Freight APIs are the Most Impactful Supply Chain Technology for Retailers and their Suppliers in 2016

project44 Enables Supplier Networks to Meet On-time Delivery Requirements, Improving Inventory Management for Big Box Retailers

CHICAGO – May 11, 2016 – Stockouts have long plagued retailers, growing increasingly more acute with the complexities that accompany e-commerce and omnichannel user experiences. Not only do they result in dissatisfied customers, but retailers can also lose nearly half of intended purchases when customers encounter stockouts. For a $74 billion retailer, out-of-stocks could mean $3 billion a year in lost sales.

Over the past year, major retailers like Walmart and Target have focused greater efforts on solving supply chain issues wreaking havoc on inventory management. “The number one pain point (for customers) is that we’re out of stock,” comments John Mulligan, Target’s Chief Operating Officer. Under Mulligan, Target’s efforts have shown early signs of success as they have taken steps to put more product on the sales floor rather than stockroom by redesigning shelves.

On May 4th, Reuters reported on Target’s most recent measures to crack down on their suppliers. In an effort to reduce stockouts, prevent lost sales and optimize their inventory, they imposed tightened deadlines for deliveries to their warehouses, hiked fines for late deliveries, and instituted penalties of up to $10,000 for inaccuracies in product information.

The most significant change is Target’s call for domestic suppliers to provide a single-day arrival date for shipments to warehouses, eliminating the previous two to 12-day grace period for deliveries. The major retailer also indicated they plan to hike fines on late shipments to 5 percent of the order cost for suppliers who fail to provide complete and accurate product information. Currently, late fines range between 1-3 percent depending on the product, according to suppliers.

“Stockouts, though disappointing for a customer and detrimental to a company’s bottom line, point to a much larger issue. Corporations have recently struggled to address complexities in their supply chain as they respond to a significant shift in consumer purchasing behavior,” said Mary Holcomb, Gerald T. Niedert Supply Chain Fellow & Professor of Supply Chain Management, University of Tennessee. “The strategic move by Target is logical in order to remain competitive and meet the dynamic needs of consumers. However, EDI technology, the industry’s legacy communication system, will impede their supplier network from meeting these precise delivery requirements.”

EDI, born in the 1940s and refined in the 1970s, runs data transmission in batches over timers. Information is stored and then forwarded without confirmation, just like a fax machine. That storage delay causes daily freight transactions, like tracking a package, to take between 30 to 240 minutes.

Target’s suppliers using EDI are making business and transportation decisions based on stale, inaccurate information. By eliminating the preexisting 2-12 day grace period offered to suppliers and replacing it with a single-day arrival requirement, suppliers no longer have the flexibility to rely on slow systems with intermittent connectivity and fragmented data.

A modern-alternative to EDI, web service APIs (Application Programming Interfaces) enable instant communication, resulting in the up-to-date and dynamic information needed for supply chains to maximize performance and implement proactive strategies. For years, APIs have transformed other industries. project44, an industry-leading connective hub between LTL carriers, shippers and third party logistics firms, is reconfiguring how the transportation industry communicates through API technology.

“With Freight APIs possibilities exist to improve supply chain operations and freight transportation that would never be possible with transportation networks running off of EDI or manual communication processes,” said Tommy Barnes, President of project44. “Target’s suppliers leveraging our API technology have a significant competitive advantage – lowering ROIC and reducing transportation failures. In a situation where most vendors will stumble under the new requirements, APIs will improve a supplier’s vendor scorecard, opening the door for additional revenue opportunities and promotional partnerships with the retail giant.”