A White House initiative launched in March to address supply chain bottlenecks was a welcome recognition that simply throwing money at physical infrastructure — which was the recommendation that came from a federal 100-day supply chain review last year — won’t solve all the problems.
The Freight Logistics Optimization Works (FLOW) data-sharing initiative pilots key freight information exchange between ocean carriers, ports, trucks and major retailers to improve the flow of goods in the U.S.
Getting some of the major players together is a great first step, although it hasn’t gone unnoticed that tech companies, which might be best positioned to help, weren’t invited to the table. Rail and truck industry leaders were also left out of the initial discussions, but it is expected all three will be involved as the FLOW initiative continues to move forward.
Unquestionably, data sharing is one of the glaring issues in today’s supply chains, but just as important is that every stakeholder is on the same page, working with the same kind of data at the right time.
The biggest impact in the information exchange would be creating information sharing standards. As difficult an undertaking as this would be, it would allow information to scale across multiple partners and provide the most efficiency, in turn allowing organizations to better plan and optimize their supply chain operations.
A single mode of transportation in a supply chain transaction is rare, and that is what makes the entire process so complicated. Information is exchanged during some handoffs, but it’s often not standardized and too frequently driven by manual processes which involve spreadsheets, PDFs, emails and phone calls. It’s easy to understand then that this environment doesn’t scale across a highly complex and fragmented network with thousands of different companies solely responsible for their respective link in the chain.
The complexity leads to wasted human capital and inefficient processes at our ports, dray and rail, where the supply and demand of assets are unbalanced and the finite resources are the furthest thing from optimized. From the carriers to the terminals to the to the dray, chassis or rail providers, there is a high degree of velocity and not enough visibility. According to a recent study from Penn State, 60% of shippers report control tower visibility, like tracking and asset management, as a top need — way up from the 37% that reported it as a need in 2021.
Standards are the best vehicle to achieve that visibility, and they need to scale across all modes of transportation to simplify handoffs. Today, each step of an intermodal transaction has its own standards, if any at all.
Air freight has well-defined cargo standards from the International Air Transport Association (IATA), the trade association that represents 83% of total air traffic. Ocean freight has standards from the Digital Container Shipping Association (DCSA), but the organization just published the standards in 2020 and adoption hasn’t caught up yet. Land freight — which includes terminal operations, drayage companies and rail processes — is where much of the confusion lies and it’s no surprise that it’s also the domain without clearly defined standards.
Implementing standards that stretch across all modes of transportation is our best chance for drastically smoothing the friction that has been plaguing the supply chain. Clearly this is easier said than done, but hopefully is something the FLOW initiative can start to address.
Beyond the U.S.
It’s easy to think of this as a uniquely American issue, because bottlenecks at ports and chassis shortages often get media attention. In reality, the supply chain is a global issue. According to the International Trade Administration, global supply chains account for more than 76% of world trade.
If new standards only apply to American supply chains, there will continue to be hiccups along the information-sharing process as much of the key supply chain information originates outside of the U.S. A global economy with global companies and global systems needs consistent standards.
Nearly 70% of shippers believe that supply chains have become too global and must be rebalanced toward more regional, domestic ecosystems. Some 83% plan to adjust supply sources accordingly, according to Penn State’s study.
While a regional focus on supply chains may decrease the amount of international data exchange, global trade will always exist in some form and those standards would still need to be in place. This needs to be a consideration of the FLOW initiative as it builds out a proof of concept by this summer.
What Comes Next?
We’ve been here before in the quest to ease the burden on the supply chain. Other strategies have come and gone without providing a clear-cut solution. Even if this panel of 18 participating companies produces an incremental stopgap for the disruptions, it would be a big win.
No one is expecting the FLOW initiative to produce a silver bullet that solves every problem, but so far it’s a broad statement that hasn’t defined an overarching strategy.
Standards should be a key, but how will this panel tackle defining or adopting them? Members of the initiative will have to determine who is responsible for creating the standards, how long it’s going to take, and what incentives should be in place so that companies make the investment to enhance their IT capabilities and treat standards adoption seriously. Even if a retailer like Target, one of the 18 stakeholders to get a seat at the FLOW table, was to embrace a set of data standards, all its partners (big, medium and small) would need to adopt them too, or the whole idea falls short.
The findings of the first phase of this initiative will be a fascinating case study and just the latest chapter in trying to fix what has proven to be an enormously complex problem. Hopefully it is at least able to answer some important questions.
Corey Bertsch is vice president of solutions management at Slync.io.