Supply Chain Interoperability: Its Meaning, Its Challenges, and How to Overcome Them

As technology improves, it should become easier and faster to share information. But things don’t always work out that way in the real world. How can shared information affect the supply chain, and what could—or should—you do about it?

In this article, we’ll look at the hot topic of supply chain interoperability. Then you’ll hear from some experts about how interoperability can help you save money and time.

What Is Interoperability?

In the world of logistics, interoperability means that independent companies can share information and work together. You can read some scholarly articles about it, but that’s basically what it is.

What would this look like? Mike Turner, vice president of sales at dynamic freight matching company DFM Data Corp., has an idea.

“I can see—and this is the future—truck A, truck B, and truck C,” Turner says. “They’re coming in from different suppliers, and at the end of the day, they might all be going to the same retailer. Is there a place where we can consolidate that merchandise so the trucks don’t all have to flow into one location?”

And why is this worth doing? Turner continues, “You can take out a significant amount of waste in the system.” So companies can save money and time. He mentions that there are also companies that are committed to producing net-zero emissions by 2025 or 2030. Supply chain interoperability would help those companies meet those goals and improve their public relations profiles.

Challenges of Interoperability

This all sounds good, right? Less waste, more efficiency, less pollution, more sharing of information?

It’s that last part that tends to be the problem.

“Where’s the value associated with me creating something that might help my competitor?” Turner asks.

Interoperability requires several companies to share information with one another. And most companies are reluctant to reveal their private, hard-won information about clients, rates, and delivery speed, among other metrics. “There’s winners and losers in that process,” Turner notes. “It can be a risk rather than an opportunity.”

Another issue, he explains, is “Humans don’t like change.” So, the biggest impediment to interoperability and a paperless supply chain is “legacy systems, legacy processes. And I’d say complacency and a fear of moving forward.”

Will Interoperability Work for You?

How much of a challenge interoperability will be depends on what your organization does and how old it is.

“The answer is different in every single environment,” says Chris Petrocelli. He’s an advisory board member and professor at SUNY’s Maritime College. Even some high-tech companies have decided to address the rewards and challenges of interoperability somewhere down the road, Petrocelli says, rather than coming up with innovative solutions now.

In contrast, some small firms have decided to “go right at” the issue. They “really work toward never putting themselves into environments where they’re forced to do work-arounds and manual subprocesses,” Petrocelli explains.

Companies are more likely to tackle this issue if they’re younger. “Companies that have been doing things for a while—it’s just so hard to change,” says Petrocelli. People are used to doing things on paper, and they trust that process. But sticking with a paper-based system means the organization misses out on the opportunities that come with big data, streamlining, and information that’s in real time or close to real time.

“There are companies now,” explains Turner, “that are doing the work of connecting with the driver, communicating to find out where the load is, identifying where capacity may and may not exist. Understanding lane capacities, understanding backhaul opportunities. A lot of these scenarios are being digitized.”

But the companies making this extra effort are still in the minority. Turner estimates that only about 7 percent of the $800 billion U.S. trucking market is currently modernized in this way.

So there’s plenty of business to modernize! And logistics consultant Jack Carbone adds another important point to consider.

One of the benefits of contactless, streamlined communication is that “the drivers are getting in and out fast,” Carbone explains. “In the industry, they call it reduced churn time.” And that reduced time can not only save money but reduce driver frustration—at a time when there’s a significant shortage of qualified drivers.

“There’s an extreme shortage of drivers,” confirms Wayne Steinberg. He’s director of transportation and logistics at US Foods. Steinberg mentioned that government regulations about training drivers are getting stricter as well.

Overcoming the Challenges of Interoperability

How can you overcome the challenges and make interoperability (and other paperless solutions) work for you? Here are four strategies.

Strategy 1: Identify a Motivating Force

“If you think about dramatic change, there’s always an outside force that drives the desire and willingness of individuals to cooperate,” Turner says.

In terms of interoperability and contactless solutions, that outside force could be the government. Or it could be a major retailer. “They dictate what they’re going to have in their space,” explains Turner.

If you know that a major player is considering interoperability requirements, then you’re more likely to get executives in your organization to agree that spending time and money on logistics solutions is worth doing as soon as possible. And something as complex as a digital logistics solution needs that buy-in from the people in charge.

Strategy 2: Focus on the Shared Benefits

Another potential motivating force is the fear of missing out.

“When you’re asking vendors and partners to work with you,” Petrocelli says, “you’ve got to come up with a good business case.”

He recommends emphasizing these points:

• cost savings
• efficiency
• visibility
• better working relationships to improve service to a common customer

Also, every organization that becomes part of an interoperability system can benefit from faster decision-making. And that can mean the difference between profit and loss in this business!

Improved customer experience is another significant benefit. Only in the past few years has a chief customer officer (CX) even been a C-suite position. Turner explains, “The more you become digital, the more information becomes paperless, the more I can design a customer experience that’s based on data and inputs and touchpoints that are more real-time, as opposed to the lag that we get right now.”

Strategy 3: Start Small and With Limited Information Sharing

Turner recommends trying to form a consortium or working group among a few companies. “If you can bring these organizations together, you can look at how they’re doing design work, or strategy work. But you can find one or two common areas among disparate players,” he explains. “And you can say, ‘Let’s start here.’ ”

Over time, you can expand the scope and participation within the different companies. “Once you get that proof of concept in play, you get individuals seeing where this is going to work,” he says.

And interoperability doesn’t mean you need to share all your data. “It might be four or five pieces of data that continue to flow downstream” that would affect the end user’s experience, Turner comments.

Jack Carbone suggests focusing on information that many organizations have used for quite some time—not only GPS but also temperature monitors, sensors that detect how long truck doors are open, and chassis sensors that check the air pressure level in tires or indicate whether a chassis has a container mounted.

Strategy 4: Think About Security All Along the Way

Sharing digital information with other companies means the risk of leaks increases exponentially. “The more you make things paperless,” Turner advises, “the more you have to ensure security and compliance appropriate to how that information is handled and who owns it.” Don’t let your carefully laid plans be scuttled because a client or participating business asks, “How will you protect my information?” and you don’t have an answer.

Moving Forward

Does interoperability seem daunting? Don’t be discouraged.

Petrocelli comments, “I can’t, on my own, accomplish this task of getting visibility to 20 different logistics providers.” Instead, he suggests finding trusted providers to help you.

“That’s what Vector does,” he says. “There are companies, there are environments that just focus on that, and can connect the dots in ways that you can never really get there, as an individual company with your own constraints and business requirements.”

Kirsti MacPherson writes about logistics, nonprofit businesses, and education. For Halloween 2021, she dressed up as the Ever Given.