terminal managers, focus group meetings with representatives of the trucking industry in California, and telephone interviews with technology providers. Their study found that trucking companies were willing to invest and participate in technology implementation as long as the investment required was modest, there were no new taxes or user fees imposed, the technologies promoted operating efficiency, customer service, or safety, and implementation was voluntary.24 Several studies of EDI use in the motor carrier industry have been conducted in the past few years. A study by Crum et al. (1998) compared two surveys of EDI capable carriers that were conducted in 1990 and 1996 and found significant increases in the use of EDI in carrier-shipper transactions during that six year period.25

During the spring of 1998, a survey of California-based for-hire trucking companies, California-based private trucking fleets, and large national carriers with operations in California was carried out by a private survey research company for the Institute of Transportation Studies at the University of California, Irvine (UCI)26. The ATA also conducted a national survey on technology use in 1994. The penetration of technology was significantly higher in the UCI study than the penetration found by the ATA study. The ATA study estimated that market penetration for mobile communications, EDI, and AVL was 46 percent, 11 percent and 2 percent, respectively, while the market penetration for companies in the UCI

23 Regan Amelia. C., H.S. Mahmassani, and P. Jaillet (1995). Improving efficiency of commercial vehicle operations using real-time information:potential uses and assignment strategies. Transportation Research Record 1493: 188-198. 24 Hall, R.W. and C. Intihar. Commercial Vehicle Operations: Government Interfaces and Intelligent Transportation Systems. California PATH Research Report UCB-ITS-PRR-97-12. (Institute of Transportation Studies, University of California, Berkeley). 1997 25 Crum, M.R, D.A. Johnson, and B.F. Allen (1998). A longitudinal assessment of EDI use in the U.S. Motor Carrier Industry. Transportation Journal. 38.1., 15-28. 26 Regan, Amelia C., Thomas F Golob (1999). Freight operators' perceptions of congestion problems and the application of advanced technologies: Results from a 1998 survey of 1200 companies operating in California Transportation Journal Spring 1999. Vol. 38, Iss. 3; pg. 57 -68


study was 80 percent, 32 percent, and 21 percent.27 However, the ATA study defined large fleets as those with more than 100 vehicles, while the University of California, Irvine (UCI) study defined large fleets as those operating 50 or more vehicles (power units) in California at one time.

Recent data gathered by the authors is consistent with the notion that technology continues to diffuse in the industry. The data that we discuss below are based on a mail survey concerning the use and impact of information technology in the trucking industry.28 We summarize results from 179 respondents (775 surveys mailed) to the survey, which provide information concerning trends in the industry. The information from the survey applies to late 1999 and early 2000. The respondents represent a cross section of the trucking industry. Segments represented include TL (40%), LTL (71%), logistics services (20%), package express (9%), and private fleet operators (30%). About 55% of the firms participate in two or more of these segments of the industry. There is also a useful size distribution of respondents, with about 65% of the respondents operating 100 or fewer power units and 35% operating more than 100 units.

First, we present some results aggregated across the six technologies described earlier: Mobile Communication Systems (MCS), Decision Support Systems (DSS), Automatic Vehicle / Equipment Identification Systems (AVEIS), Electronic Data Interchange (EDI), Bar Coding (BAR) and, Imaging Systems (IMG). After this aggregated analysis, we explore each of these systems in more depth. A.3.a Findings across the six technologies It is interesting to compare some statistics across the six technologies included in the survey. From the data, one can assess the relative use of each of these systems. Table 1 presents the number and percentage adoption of the systems by segment. Table 1: Number of firms that have adopted specific technology Segment MCS DSS AVEIS EDI BAR IMG TL 10 4 4 10 1 6 LTL 22 7 6 17 8 10 Combined 46 10 9 26 14 16 Private 30 11 8 24 15 16 Total 108 32 27 77 38 48 Percent 60% 18% 15% 43% 21% 27%

27 American Trucking Associations (1996). Assessment of Intelligent Transportation Systems/ Commercial Vehicle User Services; ITS/CVO Qualitative Benefit and Cost Analysis. Alexandria, VA 28 We conducted the survey during early 2000, with the sponsorship of the University of Michigan Trucking Industry Program (UMTIP). UMTIP receives generous support from the Sloan Foundation and from trucking industry corporations.


From table 1, one can see that for all firms by far the most prevalent technology is MCS (108 out of 179 firms or 60%) followed by EDI (77 out of 179 firms or 43%). As we will discuss in later parts of this report, MCS penetration is due to the relative inexpensive acquisition and operation of this system, mainly through the use of pagers. For EDI, the penetration is principally a result of the pressure of customers on firms to deploy this system.

Analyzing the penetration of the technologies between segments, the figures on table 2 reveal the same result. MCS and EDI systems are the most prevalent technologies in all segments of the trucking industry. Note that the adoption of the systems is quite similar within segments except for bar code use (BAR). For BAR the percentage of TL firms that have implemented it is between four and five times lower than for the rest of the segments. Since TL firms do not need to frequently transfer loads from one truck to another or consolidate different shipments, the need for administrative tracking many dispersed shipments is lower than in the rest of the segments. This makes BAR a less useful system for TL firms. Table 2: Percentage of firms by segment that use specific technology Segment MCS DSS AVEIS EDI BAR IMG TL 53% 21% 21% 53% 5% 32% LTL 61% 19% 17% 47% 22% 28% Combined 67% 14% 13% 38% 20% 23% Private 55% 20% 15% 44% 27% 29% Turning now to the question of how successfully each system has been deployed in the firms, table 3 shows that both between and within segments the success scores are essentially the same. In this question, respondents used a scale ranging from 1 = not successful deployment to 5 = very successful deployment. Table 3 indicates an average score of about 4 showing that firms believe that the technologies have been successfully deployed. Table 3: Success of technologies at firms (1 = not successful to 5 = very successful) Segment MCS DSS AVEIS EDI BAR IMG All segments

3.8 3.9 3.8 3.9 3.9 4.0

TL 3.5 3.5 3.7 3.8 5.0 4.2 LTL 4.0 4.0 4.2 4.0 4.0 4.2 Combined 3.8 4.0 3.8 3.8 4.0 4.3 Private 3.8 3.8 3.6 3.9 3.7 3.6 Now we explore in greater detail some issues for each of the six technologies. A.3.b Mobile Communication Systems (MCS)


Table 4: Most frequently reported use of MCS: percentage of firms reporting specific use among firms that have adopted the system Segment Data

communicationsVoice communications

Automatic vehicle location / position reporting

Check calls / event notification

Estimated Time of Arrival(ETA)

TL (N = 10) 50% 80% 70% 80% 50% LTL (N = 22) 41% 82% 32% 55% 41% Combined (N = 46)

46% 91% 41% 61% 46%

Private (N = 30) 34% 79% 34% 59% 45% The most frequently reported uses of MCS systems among the firms that employ them are shown in table 4. As table 4 shows, the most common application of MCS is for voice communication, consisting of cellular phones. The uses are quite similar among segments. Table 5: Importance of factors in adopting MCS (0 = not at all important to 4 = very important) Segment Competitive

Pressure Improved Business process

New Business opportunity

Customer Insistence

Improved Efficiency

Improved Reliability

Improved Overall Performance

TL 2.0 2.9 1.8 2.3 3.0 3.0 2.9 LTL 1.4 3.3 1.8 1.1 3.1 3.0 3.0 Combined 2.1 3.3 2.0 1.5 3.3 3.3 3.3 Private 1.5 3.3 2.0 1.5 3.4 3.3 3.2 Table 5 shows that across segments, the most important reason for implementing MCS is to improve business processes, efficiency, reliability and overall performance. Customer insistence is an important reason for adoption of MCS in the TL segment. The impact of MCS on different business aspects of firms is presented in table 6. This table gives the percentage of firms that having implemented the technology, responded that the new system impacted them in the specific areas outlined in the first row of the table. For example, of the 108 firms that have deployed MCS, 92 companies (85%) responded that the system improved their processes. In general (all segments) and in each segment, the most frequent impact of MCS has been to improve processes. This impact is followed by reducing costs, but this impact is significantly less. Few firms responded that the system did not have an impact on their business. Finally, it is interesting to note that the percentage of TL firms that answered that the system increased their costs (60%) is higher than that of the rest of the segments.


Table 6: Impact of the MCS on firms’ business: percentage of firms responding that corresponding impact occurred Segment No change Increased

Revenue Reduced Costs

Improved Processes

Increased Costs

Changed organizational structure and systems

All segments (N = 108)

6% 20% 39% 85% 24% 23%

TL (N = 10) 10% 20% 30% 80% 60% 30% LTL (N = 22) 5% 9% 36% 91% 14% 9% Combined (N = 46) 7% 30% 39% 76% 26% 22% Private (N = 30) 3% 10% 43% 93% 17% 33% A.3.c. Decision Support Systems (DSS) Table 7: Most frequently reported use of DSS: percentage of firms reporting specific use among firms that have adopted the system Segment On-time pick up

data from customerOn-time delivery data

Data on commitments to Customer

Equipment utilization data

TL (N = 4) 50% 50% 75% 75% LTL (N = 7) 43% 43% 14% 57% Combined (N = 10)

50% 80% 60% 40%

Private (N = 11) 27% 55% 36% 36% The most frequently reported uses of DSS systems among the firms that employ them are shown in Table 7. On-time delivery and equipment utilization appear to be the most frequent uses for DSS. Table 8: Importance of factors in adopting DSS (0 = not at all important to 4 = very important) Segment Competitive



Customer Insistence

Improved Efficiency



TL 1.5 3.0 1.0 2.0 3.0 2.8 3.3 LTL 1.5 3.0 1.0 0.9 2.9 2.3 3.1 Combined 1.9 3.6 2.6 1.9 3.8 3.8 3.7 Private 2.1 3.3 2.3 1.6 3.2 2.9 3.1 Table 8 indicates that improving overall performance, business processes and efficiency are the most important factors that influenced firms in the adoption of DSS.


Table 9: Impact of the DSS on firms’ business: percentage of firms responding that corresponding impact occurred Segment No change Increased


Improved Processes

Increased Costs



6% 30% 67% 76% 18% 36%

TL (N = 4) 0% 25% 75% 75% 0% 50% LTL (N = 7) 14% 29% 86% 86% 14% 14% Combined (N = 10) 0% 30% 70% 80% 40% 70% Private (N = 11) 9% 36% 55% 73% 9% 18% Table 9 presents the impact of DSS on the firms’ business. Similar to the responses on MCS, most companies answered that improving processes and reducing costs are the major impacts of DSS on firms’ business. A.3.d. Automatic Vehicle / Equipment Identification Systems (AVEIS) The most frequently used applications for AVEIS are presented in table 10. “Equipment availability” and “Key Vehicle Operating Statistics “are the most repeatedly use of AVEIS at Private fleets, whereas “Automatic toll payment” is the system used most at TL firms. Private fleets frequently use AVEIS for collecting key vehicle operating statistics, while no TL and LTL reported using this system for this purpose. Table 10: Most frequently reported use of AVEIS: percentage of firms reporting specific use among firms that have adopted the system Segment Equipment

availability Automatic Toll payment Key Vehicle Operating Statistics

TL (N = 4) 25% 50% 0% LTL (N = 6) 33% 33% 0% Combined (N = 9)

22% 22% 22%

Private (N = 8) 50% 13% 75% Following the same pattern of the previous technologies, table 11 shows that improving efficiency, business processes and overall performance, and improving reliability are the dominant factors influencing the adoption of AVEIS system. Table 11: Importance of factors in adopting AVEIS (0 = not at all important to 4 = very important) Segment Competitive



Customer Insistence

Improved Efficiency




TL 1.3 3.0 0.7 1.7 3.0 2.0 2.7 LTL 0.0 3.6 0.3 0.3 3.4 3.0 3.5 Combined 1.0 3.2 0.7 0.6 3.8 2.9 3.3 Private 1.8 3.3 1.9 1.5 3.3 3.1 3.0 Respondents stated that AVEIS had the most impact on “Improved processes” and “Reduced costs” as shown in Table 12. A noticeable difference between AVEIS and the other technologies discussed thus far is that the percentage of firms reporting an increase in revenue attributable to the adoption of the technology is substantially lower for AVEIS than for MCS and DSS. Table 12: Impact of the AVEIS on firms’ business: percentage of firms responding that corresponding impact occurred Segment No change Increased


Improved Processes

Increased Costs



12% 8% 60% 76% 20% 8%

TL (N = 4) 0% 0% 25% 50% 50% 0% LTL (N = 6) 33% 0% 33% 50% 0% 0% Combined (N = 9) 0% 11% 67% 100% 22% 11% Private (N = 8) 13% 13% 75% 63% 13% 13% A.3.e. Electronic Data Interchange (EDI) Table 13: Most frequently reported use of EDI: percentage of firms reporting specific use among firms that have adopted the system Segment Shipment Info.

(bill of lading) data from customer to carrier

Shipment Status or tracing requests from customer to carrier

Freight details and charges from carrier to customer or freight payment agent

Freight payment details and remittance advice from customer, bank or freight payment agent to carrier


81% 62% 85% 62%

Private (N = 24) 57% 43% 57% 48% The most frequent uses of EDI as shown in Table 13 reveal that applications of EDI entailing the transfer of information from customer to carrier are used more frequently than the transfer of information from carrier to customer. Table 14: Importance of factors in adopting EDI (0 = not at all important to 4 = very important)


Segment Competitive Pressure

Improved Business process


Customer Insistence

Improved Efficiency



TL 2.4 2.6 2.3 3.6 2.6 2.6 2.4 LTL 2.4 2.9 2.1 2.8 2.6 2.7 2.6 Combined 2.7 3.0 2.6 2.6 3.2 3.0 3.1 Private 3.0 3.6 3.0 2.9 3.4 3.3 3.3 Regarding the important factors that influenced firms’ adoption of EDI, Table 14 reveals that again improving business processes, efficiency and overall performance are important factors. In contrast to MCS, DSS and AVEIS, for EDI customer insistence and competitive pressure are also very important factors across all segments. Table 15 shows improved processes, reduced costs, and increased revenue are the most frequently cited impacts of EDI on a firm’s business. Table 15: Impact of the EDI on firms’ business: percentage of firms responding that corresponding impact occurred Segment No change Increased


Improved Processes

Increased Costs



9% 37% 43% 76% 24% 22%

TL (N = 10) 30% 20% 30% 50% 10% 30% LTL (N = 17) 6% 29% 41% 82% 29% 12% Combined (N = 26) 8% 42% 46% 85% 31% 23% Private (N = 24) 4% 42% 46% 71% 17% 25% A.3.f. Bar Coding (BAR) Table 16: Most frequently reported use of BAR: percentage of firms reporting specific use among firms that have adopted the system Segment Shipment

tracking Package tracking Automated Data input applications

TL (N = 1) 0% 100% 100% LTL (N = 8) 88% 38% 38% Combined (N = 14)

57% 43% 50%

Private (N = 15) 57% 36% 71% For TL firms use of BAR technology, shown in Table 16, seems to focus on “package tracking” and the “automatic input of data” with little use for “shipment tracking”. Conversely, in LTL firms BAR is mainly aimed at “shipment tracking”.


Table 17: Importance of factors in adopting BAR (0 = not at all important to 4 = very important) Segment Competitive



Customer Insistence

Improved Efficiency



TL 0.0 4.0 2.0 1.0 4.0 4.0 3.0 LTL 1.9 3.9 1.4 1.0 3.9 3.9 3.8 Combined 1.8 3.8 2.1 2.3 3.6 3.7 3.5 Private 1.8 3.3 2.4 1.8 3.2 3.2 3.2 Analyzing the factors that influenced the adoption of BAR, Table 17 reveals that improving business processes, efficiency and reliability are the most important. Finally, the most cited impacts of BAR on firms’ business are the same as the ones for the other technologies. As Table 18 shows, improved processes and reduced costs are the most cited impacts on firm business practices. Table 18: Impact of the BAR on firms’ business: percentage of firms responding that corresponding impact occurred Segment No change Increased


Improved Processes

Increased Costs



3% 16% 70% 84% 8% 41%

TL (N = 1) 0% 0% 100% 0% 0% 0% LTL (N = 8) 0% 13% 75% 75% 0% 25% Combined (N = 14) 0% 14% 86% 79% 7% 43% Private (N = 15) 7% 20% 47% 93% 13% 47% A.3.g. Imaging Systems (IMG) Table 19: Most frequently reported use of IMG: percentage of firms reporting specific use among firms that have adopted the system Segment Imaging Trip sheets Imaging Freight

bills Imaging Proof of delivery

Imaging Claims


81% 69% 75% 44%

Private (N = 16) 13% 6% 9% 4% The most frequent uses of IMG are presented in Table 19. The data show that imaging is used primarily in LTL and Combined fleets. Imaging trip sheets and imaging proof of delivery appear to be the most frequent uses of imaging systems.


Table 20: Importance of factors in adopting IMG (0 = not at all important to 4 = very important) Segment Competitive



Customer Insistence

Improved Efficiency



TL 2.2 3.3 1.3 1.3 3.5 3.3 3.2 LTL 1.6 3.9 1.7 1.3 3.7 3.7 3.4 Combined 1.8 3.4 1.5 1.4 3.7 3.6 3.5 Private 1.3 3.7 1.3 1.2 3.4 3.0 3.6 The data in Table 20 suggest that improving business processes, efficiency, overall performance and reliability are the factors that principally influenced firms in adopting IMG technology. This result is similar to the reasons expressed for the adoption of previously discussed technologies. The reported impacts of IMG on firms’ business (Table 21) also reveal a similar pattern as the one for previously analyzed technologies. Here again, improved processes and reduced costs are the most cited impacts on firm business practices. Table 21: Impact of the IMG on firms’ business: percentage of firms responding that corresponding impact occurred Segment No change Increased


Improved Processes

Increased Costs



6% 6% 72% 79% 6% 40%

TL (N = 6) 0% 17% 50% 83% 17% 33% LTL (N = 10) 0% 10% 80% 100% 10% 10% Combined (N = 16) 6% 0% 75% 81% 0% 56% Private (N = 16) 13% 6% 69% 56% 6% 44% In summary, the use of technology has become widespread in the trucking industry. Firms are using technology to refine processes, cut costs, and increase revenue. In modern times, the technology trajectory has been steep and new technologies and products are being introduced rapidly. Already EDI and bar code technology are being made obsolete by new contenders such as web based EDI and RFID. The challenge for trucking organizations has been to distinguish the difference between what technology can do and cannot do. A strong technology base is as important—or sometimes more important—than the ability to just move the freight and the choices made in this area could mean the difference between survival and extinction.


B. Internet Usage in Trucking29

The chain that holds the trucking process together is information. As the previous section has shown, technologies that enable increased and accurate information throughout the trucking value chain are the ones that are being widely adopted. The internet has the potential to improve the efficiency and productivity of firms in the industry due to increased transparency of information for trucking firms and their customers. Three independent sources confirm that the internet is widely used in the industry. First, the ATA Foundation and the National Private Truck Council conducted a survey of internet usage in 1998. The ATA survey found that 51% of TL carriers were using internet technology in 1998 compared to 11% in 1996. Among the LTL carriers, 61% were using internet technology in 1998 compared to 14% in 1996.30 Second, more recent information on internet use in trucking comes from a mail survey the University of Michigan Trucking Industry Program (UMTIP) concerning the use and impact of information technology in the trucking industry in early 2000.31 Based on 179 respondents (775 surveys mailed), we found that 75% of the responding firms use the internet (79% of the TL firms, 72% of LTL firms, 75% of the firms that participate in more than one segment, and 75% of the private fleets). Third, in August 2000, we searched the web for public internet sites at 132 for-hire trucking firms for which we had 1999 Form M data. Of these firms, 80% had public web-sites in August 2000 (75% of 97 TL firms; 95% of 24 LTL firms; 82% of 11 firms that operated in multiple segments). Thus, the two sources of recent information provide similar estimates of current web-usage rates by trucking firms (75% in our survey from early 2000, 80% in our search of the web in August 2000). The results of a survey released by Morgan Stanley Dean Witter in October 2000 indicate that 44% of shippers felt that a freight transport provider must have e-commerce connectivity in order to bid for their business. Respondents indicated that most of the internet applications were developed internally by the trucking firm (78%), sometimes in conjunction with consultants. Our conversations with trucking firm managers suggest that the nature of the trucking industry requires company specific knowledge to develop effective

29 This section draws from two earlier publications by the authors : Nagarajan, A., E. Canessa, W. Mitchell, and C.C. White III. “Trucking Industry: Challenges to Keep Pace”. In The Economic Payoff from the Internet Revolution. Eds. Robert E Litan and Alice M Rivlin. Washington D.C.: Brookings Institution Press 2001 and Nagarajan, A., E. Canessa, W. Mitchell, and C.C. White III. “e-Commerce and Competitive Change in the trucking industry”. In Tracking a Transformation: e-Commerce and the terms of competition in industries. BRIE-IGCC E-conomy project. Washington D.C.: Brookings Institution Press 2001 30 Daniel P. Bearth. Industry Use of Internet Blossoms. Transport Topics. July 31, 2000 p 18 31 We conducted the survey during early 2000, with the sponsorship of the University of Michigan Trucking Industry Program (UMTIP). UMTIP receives generous support from the Sloan Foundation and from trucking industry corporations.


internet applications, at least at this early stage of internet diffusion. As Shulz notes, “the Internet is the new ante needed just to play the freight transport game.”

32 The key reason that the internet is affecting the industry stems from the

availability of more detailed information to customers and competitors about goods and services, prices, and timing. Firms are changing the way they gather, process, and disseminate information. The changes in information result in both potential for greater efficiency in traditional transportation activities and in the creation of demand for new types of transportation activities. The immediate consequences of increased dissemination of information include greater price pressure and greater incentives for efficiency. In addition to greater efficiency of traditional services, though, increased information is also leading to more fine-grained market segmentation, as well as to demands for new goods and services by trucking companies.

In section B.1 we present vignettes of how firms in the trucking industry are using the internet to exploit existing opportunities and to explore new opportunities. Section B.2 presents data on the internet's impact on firms in the industry based on our survey. We illustrate that the internet is transforming the way firms do business as it becomes increasingly ubiquitous in the trucking environment. B.1 Vignettes Of How Firms In The Trucking Industry Are Using The Internet

With the demands for greater speed, reliability, efficiency and innovative services, the internet is causing substantial pressure on the capabilities of trucking companies. Firms are able to respond to some demands through incremental expansion of their existing expertise. We illustrate such changes with the example of ABF Freight. The introduction of the internet has required major changes in business routines and resources33. Arnold Industries and UPS are examples of firms that are exploring new opportunities by both building on its existing repertoire of skills and acquiring new skills. In some cases, new skills and opportunities are redefining the business. The freight-broker segment is an example of business transformation. Incumbents such as DAT and Transplace.com have combined existing skills, assets, and intangibles such as reputation with new technology and new skills to dis-intermediate the brokerage business. However, interesting new business models have also emerged. Some such as NetTrans, the Internet Truck Stop, and freightquote.com enable freight brokers and owner operators in their load matching activities. Others such as the industry entrant Nistevo are exploiting latent needs among shippers to create private exchanges to improve transportation outcomes.

32 Schulz John D. It’s Adult Swim Time. TrafficWorld October 30, 2000 pg 31 33 Karim, S. and W. Mitchell. (2000). Reconfiguring business resources following acquisitions in the US Medical Sector, 1978-1995. Strategic Management Journal (special issue on the Evolution of Business Capabilities: 21 (10-11) pp 1061-1081


B.1.a Firm level transformation in response to internet-enabled opportunities B. 1. a. i. ABF Freight

ABF Freight System is an example of a firm that gradually exploited the web to improve its existing capabilities. Starting about 1994, ABF initially offered downloadable personal computer rating software, along with routing and zip code directories, and general marketing information. Since then ABF has added a rating guide, shipment tracing, the ability to create bills of lading online, and the ability to request pickups online. ABF also offers customer-specific pricing quotations over the internet. In 1998, the company introduced an ABF Toolkit to help customers navigate through the site. Customers were also able to retrieve shipping documents, as well as review loss and damage claims online. In 1999, ABF introduced “Transparent Direct Links”, which enables shippers to incorporate data from ABF's internet site directly into their own site. In January 2000, ABF introduced the “Shipment Planner”, which is a patented program that displays shipment reports on a calendar, and the “Dynamic Rerouting” module, which is a program that allows customers to re-route in-transit shipments. ABF has made the internet a focal point of their growth strategy. The company has expanded and exploited existing capabilities to improve both its interactions with customers and its internal processes34. The impact of the actions taken by ABF will be felt primarily by their business customers particularly in the areas of “just in time” and “lean” manufacturing.

B. 1. a. ii. Arnold Industries and UPS

Arnold Industries illustrates a trucking company that is exploring the new competitive environment and redefining the boundaries of the services it offers in the internet-enabled economy. Arnold Industries has long been a profitable LTL company. During the 1990s, the company has expanded into the regional TL segment by acquiring TL firms. The company is now combining its trucking and warehouse operations to offer one-stop order fulfillment services for e-tailers and mail-order catalog companies. These services include order processing, inventory management, and small package shipping. In this process, the company has transformed its business to improve its ability to fill orders quickly and precisely. The firm has turned its warehouses into logistics hubs where more than six hundred people are involved in the order fulfillment process. The process involves receiving goods from manufacturers or suppliers, processing, packaging, and delivering to customers. Arnold Logistics, a subsidiary, also provides value-added services by comparing freight rates and handling customer returns. Further, the company takes online orders on behalf of its shippers and also provides live-chat and e-mail support for customers.

34 Bearth, Daniel P. “ABF Website wins Kudos” Transport Topics, July 31, 2000 Page 16


The traditional LTL and TL segments of Arnold Industries have benefited from the new business activities, because shipments to the firm’s logistics warehouses use TL and LTL services. In addition, and at least as importantly, the company has gained substantial expansion into new transportation services that emphasize information management rather than physical handling of goods. Thus, Arnold Industries has transformed the company’s definition of the transportation business to extend far beyond movement of freight. The firm has leveraged its knowledge and expertise to become “an information transfer point” in the new economy35.

Several examples involving UPS further illustrate how trucking companies are integrating themselves into the web of internet activities. UPS dominates shipping from internet retailers. For instance, UPS delivered 55% of the goods ordered online in the 1998 Christmas season. UPS’s relationship with Nike demonstrates the basis of UPS’s success. In order to expedite the order-to-delivery process for Nike.com, UPS stocks Nike shoes and warm-ups in its Louisville warehouse and fulfils customer orders hourly. Indeed, UPS plays a direct role in the order process, as well as in delivery, because a UPS call center in San Antonio handles Nike.com customer orders. Consequently, Nike saves on overhead costs and, most importantly, achieves quick sales turnaround.

In each of these examples, similar to the Arnold Industries example, UPS is extending its activities far beyond traditional movement of goods. Rather than simply being a “package express” shipper, the company is undertaking many business processes, ranging from receiving customer orders, warehousing goods, and coordinating after-sales services. Such business transformations mark both changes in the services that companies such as Arnold Industries and UPS offer and a redefinition of trucking industry boundaries. As the boundaries between transportation services become increasingly blurred, firms that provide logistics and package express services are now central to the industry. B.1.b. Industry level transformation in response to internet-enabled opportunities – the freight broker segment

The key direct impact that increased electronic information is having on the trucking industry involves load-matching and volume discounts. The strongest challenges are arising for freight brokers, who have provided these services to trucking companies and their customers in the past. In the trucking industry, productivity gains, given legal restrictions on size and weight, come mainly from two sources: (1) fewer empty miles and/or higher cubic space utilization,36 and (2) less waiting time at the dock. The trucking industry is fragmented and geographically dispersed, as we noted in the prior section, so that coordination of

35 Bearth, Daniel. “Arnold Industries hits vein in logistics” Transport Topics. January 24, 2000 pp 10-12 36 Space utilization is particularly important for LTL shipments, but also applies to TL carriers. The need to eliminate empty miles applies to both segments.


disparate fleets and drivers is critically important. Load-matching services provide information that matches available shipments with trucks that have available cargo space, in order to increase trailer utilization and decrease waiting times.

Freight brokers note that the internet is challenging their business model. In shipper-driven brokerage substitution, the internet enables many shippers to post loads and solicit competitive bids directly from carriers, which use the internet to identify backhauls. This process combines load-matching with competitive pricing. In the process, the shipper receives the advantage of a low bid and the carrier increases productivity by reducing empty miles. Shippers function as their own brokers, dealing directly with freight companies. However, as internet business models have matured, the internet has proved to be a friend and a foe to the freight broker.

The geographical dispersion of the trucking industry makes it a natural application for the integrative powers of the internet. A number of Web-based exchanges sprung up in the heyday of the internet boom, all attempting to generate an open, efficient spot market for freight. Mimicking the larger industrial landscape, many of the internet sites are now defunct, without ever achieving the critical mass of shipments and carriers needed to become a viable and reliable source of load matching and backhaul freight. A few survived, however, by attracting enough freight to reach that critical mass or by evolving into new types of online freight tendering and management systems. The term "online exchange" has come to cover a wide range of business models in trucking. It includes sophisticated systems for developing and managing long-term freight agreements, and private trading groups that offer e-commerce tools for shipper and carrier partners37. We begin by presenting the emergence of simple electronic load posting boards such as freightquote.com. Some trucking industry incumbents are exploiting their existing capabilities and physical assets to extend into the information brokerage segment of the industry, as exemplified by DAT services and Transplace.com, while Nistevo is an example of an industry entrant who is using the internet to integrate information and conduct e-commerce. B.1.b.i –Freight broker enabler - Electronic load boards The simplest of these exchanges are Web-based load matching operations, providing online access to a backhaul spot market as a single core service. Often known as load boards or freight bulletin boards, those that survived the initial shakeout remain among the most well known Web services for the industry. Contrary to expectations, the freight matching sites have not replaced freight brokers. Instead of being dis-intermediated by online load matching services, freight brokers have become the primary customers for them. According to Darren Brewer, founder of NetTrans, “When we started NetTrans (www.nettrans.com) in 1996, we thought our customers would be shippers and mid- to large-size carriers. But shippers haven't wanted to use [the load board], so virtually all of our freight

37 Mele Jim. Surfing for freight Fleet Owner June 2002 Vol. 97, Iss. 6; pg. 84-87


comes from brokers. Broker freight is less profitable, and our core carriers tend to be smaller fleets with 10 or fewer trucks and owner-operators because they can't afford a sales staff to generate their own backhauls”. The Internet Truckstop (www. internettruckstop.com) is another well-established and successful load board that generally connects smaller fleets to freight offered by brokers and third-party logistics providers. "A freight exchange is a dating service,". says founder and president Scott Moscrip "We introduce you to people outside your circle. Small fleets [use an exchange] because they don't have a sales staff. They can't afford to pay someone to make those introductions." In general, these load matching services are ideally suited to owner operators and carriers who do not have contacts in a specific area and would like to use the online exchange to reduce deadhead miles.38

Freightquote.com is another successful internet-based info-mediary that specializes in the trucking industry. Freightquote.com began, not with the notion of becoming the cheapest shipping option online, but with the desire to become the one-stop shop for shippers using multiple modes and seeking a simpler way to handle transportation. Customers found that the rates at freightquote.com were surprisingly attractive. Managers at shipping companies also found the consolidated billing and elimination of rate shopping to be time and money savers. Freightquote.com, while continuing to expand its vendor base, is careful to team only with companies that have technological know how and are reputed and reliable. All communication between freightquote.com, the carrier, and the shipper is done electronically. The shipper also has real time tracking facilities at freightquote.com. Freightquote.com targets smaller shippers that do not have enough volume to negotiate discounts on their shipments. On its internet site, shippers can identify prices and order deliveries. Membership is free for shippers, although membership information provides freightquote.com with valuable shipper and carrier data. Shippers pay a fee each time they use the service to ship a load of goods. Freightquote.com strikes the deals with carriers, provides all the technology interfaces, fields customer service questions, handles arrangements for pick-up, paperwork, and billing online. Shippers receive one bill no matter how many different carriers and shipments were made in a given month. While the number of internet brokerage sites popping up on the internet is intimidating, freightquote.com’s business model differs from the typical auction/brokerage site. Freightquote.com acts as a facilitator, a broker, and a solutions provider39. This scenario provides a critical role for freight brokers in the changing industry, unlike the emergence of shipper-driven brokerage substitution. Brokers are now required to develop information technology skills and management abilities.

38 ibid 39 Krause, Kristin S. The Missing Piece. TrafficWorld. April 3, 2000. 28-30


B.1.b.ii – Incumbent response to internet opportunities – a firm effort DAT Services Incumbents in the load matching business such as DAT services have had to dramatically alter their business model or face the threat of extinction. DAT Services began load matching services by pinning up printed listings on real, not virtual, bulletin boards located in truckstops. Eventually they replaced the cork boards with video screens and Internet terminals. Now part of TransCore Inc., the traditional DAT service is still the leader in load exchanges with a monthly subscription base nearing 20,000 users. However, the company has also begun moving beyond simple load matching over the Web to what it calls the TransCore Exchange at www.transportationsoftware.com. With a freight board, the carrier identifies a load online and then negotiates rates over the telephone. With TransCore Exchange, the Internet is used as the negotiation and confirmation tool. Nearly the entire bill of lading is built online. The advantages to moving to electronic transactions are that the processes are completed in a fast and efficient manner and costs are reduced by eliminating redundant data entry and decreased telephone bills. The TransCore Exchange also addresses the service level issue by allowing brokers and other freight intermediaries to create private trading groups. Instead of a load being posted on an open board, the group structure allows users to simultaneously offer it to all their core carriers. Once again, freight brokers are the segment that most directly benefit from the TransCore Exchange. They are able to put together a group of trusted carriers and offer them loads that meet their requirements. If the core carriers pass on a particular load, it can then be offered to all the carriers participating in the exchange or posted on the traditional DAT board at the truckstops.

National Transportation Exchange (NTE) of Downers Grove, IL (www. nte. net) is another successful marketplace. There's no cost to join, but carriers must meet the eligibility requirements and abide by the marketplace's governing rules, which include maintaining their commitment to pick up and deliver loads on time. NTE pays them directly for their freight movements within the marketplace. NTE also sets up private communities or collaborative exchanges. Customers pay a small monthly or transactional fee and the payback is rapid since the firms do not have to invest in hardware, software, and personnel.40 B.1.b.iii – Incumbent response to internet opportunities – a co-operative effort Transplace.com

40 Cullen, David. Look out: Don't miss the benefits of exchanging freight over the Internet Fleet Owner. Nov 2001. Vol. 96, Iss. 11; pg. 23, 3 pgs


Cooperation in the trucking industry reached new heights when six of the largest publicly-held TL carriers formed a new alliance called Transplace.com to explore new web based business opportunities. Transplace.com is an example of how industry incumbents are combining asset rationalization and the management of information to gain efficiencies. The objective of Transplace.com is to create a high volume freight network that will increase equipment utilization for fleets and reduce waiting time for drivers. Transplace.com serves as an information aggregator in the fragmented truckload sector, with its tens of thousands of competitors, by helping both shippers and carriers to match loads and rationalize capacity. The venture combined the firms’ logistics services. The founding firms hope to leverage their bricks and mortar experience, their physical assets, their industry-specific information technology expertise, their brand equity, and their customer relations in the electronic market-space. The six firms, among the largest publicly held TL carriers, that combined their expertise in regional and national truckload freight movement include Covenant Transport, J.B. Hunt Transport Services, M.S. Carriers, Swift Transportation, US Xpress and Werner Enterprises. In addition to providing logistics services, Transplace.com negotiates discounts for fuel, equipment, maintenance and parts, insurance, credit, and other services for its equity partners and other carriers that choose to join the purchasing co-operative.

B.1.b.iv –A new business model exploiting internet opportunities Nistevo The importance of private networks to the trucking industry is evident from the success of Nistevo Corporation. Nistevo sets up collaborative logistics networks for shippers and carriers with existing relationships. It was recently featured as a “Forbes.com Best of the Web” for its unique and successful business model41. Headquartered in Minneapolis, the company was formed in 1998 with its first online customer, Monsanto and has since expanded to provide an Internet infrastructure for a number of shippers who can set up private or semiprivate networks using Nistevo technology. In this sense the Nistevo system differs from other online marketplaces such as the National Transportation Exchange discussed above since it specializes in setting up closed marketplaces for individual shippers or groups of shippers. Initial figures show that the business case for load planning using the online network can be strong. Its subscription-based service helps ground-transport carriers eliminate "deadhead" miles by matching clients' routes and optimizing truck capacity.

Upon signing up with Nistevo, subscribers enter their shipping rules into the system. Each carrier's agreed-upon rate, committed quantity, service levels, ranking and equipment usage profile is maintained in the database. Based on these parameters, the system enlists its carrier and mode selection engines to determine which carriers are eligible to take a given shipment. In accordance with users' pre-

41 Forbes.com Best of the Web Summer 2003 B2B directory Logistics and Transportation available at http://www.forbes.com/bow/b2b/industry.jhtml?id=13

http://www.forbes.com/bow/b2b/industry.jhtml?id=13


programmed instructions, it then tenders the shipment to a single most appropriate carrier or to multiple carriers. Once a shipment has been assigned, shipper, carrier and consignee alike can establish pickup and delivery appointments and track each movement of freight. Shipment status is updated in adherence with subscribers' rules. An "active event notification" alerts the appropriate individuals-transportation manager, customer service representative or customer - should delivery status be affected by such circumstances as late departures, weather delays and equipment problems.

Additionally, the system features automated load-building and sophisticated reporting capabilities. Statistics that appear on users' computer screens show loading and routing efficiencies as shipments are added. An optimal load planner geared toward higher-volume facilities automatically builds full or LTL shipments, taking into account any preprogrammed operating constraints. Resulting load plans, which contain summary and detail statistics, may be edited manually before execution. Subscribers can enlist the system to share assets with other shippers, in the form of static or dynamic tours, continuous moves or the filling of backhauls. Performance may be benchmarked against the combined performance of all Nistevo members42.

Within the exchange individual members choose which companies they wish to partner with. The partners establish rules of engagement beforehand, so that each company knows what truck space it is entitled to in a given situation. Nistevo.com then builds these rules into the operating system. Carriers get the opportunity to show whether they are available for another load. A member is given first refusal according to the rules of engagement, and if it does not need the space, the opportunity is passed on to its partners and then on to all alliance members should the partner companies not be interested in booking the carrier.43

The consumer packaged-goods market is a good fit for the system since players in this sector tend to have long, fairly complex supply chains. An alliance of 12 companies in the consumer packaged-goods business is testing a semiprivate online exchange that enables members to share truck capacity by using the Internet to monitor space availability. The network, which is hosted by Nistevo.com, is a variation on the business-to-business online exchange theme, in that it uses the Internet as a communications infrastructure, but within a trading community that is limited to complementary businesses. The project was initially launched, when General Mills, The Pillsbury Co., Land O'Lakes, Graphics Package Corp. and Fort James Corp. announced an alliance to create the Internet-based logistics exchange. Later seven more companies joined the group: Nestle USA, Nabisco Inc., ConAgra Inc., McCormack & Co. Inc., Hormel Foods, International Multifoods and IVEX Package Corp. The participants use the exchange to match product shipments and destinations with available trucks. By better utilizing truck capacity, empty backhaul mileage is reduced and the shippers can improve load planning. General

42 Ross Julie Ritzer A shipper connects to the Internet. Transport Topics March 10, 2003, Iss. 3527; pg. S14 -17 43 Cottrill Ken. Sharing the load. Traffic World. Washington: July 31, 2000 Vol. 263, Iss. 5; pg. 15-16


Mills estimates that it can achieve total logistics costs savings of 4 percent to 7 percent a year.44 For example, by combining the freight and the lanes from scattered routes of Georgia Pacific and General Mills, Nistevo was able to create one regular eight day circuit for a truck handling a full load and far less deadhead travel. This combination saved the two companies $731,000 a year, about 19% less than the previous year. Further, by making the circuit a dedicated route, drivers were able to work on a more regular, predictable schedule45,46.

The examples in this section illustrate the manner in firms in the industry are able to exploit efficiency opportunities because of the information and communication enabled by the internet. Services that offer to match loads with empty trucks have been around for years, but the rapid spread of Internet communications seemed to hold great promise as a cost-effective tool for finding those elusive backhauls. Firms in the trucking industry operate in an environment of tight margins. Efficiencies, offered by the examples discussed above, in terms of load matching, reduction of empty backhauls, volume efficiencies in purchasing and negotiating, and other value added services should help improve profitability in the truckload sector. Brokers must be able to provide new information through new media. In parallel, trucking companies must develop skills that allow them to identify and negotiate shipments that are now available because of the increased information. Key capabilities include information technology skills and organizational skills. The new information-based brokerage environment allows some incumbents to use inherent strengths and capabilities to exploit new opportunities and opens the door for new entrants with skills appropriate for the new competitive landscape to explore new business models.

B.2. Survey Data On Internet Usage In The Trucking Industry

In order to investigate the most recent internet technology adoption practices in the trucking industry, we conducted a survey of trucking firms that we noted in the prior section. Our goal was to identify how the firms are using internet technology, and to gain an understanding of how early internet usage is affecting firm performance and profitability. Some of our internet related findings are presented here.

As we noted earlier, 75% of the respondents report at least minimal internet activity by early 2000. At the same time, however, the impact is at very early stages of both investment and customer activity. The firms on average devoted only about 12% of their investment in new technology on internet-related projects. Internet sales activity is even lower, also, as on average the firms with

44 ibid 45 Reiskin, Jonathan S. Trucking Firms tout their products as able to boost trucking productivity. Transport Topics. May 28, 2001. Pgs 2, 31. 46 Ross Julie Ritzer A shipper connects to the Internet. Transport Topics March 10, 2003, Iss. 3527; pg. S14 -17


internet activity procured only about 5% of their shipments by the internet in 1999. Thus, although internet applications are diffusing widely among trucking firms, they still account for only small parts of the firms’ business activities. We also present data on the association between internet use, change of business activities, and firm performance. The data suggest that the internet is having greater impact on business activities that enable growth than on cost reduction. B.2.a. Internet applications

Table 22 lists the most frequently used applications of the internet. As we noted earlier, most firms use the internet to exploit many aspects of their existing capabilities and improve customer relationships and internal processes. In addition, many firms go beyond skill exploitation and look for new ways to identify new markets and customers using the internet as a springboard. Accordingly, we classify the features in one of three categories -- “Exploration”, “Exploitation of existing skills: Customer-related”, and “Exploitation of existing skills: Process-related” -- to understand how firms are using the internet. The most common exploration features in Table 22 are attracting new customers (72%), followed by service customization (27%). The most commonly used skill exploitation features that firms use to improve the customer experience are (1) marketing services (75%), followed by (2) online shipment orders from existing customers (37%), (3), online pricing and rating software (31%), and (4) freight pick up request (29%). The most commonly used skill exploitation features for internal process improvement are office communications (61%), followed by recruiting drivers (39%) and recruiting personnel other than drivers (37%). The central conclusion is that firms are using internet applications both to enhance many types of existing skills and to explore new opportunities.

Table 22 – Internet Applications available at US Trucking Firms Internet Application Firms with application (percent) 1. Exploration Attracting new customers 72 Service customization 27 2. Exploitation of existing skills: Customer-related Marketing your company’s services 75 Online shipment orders from existing customers 37 Online pricing and rating software 31 Freight pick up request 29 Dedicated customer service 26 Cargo claims status 16 Offering special discounts 10


3. Exploitation of existing skills: Process-related Office communications 61 Recruiting drivers 39 Recruiting personnel other than drivers 37 Real time shipment tracking 30 Forms and permits 30 Online bill of lading and proof of delivery 28 Load viewing and availability 23 Recruiting owner operators 18 Online bill payment 17 Real time routing 14 Real time trailer tracking 12 Posting real time driver schedules 10

Source: UMTIP survey of U.S. trucking firms. The table shows results from 130 respondents who reported at least one Internet application

B.2.b. Internet applications Impact on business functions

Trucking firms are using the internet in many ways. The internet helps firms explore new opportunities by aggressive sales and marketing. By providing immediate access to customers about routine information and documents, the internet allows marketing personnel time to offer timely service to existing customers and to explore venues for new markets and growth. Trucking firms as the physical conduits of e-commerce have access to customer specific data. Trucking firms are combining new data management capabilities, network management capabilities, and existing warehouses and mobile assets to offer integrated transportation services within the supply chain. The internet also allows firms to exploit existing skills by improving the quantity and quality of information available to customers in real time and in a customized manner.

The internet has also become instrumental in process improvement. The incremental cost of transacting on the internet is as much as fifteen times less expensive than paper transactions and trucking firms are aggressively moving to the net, in some cases replacing existing systems and in many cases creating new electronic interfaces. For instance, traditional electronic data interchange (EDI) services such as load tendering, status reporting, and invoicing cost thousands and tens of thousands of dollars to set up and run, while also requiring substantial ongoing effort to maintain inter-firm system compatibility. These costs and difficulties inhibited adoption of EDI systems by small carriers and, in turn, the limited adoption hurt the capability of small carriers to work with large shippers that mandated EDI transactions. Now, some shippers are using systems that allow EDI transactions over an Extranet, which is a secured internet location that reduces set up costs. Still in its nascent phase as discussed earlier, web-based EDI systems


require manual entry and have not yet been widely adopted, but the potential low cost and standardized accessibility of EDI over the internet levels the playing field for carriers that had been excluded from many freight opportunities earlier. Smaller firms are also able to obtain loads and conduct more business due to the freight matching transparency of the internet.

Table 23 – Use of Internet for Business Functions 1999-2000 Business Activity Mean effect 1. Exploration Variety of services increase 2.3 Customization of services 2.3 2. Exploitation of existing skills: Customer-related Company image enhancement 2.8 Exchange of information with shippers and consignees

2.7

Market share 2.0 3. Exploitation of existing skills: Process-related Process improvement 2.6 Exchange of information with third parties 2.5 Exchange of information with other trucking firms 2.1 Service quality improvement 2.1 Security of transactions 1.7 Source: UMTIP survey of U.S. trucking firms. The table shows the impact of Internet on business functions for 130 respondents. 1= no use 5 = significant use, thus a higher mean signifies more use

Table 23 reports the use of the internet for various business functions. We

find that the internet has had the most use for company image enhancement (mean 2.8, on a 1 to 5 scale). The wide reach of the internet has facilitated the broadcast of information in an environment where all the constituents are geographically dispersed. The connectivity enabled by the internet also has facilitated the exchange of information with shipper and consignees (2.7), and third parties (2.5). Thus, the internet has contributed to multiple business functions needed for offering new services, dealing with existing customers, and operating internal processes.

Table 24 – Role of Internet in changes of business activity at firms since 1996 Area where change occurred Firms reporting some change due to Internet Exploration Acquisition of new customers 72% Addition of new services 51%


Acquisition of new markets 45% Exploitation of existing skills: Customer-related Improved shipper relationships 67% Improved consignee relationships 63% Enabled quicker service 57% Enabled customer analysis 51% Improved dedicated services 50% Increased dependability 48% Improved on-time delivery 46% Exploitation of existing skills: Process-related Provided quality improvements in internal processes.

72%

Improved third-party relationships 64% Enhanced the management of change . 64% Provided time improvements in internal processes. 59%

Source: UMTIP survey of U.S. trucking firms, 179 responses out of 775 surveys. The higher the percentage the more common the Internet role in the change.

Table 24 presents the firms’ reported impact of the internet on helping

firms change their business activities since 1996. Firms were asked about the extent to which changes in different business activities were due to their internet activities. Possible responses were that none of the change is attributable to the internet, some of the change is attributable to the internet, most of the change is attributable to the internet, and not applicable. Once again we organize the features in terms of exploration of new opportunities, exploitation of current customers, and process improvement orientation. As indicated in the table, in the exploration category, we found that 72% of the respondents said that some or most of the change in acquisition of new customers is due to the internet. In improving services to existing customers, trucking firms respond that the internet has helped them improve relationships with their shippers (67%) and consignees (63%), as well as provide quicker service (57%). In improving processes, many firms said that the internet helped facilitate internal process improvements (72%), improve relationships with third-parties (64%), and enhance the management of change (64%). The key conclusion here is that the internet has helped facilitate recent improvement on many dimensions, although the internet is far from the sole source of improvements.

In summary, the internet is changing the competitive environment of the trucking industry, both directly in challenges to traditional freight brokers and through changes in trucking company customers’ competitive environments that are challenging trucking firms to transform their business services. In this process, the borders of the trucking industry and other transportation-oriented sectors such


as package express are becoming increasingly blurred. In addition, traditional trucking companies face incentives to transform their businesses from primarily emphasizing shipment of goods, to providing a broader set of “asset-based transportation management” services. The companies provide a broad range of information-based transportation management services that emphasize coordinating many steps in the production-to-customer value chain. These additional services range from warehousing goods, to order taking, to logistics management, to after-sales services. The connectivity offered by the internet allows truckers to communicate with shippers and subcontractors. The internet provides the foundation for innovative integration of complex logistics algorithms with aggregation of fragmented information providing a seamless transportation alternative47. In order to exploit the growing potential of this environment, trucking firms will have to change their business practices in significant ways. The cases described above are instances where firms in the trucking industry are value innovators. These firms are addressing the opportunities provided by the transformation of the traditional trucking industry structure. Trucking firms are also evoking changes in their competitive and customer environments, by developing new demand for new products and services. The results that we report here from the survey serve as an indication of the impact of the internet in the trucking industry. The results consistently show that competitive conditions are changing and that many firms are seeking both exploitation and exploration opportunities to position themselves to advantage in the turbulent world of trucking.

C. Technology application for HAZMAT and National Security

Since September 11, 2001 homeland security has become an overwhelming concern for the government and trucking firms. Technology is starting to help in the homeland security effort as well as improving the safety of big trucks. The potential threat to truck drivers, especially those with hazardous loads, is obviously immense, and once a truck leaves its terminal, typically its only safeguard is a lone driver. Some trucks are being equipped with high-tech protections like password access that would make hijacking or theft much more difficult. A truck someone is attempting to drive without the "driver password" being keyed into the onboard computer will shut down. And a hijacked driver being forced to comply can input a "theft code" that immediately advises company headquarters. The "theft code" also soon leads to a vehicle shutdown. Onboard global positioning technology also allows company officials and law enforcement authorities to immediately locate a stolen or diverted vehicle. Geo-fencing, a technology developed by Qualcomm in Brazil, looks at the real time location of trucks as reported by mobile communications systems and compares them with assigned routes. It flags any truck that deviates beyond tolerances. Intelliroute from Rand McNally enables the

47 D. P. Bearth, “Virtual Truckers vie for freight business” Transport Topics. March 6, 2000. pp 1,5


fleet or the individual tracker to define prohibited roads and areas based on their own concerns. The system can use the latitude and longitude information from wireless and satellite providers to track where a truck is at all times.48 In May 2002, Qualcomm introduced the wireless panic button, driver authentication, and tamper detection services. The wireless panic button enables drivers to send a panic message on the OmniTRACS system within 150 feet of their vehicle. For driver authentication, a driver must be authorized to operate the vehicle through use of an ID and password. The login is validated through the satellite system and sent to Qualcomm's network management center. The tamper detection feature alerts the fleet management or the driver if an attempt is being made to disable the OmniTRACS unit.49 Approximately 125,000 trucks carrying hazardous materials in the United States have some type of tracking and communications capability on board. Through these systems, location, content, and status information are routinely provided to shippers, carriers, and authorized third parties50. A service called the Hazmat Tracking Center tracks the patterns of hazmat shipments. If a driver, unknown to the dispatcher - and for reasons unknown - is suddenly incapacitated, an onboard computer generates an alert message notifying the dispatcher, key trucking company personnel and authorities of a dangerous situation warranting immediate attention. About 850 hazmat haulers use the service of the Hazmat Tracking Center. The tracking service was developed in cooperation with mobile data systems supplier Qualcomm of San Diego. The center's objectives in establishing the facility included realtime monitoring of hazmat shipments, which according to the Department of Transportation amount to roughly 3 billion tons annually. The response time for state police after being notified of a hazmat spill is 27 minutes, according to the Center for Technology Commercialization51. Qualcomm, the pioneer in satellite communication systems, had identified a desire among its client companies to leverage their mobile communications investments through integration and data sharing. Data sharing for carriers of hazardous materials, after September 11, 2001, has become not only a corporate aspiration but a national imperative.

At the heart of the Hazmat Tracking Center is Aries Messenger, a patent-pending, proprietary software that plugs directly into wireless tracking equipment manufactured by Qualcomm and other leading companies via unique connector interfaces. These connectors, which are based on each manufacturer's automated processing interface, allow the automated agent to access data streaming in from

48 Bendel, John. Taking Command and Control. Heavy Duty Trucking. April 2002. Pgs 40-48 49 Warner, Peter. Qualcomm leverages Satellites for shipping security. Satellite News. Vol 25, No. 28. July 22, 2002 50 Joey Ledford. High-Tech Systems Work To Keep Big Rigs Secure Atlanta Journal Constitution March 5, 2003 available at http://www.accessatlanta.com/ajc/metro/0303/05ranger.html 51 Ritzer Ross, Julie. Hazmat haulers: On being prepared Transport Topics Alexandria: January 13, 2003. Iss. 3519; pg. S14-15


mobile transmitting equipment, regardless of vendor. Aries Messenger continuously monitors data transmitted from onboard truck computers and other asset-tracking devices, keeping close tabs on vehicle location, speed, trailer connection, tank valve status, door status and other variables. It predicts problems with freight in transit and identifies possible on-road emergencies or developing incidents by comparing incoming data with data values and patterns that have been programmed into its customized data tables. Matching values trigger automatic alerts to law enforcement agencies, emergency response agencies and other addresses on client-supplied, customized distribution/notification lists. Communication with these entities occurs via fax, page, e-mail or text-enabled cell phone message.

There are very specific conditions under which the system sounds the alarm. For instance, should the system detect a delay in a monitored shipment, a route change for an unknown reason or a vehicle's unexpected approach to a location identified as a vulnerable terrorist target, notification of law enforcement and defense agencies would be automatic. Sudden deceleration, off-route status, loss of communications from a vehicle, or situations that may pose a threat-for instance, the presence of a speeding truck, containing toxic material, in a populated area can also trigger alerts. The Hazmat Tracking Center serves as the hub in a communications network, as well as to other predetermined addressees. Aries Messenger is linked through the Hazmat Tracking Center to specialized databases containing participating shippers' bills of lading; government mapping data; public, private and for-hire response resources; and similar information accessed through Spill Center's proprietary data structure. The Spill Contingency Plan was developed specifically for trucking companies carrying hazardous materials. Recognizing that an immediate, effective response is critical to minimizing costs and limiting liability related to these incidents, the center has compiled and maintains a comprehensive, nationwide database of hazmat response contractors. The database includes detailed information on each contractor's response capabilities, personnel, equipment assets and insurance coverage. Spill Center personnel verify that the appropriate authorities and transportation company contacts have been informed of the problem and can locate and coordinate deployment of additional response assets if required.52

Advances in monitoring and communication technologies combined with decision support software are helping to increase truck safety and national security. The trucking industry can look forward to technological advances that will have a significant impact on driver safety and the cost of operating a fleet. Increased adoption of safety related technology will occur when the technology is proven and the benefits of adoption exceed the costs of technology acquisition.

D. Technology for the truck The pollution created by the trucking industry has long been a source of concern for the federal government and the public. Recently, EPA has mandated stringent

52 ibid


emission standards for diesel engines in trucks. Further, new solutions are being considered as alternatives to the pollution created by idling trucks at truck stops. This section presents the various alternatives on the horizon that manufacturers are presenting to comply with EPA mandates and to reduce truck idling. We also discuss the new opportunities for efficiency and safety created by tire inflation sensors and electronic brake systems. Together, these new technologies enhance the driving environment for the trucker, provide safety and operational advantages for the business, and a cleaner environment for the public. D.1. Diesel engines face challenges

Fleets are facing an interesting challenge when they buy new trucks-integrating low-emission engines into their operations. Engines built after October 1, 2002 must meet the Environmental Protection Agency's (EPA) stricter emission standards, bringing a good deal of new technology into the mix. The standard will also be applied to Mexican trucks starting in 2004. More stringent standards are expected by 2007. According to the Diesel Technology Forum, engine makers will have to make changes in four areas in order to meet the 2007 standards. First, there is the need for cleaner diesel fuel: Although EPA has mandated 15-ppm low-sulfur diesel, several engine manufacturers say 5-ppm fuel is needed to meet the 2007 goals. According to EMA, 5-ppm ultralow-sulfur fuel would cost 7 to 9 cents more per gallon. Second, the advent of electronic engine controls has given diesel engine manufacturers almost pinpoint control of fuel delivery to the combustion chamber. This control of the fuel injection systems is necessary to avoid temperature spikes during the combustion process, which create higher levels of NOx. Third, firms need to focus on air intake management and exhaust gas recirculation. Better air intake management results in better fuel combustion, leaving fewer particles to remove from the exhaust. EGR takes it a step further by rerouting exhaust through the high-heat combustion process, literally burning away more hazardous exhaust chemicals. Finally, manufacturers need to invest in after treatment technology: This includes catalysts and particulate traps that either convert or capture emissions before they leave the exhaust pipe.

Engine manufacturers are scrambling to comply with 2002 consent decree before considering the technology needed to meet 2007 mandates. Most of the engine manufacturers are using what's called cooled exhaust-gas recirculation (EGR) to achieve lower emissions. Although cooled-EGR engines do have drawbacks, the most prominent being a 3% to 6% reduction in fuel economy, by and large they provide drivers with better performance and responsiveness. And while fleets have to pay more for the cooled-EGR engines themselves, experts believe that maintenance costs probably won't be as high as many in the industry have feared. Essentially what happens in engines with cooled EGR is that some of the exhaust air coming out of the engine's combustion chamber is cooled down and introduced back into the engine to bum off emissions. Anywhere from 5% to 30% of the exhaust is re-circulated, with between 20% and 60% of the exhaust heat dispersed through the radiator instead of the tailpipe. Overall, cooled-EGR engines will add anywhere from $2,500 to $4,000 more to the price of a Class 8 truck. The


extra cost of maintaining a Class 8 EGR engine could run upwards of $800 a year, including the cost of new oil and coolant. The reduction in fuel economy must also be taken into consideration. One fleet estimates that that could be an additional $4,000 to $5,000 a year in fuel costs per vehicle although this has not yet been demonstrated in field tests. Cooled-EGR engines will need to use a new grade of engine oil called CI-4, which is designed to handle the higher heat and soot load produced by those engines, as well as new oil filters to remove the higher levels of contaminants produced by the EGR process53.

One manufacturer who has decided to use a different technology is Caterpillar. Caterpillar opted to pursue a new combustion system called “ACERT,” or Advanced Combustion Emissions Reduction Technology, which is available across Cat’s product line. The engines feature a double turbo system, an air management system designed for better combustion efficiency, a new fuel system and new electronics. It also employs an exhaust after treatment system already in use on other Cat engines54.

Initially users were disappointed with the new engines’ fuel economy and were uncertain about long-term maintenance and durability issues. While long-term maintenance and durability are still uncertain, most users are experiencing better fuel economy than they had originally projected. Driver acceptance has been strong. So far it does appear that the technology solutions delivered by the engine manufacturers for 2002 have been successful. They have a higher hurdle in the 2007 mandates. D. 2. Technology alternative to engine idling

The deafening hum and illuminated running lights are the mainstay of the nights at most truck stops. Truck drivers idle their engines primarily to heat / cool cab or sleeper, and keep the engine warm in the winter so that the engine is easier to start. In addition, truck drivers today need to power modern communications, computers -- not just to contact home, but to keep track of inventory, trip planning, and routes. The need for power has increased as the technology on the truck has increased. Long haul trucks, according to the US Department of Energy, idling overnight consume more than 838 million gallons of fuel annually.55 With the national average retail diesel price at record highs, idling trucks all over the country are

53 Kilcarr, Sean. Making ’02 work. Overland Park. September 2002 Vol. 97, Issue 9 Pages 49-51 54 Richards, Paul and John Baxter. The New Engines:High Marks. Commercial Carrier Journal. July 2003 available at http://www.etrucker.com/apps/news/article.asp?id=39884 55 Vise, Avery. Money for Nothing. Commercial Carrier Journal. March 2003. Available at http://www.etrucker.com/apps/news/article.asp?id=34989

http://www.etrucker.com/apps/news/article.asp?id=39884

http://www.etrucker.com/apps/news/article.asp?id=34989


burning a gallon or two of diesel every hour and not producing any revenue. The average long-haul truck idles away up to $1,790 in profits each year56.

Idle control technologies provide potential reductions of carbon dioxide of approximately 8.1 million tons a year and the potential reduction of diesel fuel consumption of approximately 1.2 billion gallons per year. Reducing idling would have significant environmental and economic benefits on the national level as well. If all class 7 and 8 long-haul trucks (about 480,000 vehicles) used these devices, the total fuel savings would be as much as 0.6% of all fuel used for surface transportation in the United States. Furthermore, reducing idling is important for reducing air pollution. Assuming 1,830 hours of idling a year, a single truck emits about 22 tons of carbon dioxide, a greenhouse gas; 390 pounds of carbon monoxide; and 1,024 pounds of nitrogen oxides. Several fuel efficient alternatives are emerging through advances in technology. Direct-fired burners for heating, thermal storage devices for heating and cooling and auxiliary power units for heating, cooling and electrical power are some options. TMC’s Recommended Practice 1105A on idling-limiting systems and the Argonne National Laboratories (www.ipd.anl.gov/ttrdc/idling.html) provide resources to help truck owners explore the payback on idling alternatives. For example, the AuraGen(R) combines sophisticated mechanical and electronics design, advanced engineering and break-through electromagnetic technology to produce a highly reliable and flexible mobile power generating system that creates alternating current (AC) and direct current (DC) electricity, both with and without the engine on. Through its Inverter Charger System (ICS), the AuraGen provides engine-off power for any equipment including power to provide heat or air conditioning and electrical power for appliances57.

Another proposed solution has involved truck stops where truckers gather to rest. A solution to the problems caused by idling is truck stop electrification. Truck stop electrification has been gaining momentum through advances in technology that permit lower costs and the potential for widespread availability. A major privately funded project just began in Atlanta. The Environmental Protection Agency awarded a $200,000 grant under its new SmartWay Transport program to electrify some truck stops. The Petro center located off Interstate 40, was involved with IdleAire Technologies Corp. in a pilot program of electrification.58 For hourly fees starting at a little over a dollar, drivers are able to access specially designed modules offering electrical hookups, ducts for heat and air-conditioning, and connections for cable television, phone and computer services. Subsequently, IdleAire has been installing module hookups at truck stops across the nation. Many owner operators enthusiastically welcome the idea of truck stop electrification visualizing fuel savings and reduced wear and tear on the engine. However company drivers wonder if the company that now pays for the fuel used during

56 www.ipd.anl.gov/ttrdc/idling.html57 Aura Systems Press Release. U.S. Environmental Protection Agency Study Lists AuraGen as Technology to Reduce Emissions and Save Fuel. April 7, 2003 58 Charlier, Tom. 18-wheeled comfort - lot hookups save fuel, money, environment. The Commercial Appeal. Memphis, TN. June 12, 2003. Pg B1

http://www.ipd.anl.gov/ttrdc/idling.html

http://www.ipd.anl.gov/ttrdc/idling.html


idling will pay for the hookups or whether the charges for the services eventually would come out of their pocket. The New York State Thruway Authority has made significant investments in truck stop electrification. They note that idling shortens engine life by about 20 percent, or 100,000 miles over five years and that fuel savings realized by not idling for an 8-hour period could provide truckers with 56 to 64 miles of distance, or about 60 more minutes of travel time before stopping to refuel.59 D.3. Tire inflation sensor technology The tires on the tractor and trailer are often the carriers’ largest maintenance cost, and proper inflation is considered essential to getting the most life out of truck tires. Keeping tire pressures within tolerances is one of the most vexing jobs in maintenance. A study done for the Federal Motor Carrier Safety Administration claims that truck fleet managers may be making a costly mistake in their reluctance to purchase tire pressure monitors and automatic inflation systems in large numbers. The same study found that the managers were having difficulty justifying the cost of the new technology. The average truck fleet loses $750 per tractor-trailer combination every year because of under-inflated tires, according to data collected for the study. Automated pressure monitoring and tire inflation systems on the market today range in price from $500 to $2,000 a truck. Systems that monitor pressure but don't keep tires automatically inflated can be cheaper and averages about $30 per tire or $540 per tractor-trailer, FMCSA's study concluded that cost of automated pressure monitoring and tire inflation systems is paid back in the first or second year.60 Beside lower maintenance costs, manufacturers state that keeping tires inflated reduces the chance of blowouts and that losing a tire on the side of the road can easily cost $450 or more when the emergency help, the cost of the tire and the lost productivity are added up. However, carriers are skeptical about the payback numbers. They are reluctant to invest in technology in the absence of concrete research into the costs of running flat tires.

First generation solutions include sensors attached to the tire or strapped to the wheel rim enabling fleets to read air pressure and tire temperature with hand-held or drive-by short-range radio receivers. Onboard inflation systems constantly monitor each tire's pressure and keep the tire inflated to the optimum level. The "smart" tire is now on the horizon61. Radio frequency identification (RFID) - the same wireless technology that shippers rely on to track movement of their goods - is finding a role in monitoring the condition of truck tires. Several manufacturers

59 Scruton, Bruce A..Less idling, fewer fumes New ideas are aimed at reducing air pollution at truck stops. Albany NY: The Times Union. April 7, 2002. Page B1 60 Johnson, Jeff. Study urges adoption of tire technology.Transport Topics. Feb 10, 2003, Iss. 3523; pg. S1-2 61 Ryder, Andrew. Dial up signals from sensors to see what your tires are doing. Transport Topics. Feb 10, 2003, Iss. 3523; pg. S1- 5


are placing computer chips on individual tires that read and report air pressure and tire temperature. The data are retrieved with a short-range radio receiver. While there are different approaches, the tire monitoring systems have a number of common components. Essential components include an in-tire sensor and transponder, which gives the tire a unique electronic "identity" and measures air pressure and/or tire temperature and a source of low power for transmitting data over very short distances, typically limited to 500 feet or less, on radio frequencies approved by the Federal Communications Commission. A hand-held or fixed drive-by receiver to collect the data from tires when a truck returns to a terminal, and/or an onboard receiver to provide the driver tire information at regular intervals is also needed. Today only one manufacturer Michelin Tires North America - has made an RFID tire monitoring system commercially available. Truck operators have many concerns about this new technology. They include durability, technological viability, and cost. The price of sensors durable enough to withstand the rigors of heavy vehicles in constant use is above the carriers’ willingness to pay at the current state of technology development. The high price level can be attributed to the research manufacturers have had to do to overcome a number of challenges associated with RFID sensors on trucks. They needed to find a sensor that can withstand temperatures generated in truck tires, mount the sensor so it can be easily installed on existing tires and not be damaged during tire mounting or removal, counter the radio wave interference created by the large amounts of steel in radial tires without increasing signal strength and still complying with FCC regulations, and eliminate any signal crossover when trucks with similar systems are in close proximity.

The sensor for the Michelin’s e-tire is mounted in a rubber dock, which is vulcanized to the inside of the tire. The dock is like a rubber mushroom. It allows the sensor to move so the tire can flex without damaging it. The vulcanizing process that attaches the dock to the tire is identical to that used to patch a punctured tire and it can be performed by any maintenance facility equipped to do tire repairs. Since the dock can be fitted to any tire, Michelin expects tire dealers and fleets to attach it to all brands of tires.

An RFID system for truck tires launched by Smartire Systems is focused more on the needs of the driver than on the maintenance manager. The company plans to offer a system consisting of in-wheel sensors with transmitters, one or more receivers in the cab of the truck and an in-dash tire information read-out. Drivers would be instantly alerted if a tire falls below a set pressure level or gets too hot.62 Smartire houses the sensor in a cradle and straps it to the center well of the wheel rim using a constant torque clamp. The sensor will come with a permanent battery, but by carefully controlling sensor on-time, power use will be minimal and the battery is expected to last a million miles or more. Built-in centrifugal switches activate the sensors when the vehicle is traveling above 8 mph. They will transmit tire ID number, pressure, temperature and battery voltage. Pressures are sensed every seven seconds. If a sensor doesn't sense a major change in pressure, it immediately goes back to sleep. If it senses a pressure change of

62 ibid


more than 6.5 psi, it transmits an alert to the in-cab readout. Potential radio interference from other Smartire equipped vehicles is managed with software.

Other tire manufacturers are sitting on the sidelines waiting for the right time to launch RFID tracking systems. The price point of current technology makes the product an unattractive business proposition. Bridgestone has a product that is ready for the market but the company is waiting until technology and policy issues are resolved. Bridgestone’s sensor is vulcanized inside the tire below the bead using a special patch that Bridgestone has patented. It can be read from 15 to 18 feet with drive-by readers. The sensor's storage of tire data would need to be activated only at specified intervals to report temperature and pressure. The key issue, according to the company, is whether a drive-by reader will be acceptable to NHTSA. If it is not, an onboard monitoring system is necessary. Goodyear agrees with Bridgestone’s assessment of market potential. The price point for the product has to decline quite significantly before the business becomes viable. The systems offered by Michelin and Smartire track air pressure and tire temperature, providing digital readouts via short-range radio. Trucks travel through the lanes at a speed of 5 mph or less, and tire pressure and identification information are automatically read as the tire passes by. If the tire is above or below the pressure level preset by the fleet by more than 7 pounds per square inch, the driver gets a warning light. Also, an alert is triggered in software installed on the fleet manager's desktop computer. D. 4. Electronic braking systems (EBS) Traditional brake systems use air signals, which travel at the speed of sound under ideal conditions. Electronic braking signals, however, travel at or near the speed of light, which will permit implementing braking behavior among trucks that is similar to that of a passenger car. The advantages of EBS cover a spectrum ranging from safety performance to drivability to maintenance costs. Using special software and a kingpin-mounted sensor, tractor-based EBS can maintain the correct braking relationship between the tractor and trailer. The result is safer brakes that last longer. Braking action is both faster and more consistent, whether or not the vehicle is loaded. Potential benefits of EBS include enhanced tractor-trailer compatibility (eliminating brake imbalance); automatic hill-holding (by linking EBS with engine-management systems); blending of engine retarder and service brake actuation (to cut brake wear); incorporation of lining-wear indicators (to rationalize maintenance scheduling); and equalization of lining wear (from left to right on vehicle).63

The durability of valves is the toughest issue facing EBS development. While an ABS valve only has to cycle during emergency braking, an EBS valve goes to work every time the brakes are applied. So, the durability of these valves is an important concern as manufacturers bring EBS to market. Adding to the design

63 Cullen, David. Smart brakes Fleet Owner. Overland Park: August 1999 Vol. 94, Iss. 8; pg. 58-62


complexity of EBS, the valves must be capable of working pneumatically as well as through electronic solenoid actuation. The SAE J1939 electronic data link may serve as a 'skeleton' to support communications interfaces between a variety of electronic systems by tying engine or driveline retarders in with the braking-control system. Higher retarder application will save on brake wear and increase vehicle safety. As more and more systems become integrated onboard and with engines, retarders, brakes, and other systems working together a true million-mile truck may be on the horizon64.

Leading brake-system suppliers are already working with major vehicle OEMs to make the new technology both practical and cost-effective for fleet owners. For example, AlliedSignal is working with OEMs on how to implement EBS and Freightliner has been offering an electronic braking system supplied by Meritor WABCO optionally on its Century Class line of premium Class 8s. Manufacturers believe that EBS won't see the resistance that ABS did, simply because fleets have gained experience with and confidence in the electronics that make antilock brakes work. EBS is gaining wide acceptability in Europe but fleets in North America remain skeptical about the payback.

A major obstacle to EBS acceptance is the way FMVSS-121 - the federal braking safety standard - now stands. As federal regulations now stand, an electronic brake system has to be backed up by a pneumatic system. Unless current redundancy requirements are relaxed by NHTSA, EBS becomes an expensive proposition and will undoubtedly dampen the enthusiasm of many fleets. The future of EBS lies as much in the hands of policy makers as in the technology trajectory. Brake suppliers, despite the uncertainty in the technological and regulatory environment continue to work towards offering early versions of EBS. They hope to grab a safety or image edge or simply to gain early experience with a technology they view as arriving inevitably.

Technologies that enhance truck performance and reduce pollution are on the horizon. As new products are introduced, the potential pay-off from these technologies will become more evident. The adoption of these technologies offers the potential for firms to trim costs and improve margins. Innovating firms have to satisfy federal regulators including NHTSA and the EPA while creating products that clearly benefit the trucking industry. Through a combination of federal mandates and voluntary adoption, the trucking industry is headed toward shaping a cleaner, safer, and more efficient environment for the drivers, the business, and the general public.

E. Technology in Trucking – 21st century applications The previous sections have presented the current state of the art in trucking technology. Recent advances and future trajectories are also discussed as appropriate. The editors of Commercial Carrier Journal, in a recent issue, presented their thoughts on technological applications that are likely to influence the trucking

64 ibid


industry the most in the next decades. In addition to tire inflation systems, and electronic brake systems discussed in Section D, collision avoidance systems discussed in Section C, internet enabled EDI and new business models discussed in Sections A and B are on the technology frontier. These technologies are likely to significantly affect the productivity and safety of trucking firms as the technology trajectories advance and the products diffuse throughout the industry. Below are some other examples of technological applications that are likely to further advance the performance of the trucking industry65. Weight on the go Onboard weighing devices will become more widely adopted. For example, in one version of such a system, a microprocessor taps into suspension air pressure to determine and display ground weight, to within a couple of hundred pounds. These systems can reduce or eliminate commercial scale fees, the cost of out-of-route miles to drive to weighing scales, overweight fines etc. Electronic fuel-injection/serial data link The ECU (electronic control unit) uses inputs from sensors monitoring accelerator pedal position, engine and road speeds, and a host of other parameters to calculate the on and off signals of proper duration. These signals are then sent to electromechanical injectors to precisely regulate the amount of fuel for given operating conditions. The ECU and the “language” it speaks will open a wide range of possible intra-vehicle communications-based applications. Multiplexing Multiplexing is a system of sending multiple, simultaneous control signals to various devices, along a single wire. As an example let us consider that a driver turns on his left signal. The turn signal is a smart device that sends a coded message to the flasher, along the same wire that is used to signal all other electrical devices on the truck. The flasher, itself a smart device, recognizes the one signal and ignores all others. It then “knows” to send a message to the left turning lights. In turn, the smart lights recognize their unique signal and start flashing. All this happens practically instantaneously. This technology has the potential to drastically reduce the wiring requirements inside a truck. E-training

65 Editorial staff. Technologies that will advance trucking in the 21st century. Commercial Carrier Journal. January 2000. Pages 34-42


While hands-on face-to-face training is till the most popular technicians are constantly looking to supplement this traditional training via computer-based CD-ROM and internet-based training. With electronic training, the technicians not only receive bite-sized on demand training but also gain valuable and marketable computer literacy skills. Conclusion

Advances in information technology, communications, and digital technology have provided the trucking industry with the means to cope with challenges presented by the new competitive environment. Trucking firms continue to struggle to conform to new and upcoming regulations and standards in emissions, ergonomics, and diesel fuel. The operating environments for the driver, the fleet manager, and the firm, are undergoing tremendous shifts as new technologies are offered in all facets of the business process. These technologies are coming faster than fleets can adopt and utilize them. Adopting a technology before the fleet and the firm is ready for it is just as bad as waiting too long to adopt it. The challenge of the future for the trucking industry is to incorporate technological advances at just the right time so that the benefits from the use of technology can be fully accrued.

The rapid diffusion of technology may be good for economies, but companies derive the greatest advantage from innovations when competitors can’t adopt them quickly. Once many companies in a sector have implemented a set of IT applications, they become just another cost of doing business, not sources of competitive advantage. Competitive advantage arises from technologies that generate new products, processes, and services or substantially extend a company’s existing advantages. These advantages are accentuated when technology adoption is accompanied by broader changes in business processes and organizational structure.66 Technology is presenting new opportunities for excellence in the trucking industry. Survival and success will depend on the rate at which firms initiate and accept the technology driven challenge of the new competitive landscape.

66 Nagarajan, A.; E. Canessa, W. Mitchell, and C.C. White III. (2001). E-Commerce and competitive change in the trucking industry. In Tracking a Transformation: E-commerce and the terms of competition in industries. BRIE – IGCC E-conomy project. Washington D.C. :Brookings Institution Press


Appendix 1 - Vehicle Routing Problem Decision Support Systems are based on various routing problems that have arisen partially due to the needs of the trucking community. The most commonly known routing problem is the Traveling Salesman Problem (TSP). The TSP may be described as follows: “A salesman is required to visit a set of locations, visiting each at least once, starting from any location and ending at the original place of departure.” An example of the TSP in trucking can be found in the package delivery service, where a vehicle must visit a number of stops to make deliveries. A generalization of the TSP is the Vehicle Routing Problem (VRP), in which the objective is to design a set of pickup or delivery routes such that: 1) each route starts and ends at the depot 2) each customer is visited exactly once by exactly one vehicle 3) the total amount picked up or delivered does not exceed the capacity of the

vehicle 4) the duration of each route does not exceed a preset limit 5) the total routing cost is minimized.

The VRP is the most commonly found problem in the trucking industry, particularly as reflected in the focus of software developed for determining solutions to this problem. Over the years, as dictated by real life practices, modifications and additions have been made to the VRP. One important addition involves the use of time windows in determining pickups or deliveries. This problem is commonly referred to as the vehicle routing problem with time windows (VRPTW). A time window can indicate the earliest time that a driver can make a pickup or delivery, the latest time, or both. Time windows are used for a variety of reasons, such as ensuring a consistent production schedule, keeping inventory at a desired level, or minimizing wait times for truckers at a dock. They are particularly important in the world of just-in-time production, where deliveries must be made as scheduled to avoid delays in production or overstocks in inventory. The majority of routing software available allows for the use of time windows. Another modification involves determining an optimal strategy with only some information available prior to making routing decisions. This is called the Stochastic Vehicle Routing Problem (SVRP). Information that becomes available only after routing decisions are made can include travel times, load sizes, and pickup and delivery locations. In these situations, decisions are made based on the probability of a set of circumstances occurring. For example, the number of parts to be delivered to a production facility may vary depending on the production schedule, which is unknown prior to the vehicle’s departure. Therefore, the solution to the routing problem must take into account this randomness. This problem is significantly more complicated than the standard VRP, with only small instances solved to optimality. Additional extensions include the use of split deliveries, where multiple vehicles can service the same destination, backhaul pickups, which allow for


vehicle to make pickups on the return trip to the depot, and real-time information, which enables a route to be modified at any time in response to various events, such as traffic, new transportation requests, etc. Each of these extensions allows for the VRP to adapt to real world circumstances; however, each also adds to the complexity of the problem and difficulty in finding an optimal solution. Solution Methods The complexity of the VRP prohibits the exact solution of any realistically sized problem in a reasonable length of time. Therefore, researchers have turned to heuristics for help in approximating good solutions. Cordeau, et al. provide a thorough review of various VRP heuristics, with some of their work summarized here.67 VRP heuristics have steadily evolved over the last 40 years. “Classical” heuristics put an emphasis on quickly obtaining a feasible solution with the possibility of using a post optimization procedure to improve the solution. One of these heuristics is the well-known Clarke and Wright Savings algorithm. This algorithm remains widely used in practice despite shortcomings involving accuracy and flexibility. It creates an initial feasible solution by dedicating an individual route to each customer back and forth from the depot. At each iteration, two routes are merged into a single route whenever this is feasible, thus generating a cost saving. Another classical heuristic is the sweep algorithm. This heuristic creates feasible routes by rotating a ray centered at the depot and gradually including customers on a route until the capacity or route length constraint is attained. Recent research has focused more heavily on “metaheuristics,” using two main principles: local search and population search. Local search intensively explores the solution space by moving at each step from the current solution to another promising solution in its neighborhood. The neighborhood is all those solutions that can be reached from the original solution by making a slight modification to that solution. Population search utilizes a pool of good parent solutions from which it selects certain traits to create offspring solutions. Simulated annealing and tabu search are two heuristics that use local search, while genetic search is an example of population search. Each of these methods implements some process that prevents the solution from becoming fixed at a local minimum. That is, they allow steps that are detrimental to the objective function, moving the solution away from a local minimum to test other possibilities. Simulated annealing draws from the annealing process in which metals are initially melted at very high temperatures, and then slowly cooled to an ordered “frozen” state. The algorithm begins with an initial solution and holding certain parameters (or the “temperature”) constant, perturbs the solution, accepting the changes if the objective function (or the “energy”) goes down or accepting them with some

67 Cordeau, J-F, Gendreau, M., Laporte, G., Potvin, J-Y., and Semet, F. (2002) A guide to vehicle routing heuristics. Journal of the Operational Research Society. 53. 512-522.


probability if the value goes up. This is repeated several times at the same temperature with different perturbations, after which the temperature is decremented. This continues until the temperature reaches a base state. Tabu search performs a local search by moving at each iteration from the current solution to a neighboring solution. This move may be inferior, causing a depreciation of the objective function, so an anti-cycling mechanism is utilized to prevent a return to the original solution. This mechanism declares certain attributes of the original solution as tabu, or forbidden, for a number of iterations. Therefore, the algorithm forces a move away from the local minimum. The adaptive memory procedure is a generalization of genetic search that is finding use in solving the VRP. In this procedure, a heuristic is used to create a pool of good solutions. This pool is then dynamically updated by adding new improved solution characteristics and removing elements of lower quality. Recombining good solutions from the pool then generates new solutions. This procedure is heavily dependent on the quality of solutions created by the underlying heuristic. With the advent of these highly effective algorithms, larger problems can now be solved to optimality or near-optimality with minimal computing effort. However, many commercial software and several in-house computer programs used by trucking companies utilize overly simple and outdated methodologies. This is the result of several circumstances. Many of the heuristics available for solving the VRP lack some of the necessary attributes that the trucking companies require for implementation. Certain methods do well in solving some problem instances, but perform poorly on others, lacking the robustness needed in real world situations. Many algorithms are overly complicated, with practitioners unable to decipher the process and write applicable code. Also, the optimization component of the routing software is only one part of the overall product, and until recently, most effort was focused on data management and user interfaces. The trucking industry is beginning to recognize the benefit of some of the more easily applied algorithms and making the appropriate changes to their software. Vehicle Routing Software Survey As the complexity of routing problems has increased and the algorithms developed to solve those problems have become more robust, and the trucking industry pursues new methods for reducing transportation costs, routing software developers must continually make improvements to their products. They must also adapt to and utilize the ever-increasing technological tools available to the industry. The use of the Internet is becoming less of an option for survival in trucking, rather more of a requirement. Because of this, Internet-based routing applications have grown significantly in usage. Similarly, new developments in areas such as wireless data communication and the genetic algorithms described earlier have led to an improvement in the level of service as well as an in increase in the number of offerings available from routing software companies. The


following analysis of a variety of those companies heavily draws from a vehicle routing software survey conducted by Hall in 2002.68 The primary growth in routing software can be found in the areas of wireless communication/vehicle tracking, integrated order processing/routing systems and web-based applications. Descarte’s “Mobile Link Freight” and “Mobile Link Tracker” software permit a driver to transfer real-time data from a pocket PC to the routing system. This allows for re-planning of routes, scheduling of tighter time windows, and the combination of orders located close to one another. GeoCom USA follows the Microsoft “.NET” structure to allow for a client-server architecture that permits each client to access server-based routing applications without having to maintain and update the software on each client workstation. GeoCom is also using genetic algorithms to improve the quality of routes, as well as real-time data for re-planning of routes. Meanwhile, UPS Logistics has made their Mobilecast available on the Web so that customers know exactly when orders can be made. On the software development side, ESRI and ILOG have made libraries of routing code available for customization through software licensing arrangements. ILOG Dispatcher is a C++ library built on top of the ILOG Solver, using constraints commonly found in vehicle routing problems, as well as search techniques effective in routing. ESRI’s NetEngine product provides a family of network-based algorithms, while MapObjects can be used for creating GIS interfaces. The vehicle routing software survey by Hall consisted of a questionnaire covering algorithmic capabilities, interfaces and features, and applications. Responses were collected from twenty-four software vendors. All responses were self-reported and unverified. Algorithmic Capabilities: Each package has the capability to sequence stops on a route, and almost all are able to assign stops to routes and to terminals. Most vendors claim that assignment and sequencing are simultaneous, and not sequential, with these decisions based on actual street distances (some approximation of street distances can be helpful in reducing the computational effort in distance calculations). Table 1 indicates some additional capabilities that the products may feature. Table 1 – Algorithmic Capabilities

Product

Assigns sequences & stops based

on street distances

Incorporates real-time traffic information in

routing

Considers time-of-day in travel speed

on road segments

Incorporates probabilistic

modeling of load size and/or stop

time ArcLogistics Route 3 y - - y

68 Hall, R. W. (2002) Change of direction. OR/MS Today. Vol. 29, No. 1.


Compass - - - y Direct Route y - - y Edgar Transportation Management System

y y y y

Fleetwise Enterprise Routing and Scheduling System

y y y y

ILOG Dispatcher y - - - Intertour/Interload y y y y Manugistics Fleet Management

y y y y

Optrak4 y y - y Prophesy Mileage & Routing

- - - -

Protour y - y y RoadNet 5000 y - y y Roadshow System y y y y RoutePro y - y y RouteSmart y - y y Routronic 2000 - - - - SHORTREC product suite

y n y y

STARS (Smart Truck Assignment and Routing System)

y - y -

Territory Planner y - y y tmsRouter y y y - tmsZoneDesigner y y y - Trapeze y y y y TruckSTOPS Routing & Scheduling for Windows

y - - y

VersaTrans Routing & Planning Software

y - - y

Node routing is the process of assigning and sequencing discrete stops, while arc


routing involves the assignment and sequencing of street segments. The former is needed more often, and occurs when the driver visits 100 or fewer locations per day. Arc routing is more specialized, and occurs when vehicles must visit a significant number of stops on a block segment, as in meter reading, mail delivery and garbage pickup. Table 2 provides information regarding which products feature both types of routing, as well as those that can route in real time (i.e., while vehicles are in motion), and on a daily basis (a more common application). Table 2 – Routing Functions

Product Node

Routing Daily

Routing Route

Planning & Analysis

Real-time Routing

Arc Routing

ArcLogistics Route 3 y y y y - Compass - y y y - Direct Route y y y y y Edgar Transportation Management System

y y y - -


y y y y y

ILOG Dispatcher y y y y y Intertour/Interload y y y y y Manugistics Fleet Management

y y y y -

Optrak4 y y y y y Prophesy Mileage & Routing

- - - - -

Protour y y y - - RoadNet 5000 - y - - - Roadshow System y y y y y RoutePro - y y y - RouteSmart y y y - y Routronic 2000 - y y y - SHORTREC product suite y y y y y STARS (Smart Truck Assignment and Routing System)

y y y y y

Territory Planner - - y - - tmsRouter y y y y - tmsZoneDesigner y y y - -


Trapeze y y y y y TruckSTOPS Routing & Scheduling for Windows

y y y y y


y y y - -

Interfaces and Features: Each product can display routes and stops on maps, and most allow the user to edit these routes with the "drag-and-drop" feature (i.e., click on a stop, and move it to whichever route you desire). This allows a dispatcher to make changes to the routes produced by the algorithm in order to satisfy customer constraints. Underlying each of these products is a digital map, such as the commercial products from Navigation Technologies and GDT, as well as the low-cost Tiger maps, available from the U.S. government. These maps are generally selected by customers based on their requirements in terms of accuracy, pricing and coverage. Software that is compatible with multiple map products can be extremely useful, particularly for companies that operate in many regions. Table 3 indicates the digital maps that each product is compatible with, along with additional interface information. Table 3 – GIS Capabilities

Software compatible with

Product Displays routes & stops on

maps

Can edit

routes with

drag & drop

Geocodes stops from addresses Etak/TeleAtlas GDT

Nav Tech Tiger

ArcLogistics Route 3

y y y y y y y

Compass y - y - y - y Direct Route y y y y y y y Edgar Transportation Management System

y - y - - - y


y y y y y y y

ILOG Dispatcher y - - - - - - Intertour/Interload y y y y y y y Manugistics Fleet Management

y y y y y y y


Optrak4 y y y - - y - Prophesy Mileage & Routing

y y y - - - -

Protour y y y y - y - RoadNet 5000 y y y - y y - Roadshow System y y y y y y y RoutePro y y y y y y - RouteSmart y y y y y y y Routronic 2000 y - y - - - y SHORTREC product suite

y y y y n y n


y y y - - - y

Territory Planner y y y - y y - tmsRouter y y y - y y - tmsZoneDesigner y y y - y y - Trapeze y y y y y y y TruckSTOPS Routing & Scheduling for Windows

y y y y y - y


y y y - y y y

Applications: While a few vendors design their products to serve a variety of applications, most have specialized in an industry sector. Specialization is largely driven by interface requirements — both in terms of presenting information in a manner that is useful to the target user and in terms of interfacing with business software systems. For example, companies like Trapeze, RouteLogic (Compass) and VersaTrans serve the transit industry, UPS Logistics serves the beverage and food distribution industry, and CAPS Logistics has been strong in distributing manufactured products. On the other hand, MicroAnalytics (TruckSTOPS) and ESRI (Arc Logistics Route) attract a broader market with a more generic and lower-priced product. And ILOG has established a unique position, providing a library of solvers rather than a family of interfaces. Table 4 provides an overview of the types of fleets that use each product.


Table 4 – Types of fleets that currently use each product

Product Freight transport

Local pick-up and delivery

Long-haul less than truckload

Long-haul truckload

Courier Buses Taxis Service fleets

ArcLogistics Route 3

y y y - y - - y

Compass - y - - - y - - Direct Route y y y - y - - y Edgar Transportation Management System

y y - - y y - -


y y y - y - - y

ILOG Dispatcher y y y y y y y y Intertour/Interload y y y y y y y y Manugistics Fleet Management

y y y y - - - -

Optrak4 y y y y - - - - Prophesy Mileage & Routing

y - - - - y - y

Protour y y - - y - - y RoadNet 5000 y y y - - - - - Roadshow System

y y y - y - - y

RoutePro y y y y - - - - RouteSmart - y - - - - - y Routronic 2000 y y y - y - - - SHORTREC product suite

y y y y y y y y


y y y y y - - y

Territory Planner y y y - - - - -


tmsRouter y y - - y - - y tmsZoneDesigner y y - - y - - y Trapeze - - - - - y - - TruckSTOPS Routing & Scheduling for Windows

y y y y y - - y


- - - - - y - -

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