Customers turn to logistics services providers (LSPs)/third party logistics (3PLs) companies because they expect them to be able to run their warehousing and transportation operations more efficiently and cheaply than they can run it themselves. These companies need to incorporate new service offerings and respond to new market requirements quickly and easily, while keeping IT costs low.

Third party logistics provider’s offer outsourced services to support supply chain management and the delivery of shipper’s products to customers in an on-demand fashion with real-time information. Standardized electronic data information exchange (EDI) will increase the efficiency for business partners. Moreover, it significantly reduces manual intervention, paper work and improves cycle time and better supports a high volume transaction environment. It provides direct electronic communication between shipper and 3PL computer systems using national and international telecommunication networks and requires agreements between trading partners. The communication is typically done through a VAN (Value Added Network) using international EDI standards such as the American National Standard Institution (ANSI) or EDI for Administration, Commerce and Transport (EDIFACT).

Customer uses the following EDI transaction sets in the typical load tendering process:
- 204 (Motor Carrier Load Tender) – Customer will transmit to the carrier a 204 transaction set. The 204 will include all information as to the pick-up and delivery of the load.
- 990 (Response to Load Tender) – The carrier will transmit to customer a 990. It is used to accept or decline the load tender.

- 214 (Shipment Status Report) – The 214 is sent by the carrier to customer to inform customer of pickup appointment information, delivery appointment information, actual pickup information and actual delivery information. See a typical load control center procedure.

 

Communications can be via traditional VAN or AS2, or more freeform FTP. Outside of the common 3PL EDI 940 Warehouse Shipping Order, EDI 945 Warehouse Shipping Advice and EDI 856 Advance Ship Notice, there are documents such as the EDI 214 Transportation Carrier Shipment Status, EDI 300 series ocean container, EDI 100 series air or EDI 400 series rail related documents as well.

All of the data is passed using one of several methods of data transport, some of the most common are:
- Value Added Network (VAN): A go-between for trading partners to pass files.
- File Transfer Protocol (FTP): This is used to pass files from one computer to another using a login, but still passes that data as clear text and is not encrypted. File Transfer Protocol Secure (FTP/S) provides an extra level of security.
- EDI-INT: This is a set of standards for transferring EDI files through the internet more securely. Those standards are defined through Applicability Statements using AS1, AS2 or AS3. AS2 is the most common and defines the standards for sending files using HTTP (web browser).

The name of the game is data, lots of data.
VANs are the “lowest common denominator” They are available to all. No special equipment needed. Remember, most 3PLs are not big companies like FedEx and UPS. So the VAN became “standardized” in the 3PL industry.

 

Now let's introduce governmental agencies. 3PLs must (increasingly) communicate to customs and border-crossing organizations. These agencies many times specify VANs for simplicity. Customs systems are often built by contractors. First off, remember agencies are driven by their contractors. The contractors are in it for themselves, period. If they can talk the agency into something proprietary, then they have a big lock for follow-on contracts, called Sole Source Justification. The notice for award w/o bid goes something like this:

As XYZ Corp. is the only company with knowledge and expertise on ABCProrietarySoftware, it is in the government’s best interest to award the following $$$ multi year contract to XYZ Corp. as the cost and time for any other company to be able to support the existing system would not be in the taxpayer’s best interest.

And so it goes...but using proprietary point-to-point is very different than VANs. Better they stick to VANs.

So be it. The VAN has become “ingrained” into the 3PL World.