THE COMPUTERIZATION OF TRANSPORTATION: Sophisticated Systems Incorporating IT in the Mobility of People and Goods

THE IMPACT OF INFORMATION AND
COMMUNICATION TECHNOLOGY ON ROAD FREIGHTTRANSPORTATION
Ryuichi YOSHIMOTO

Toshinori NEMOTO, Ph.D.

Senior Researcher
Systems Research & Development Institute of JapanTokyo, Japan

Professor
Graduate School of Commerce and Management
Hitotsubashi University
Tokyo, Japan(Received February 7, 2005)
Surveying the recent trend toward e-commerce and computerization in the trucking industry, this paper establishes a framework for analyzing
the impact of information and communication technology on road freight transportation in terms of commerce, logistics and fleet management, andproposes hypothetical mechanisms of influence. The authors note that the rapid growth of e-commerce and freight fleet management systems makeit difficult to arrive at firm, statistics-based conclusions about their impact on road freight transportation, but suggest that more sophisticated government management of transportation demand as well as freight fleet management systems could cancel out the negative impact of e-commerce onroad transportation.
Key Words: EC (Electronic Commerce), EDI, Logistics, ITS (Intelligent Transportation Systems), FFMS (Freight Fleet Management Systems)

1. INTRODUCTION
E-commerce is growing as the cost of informationand communication equipment, as well as communication fees, fall and the number of Internet users rises. Although e-commerce liberates sellers from the need tomaintain a store, and buyers from the need to visit one,it requires the delivery of goods from seller to buyer. This
has led some to argue that e-commerce will increase roadfreight transportation and lead to worse urban road congestion1.
At the same time, other research suggests that information and communication technology (ICT) will havea positive effect on traffic. For example, once e-commerce has reached a certain level of diffusion there may
be reduced use of private vehicles for shopping2 and more
efficient joint delivery systems based on shared operational information that work to prevent an increase in traffic volume3.
Research focusing on ICT’s impact on passenger
and freight transportation has existed for some time4 but
the recent rapid growth of e-commerce, computerizationof truck transportation providers and trends in e-government make necessary the establishment of a new analytical framework. This paper establishes a framework foranalyzing the impact of ICT on road freight transportation in terms of commerce, logistics and fleet management,
and proposes hypothetical mechanisms of influence.

16 • IATSS RESEARCH Vol.29 No.1, 2005

2. A FRAMEWORK FOR EVALUATING THE
INFLUENCE OF ICT
2.1

Developments in ICT
In recent years, the cost of personal computers andperipherals has dropped sharply even as their processing
power and storage capacity have skyrocketed. Likewise,as the growth of broadband and always-on Internet connections illustrates communication fees continue to drop
even as connection speeds increase. The lower cost andhigher functionality of information and communication
systems has had a profound effect in increasing the population of Internet users and fostering the growth of e-commerce.
In the transportation field, Intelligent Transportation
Systems (ITS) like car navigation systems and VICS (Vehicle Information and Communication System), which
provides drivers with traffic information, have begun tofind their way into private vehicles. For commercial vehicles it is now easy to track the location of vehicles andfreight using GPS, and apply such information to the optimization of travel routes and freight arrival times. In
addition, great promise is also seen for the use of electronic tags (RFID) and Dedicated Short Range Communication (DSRC) systems such as the ETC system used
to collect highway tolls.
Internet-accessible mobile phones have rapidly become commonplace and, together with their ability also

THE IMPACT OF COMPUTERIZATION ON ROAD FREIGHT TRANSPORTATION

R. YOSHIMOTO, T. NEMOTO

to use e-mail messaging services, are used to find roadtraffic information. Business uses for such phones include
everything from management of a salesperson’s schedule to logistics applications like photographing the insideof a shipping container with the internal digital cameraand sending the image overseas to show how an item waspackaged. In fact, by the end of September 2004 the number of mobile phone users had reached 89 million. The
total number of GPS-equipped mobile phones soldthrough 2003 is estimated to have been roughly 12 million.

tween receipt of an order and delivery of goods, reducing the opportunity cost that accompanies fluctuations ofsupply and demand and maximizing the profit associatedwith the sale of goods. Some shippers make a point to
conduct logistics functions in-house in order to gain acompetitive advantage. In general, however, there is a
growing trend toward outsourcing such functions to logistics service providers as a way to reduce costs.
To meet shipper demands, logistics service providers try to minimize logistics costs (transportation costs
and storage costs as well as general management costs
including information processing). Meanwhile, growing
demand from shippers for services such as time-specificdelivery, temperature control and cargo tracking works
to increase such costs.
Consumers seek to maximize their consumer surplus by purchasing what they want at low cost. While costis an important factor in consumer satisfaction, consumers are willing to bear a certain additional cost if they canobtain the items they want in a timely manner. Meanwhile, consumers who live along major roads bear theeffects of traffic congestion, traffic accidents and environmental degradation such as air and noise pollution.
Needless to say, they would prefer that such problems
were alleviated and a more pleasant urban environment
maintained.
In general, government is assumed to seek maximization of social welfare (overall benefits minus overall costs). While e-commerce and logistics are private
sector activities, government involvement is appropriate
in areas such as providing public funds to support transportation and information infrastructure projects, adopting regulations to ensure safety, internalization of externalcosts, efficient and appropriate resource allocation and thefair income distribution.

2.2

Logistics system stakeholders
E-commerce is defined as “doing business over theInternet” and includes business-to-customer (B2C) transactions like those at Internet bookstores as well as business-to-business (B2B) transactions. To enable a closer
examination of the role of logistics-related e-commerce
we further divide businesses (B) into shippers (manufacturers, wholesalers and retailers) (S) and logistics service
providers (such as transportation, fowarding and warehousing companies) (L). Generally when people refer to
B2B they mean S2S. ICT has the greatest impact on logistical efficiency at the point between the logistics service provider and the shipper (L2S) where the shipper
purchases logistics services. In looking at the impact of
ICT on logistics we must specify the relationships between the stakeholders, including government (G) as wellas the above-mentioned S, L and C(Fig. 1).
Businesses
C2C
S2S
B2C
Shippers(S)

Consumers
(C)
C2B

2.3

S2L

L2S

Logistics
serviceproviders
(L)

C2G

G2C

B2G
Governments
(G)
G2B

L2L
G2G

Fig. 1 Logistics system stakeholders

Shippers include both consigners and consignees,
who share a concern with minimizing the lead time be-

The impact of ICT on logistics systems
Information and communication technologies, particularly the growth of the Internet and ITS, are having avariety of effects on logistics systems5. Such effects canbe divided into three categories(Fig. 2).
(1) The Internet increases B2B and B2C transactions,leading to greater transportation demand (e-commerce).
(2) The Internet and ITS create more sophisticated markets for L2S and L2L transactions and promote freightconsolidation (e-logistics).
(3) ITS promotes optimization of fleet management basedon traffic and other real-time information, leading tobetter transportation efficiency (e-fleet management).
IATSS RESEARCH Vol.29 No.1, 2005 •17

THE COMPUTERIZATION OF TRANSPORTATION: Sophisticated Systems Incorporating IT in the Mobility of People and Goods

Internet(mobile)B2B, B2C
transaction(e-commerce)

S2L, L2L
transaction(e-logistics)
ITS
logistics operations(e-fleet mgnt)

e-fleet management. Here, in addition to offering somehypotheses concerning ICT’s impact and the role of government, we examine data that addresses whether someof these trends are already underway, measuring roadfreight transportation in tons, ton-km, vehicle-km andurban vehicle-km. In general, increases in freight transportation volume in tons and ton-km are accompanied
by increases in vehicle-km and urban vehicle-km but private-sector efforts such as joint delivery and government
introduction of road pricing may work to limit increases
in vehicle-km and urban vehicle-km.

Fig. 2 ICT and logistics system

3.1
E-commerce changes the supply chain; it enables
manufacturers, wholesalers and retailers to perform transactions directly with consumers. As a result, small andmid-sized companies in outlying areas can sell their products directly to consumers overseas. The change affects
not only B2C but also B2B transactions. The Internet offers a means of dealing with small and mid-sized firms
while at the same time offering a means to find the lowest-cost provider of mass-produced items.
E-logistics, that is, e-commerce in logistics services
markets, is expected to increase competition by adding
the potential business partners and enabling wide-ranging searches for cost information. As competition grows
fiercer, weaker logistics services providers will be weededout or reorganized. At the same time, the tendency to reduce costs by outsourcing in-house logistics operations
to outside providers can be expected to continue.
As competition heats up, logistics services providers will have to work to reign in costs even as they work
to meet shipper demands for services such as time-specific delivery and temperature control. E-fleet management – fleet management that implements ITS – cancontribute to greater transportation efficiency. The
clearest example is GPS-based vehicle tracking systems.
Further efficiency can be expected from the use of vehicle and freight-specific data culled from Dedicated
Short Range Communication (DSRC) systems and electronic tags (RFID) in combination with route planning
based on road traffic information and digital road maps.

3. THE IMPACT OF ICT ON ROAD FREIGHTTRANSPORTATIONICT exerts an effect on road freight transportation
through the development of e-commerce, e-logistics and18 • IATSS RESEARCH Vol.29 No.1, 2005

Hypothesis: E-commerce will increase consumer
demandE-commerce creates consumer demand that may
lead to higher demand for freight transportation. Consumer demand is believed to rise because of the spreadof the Internet means saving in transaction cost that leadto lower prices, careful B2C marketing that leads to better matching of products with consumer needs, and increased value-added that changes in the amount theconsumer is willing to pay.
Turning now to some related statistical data, e-commerce is still growing, from nine trillion yen in 1998 to
82 trillion yen in 2003 (Fig. 3). E-commerce can be divided into a seventy-seven trillion yen B2B market anda four trillion yen B2C market, with the mobile B2C market for transactions through mobile phones growing especially fast. Nevertheless, despite the nine-fold growthin e-commerce during the five years since 1998, household consumption expenditure has fallen in each of those
years, suggesting that e-commerce has not caused an increase in consumption expenditure.
3.2

Hypothesis: E-commerce will foster increasedorders for logistics providers, particularly parcel
delivery services
E-commerce will reduce shipping volume. Transportation to retail stores has generally been by pallet or
returnable container. E-commerce creates a need to shipa variety of items as individual units. Furthermore, thefickle consumer wants immediate delivery. Unable tocope with theses demands, more and more shippers who
have conducted their own logistics operations in-houseare outsourcing to logistics services providers, particularly
the parcel delivery services.
Increased demand for parcel delivery could increase
market concentration in the hands of a few major transportation companies. Most smaller transportation companies rely on chartered transport and lack the network of

THE IMPACT OF COMPUTERIZATION ON ROAD FREIGHT TRANSPORTATION

R. YOSHIMOTO, T. NEMOTO

internetcontents

contents exclusivefor IMPs

internet(including extra-net)

internet mobile phone (IMP) net

desk-top
personalcomputers

mobilephonesnote-bookpersonalcomputers

IMPs withmicro-browsers
mobile B2C commerce: 777 billion yen

E-commerce : 81,856 billion yen(including B2C: 4,424 billion yen)
Source: http://www.eom.or.jp

Fig. 3 E-commerce in Japan in 2003

sales offices needed to combine numerous smaller clientsor the truck terminals with sorting operations necessary
to conduct trunk route operations. As with such facilities
networked, special services like inspection, cargo tracking and return and repair are only available from the major players.
Statistics demonstrate the increasing role of logistics
service providers. The share of vehicle-km freight traffic
volume accounted for by commercial trucks has steadily
increased, from 17.6% in 1980 to 34.4% in 2001 (Table
1). Commercial vehicles carry mixed loads so they also
have a higher loading ratio than private vehicles. The increase in commercial vehicles should lead to an increasein transportation efficiency and reduction in traffic interms of vehicle-km. In practice, however, traffic volume
in terms of vehicle-km was already increasing in the
1980s even before e-commerce due to smaller lot ship-ping and time-specific delivery, an increase too great to
be offset entirely by the rising share of commercial vehicles.
Parcel delivery has increased at a rate of 10% annually from 1.8 billion parcels in 1998 to 2.8 billion in
2003, but it is impossible to know what share of thefreight originated in e-commerce. Overall freight traffic
demand in Japan in tons or ton-km is falling. Seen bymode, however, there is a slight rise in automotive tonkm, although it is difficult to draw conclusions about any
relationship to e-commerce or the growth in parcel delivery services.
3.3

Hypothesis: E-logistics can reduce the volume of
freight transportation
Schemes to match cargos and trucks are nothing
new. Logistics service providers have long communicated

Table 1 Freight traffic in Japan in terms of vehicle-km, ton-km and tons
Freight Traffic in Vehicle-km
Billion Vehicle-km

Commercial Trucks(%)

PrivateTrucks(%)

Freight Trafficin Ton-km(Billions)Freight Trafficin Tons(Millions)

1980

136

17.6

82.4

179

5,318

1985

139

22.1

77.9

206

5,048

1990

159

26.6

73.4

274

6,114

1995

166

30.6

69.4

295

6,017

2000

165

34.2

65.8

313

5,774

2001

164

34.4

65.6

313

5,578

Source: http://www.mlit.go.jp/
Note: Freight traffic in vehicle-km excludes special kind vehicles and small trucks.

IATSS RESEARCH Vol.29 No.1, 2005 •19

THE COMPUTERIZATION OF TRANSPORTATION: Sophisticated Systems Incorporating IT in the Mobility of People and Goods

over the phone to cooperate in finding backhaul freight
for empty trucks. Recently such efforts have moved to
the Internet and now even involve shippers directly. Loadefficiency can be improved and loaded miles increased
through joint pick-up and delivery systems involving
multiple shippers. Internet-based systems for joint pickup and delivery are now being adopted by logistics services providers and shippers.
Internet-based systems for matching cargos andtrucks underwent something of a boom and increased rapidly a few years ago but the simple information-sharing
sites and freight charge auction sites have largely disappeared. Today, only those systems for matching cargos
and trucks that operate between qualified logistics services providers remain in active use. Among websites run
by shippers’ logistics subsidiaries (non-asset based systems) are companies that provide third-party logistics(3PL) services in conjunction with inventory managementand distribution processing.
Unfortunately, there are many obstacles to actual
operations and few examples of successful joint pick-up
and delivery systems are to be found. It is particularly difficult to determine cost and profit in such collaborations
and maintain an equitable distribution among partner
firms handling differing volumes of freight6. In addition,
it is difficult for parcel delivery services, for which pickups double as sales and marketing calls, to defer work toothers.
3.4

Hypothesis: ITS will improve transportation efficiency
Dispatch centers can access road traffic information
as they direct deliveries and routings. This increases theiraccuracy in predicting vehicle arrival times and improves
their ability to respond quickly and accurately to customer
inquiries. Recently, compilations of GPS data have enabled route selection and coordination of departure times
by day and time that improve the accuracy of arrival
times. Real-time road traffic information is available not
only at dispatch centers but also to drivers through mobile phones. Drivers are now able to contact customers
directly.
Automatic Vehicle Identification/Automatic Equipment Identification (AVI/AEI) is also expected to contribute to improved transportation efficiency and security.
For example, a trailer could be automatically identified,given permission to enter a container yard and instructed
where to drop its load. The ISO is standardizing data dictionary and message sets in anticipation of an international, inter-modal freight tracking system.

20 • IATSS RESEARCH Vol.29 No.1, 2005

That many trucking companies are small and midsized has prevented the spread of ICT. Usage has finally
increased, however, with the recent availability of inexpensive, high-speed, always-on Internet access in offices
and the development of vehicle-side applications incorporating GPS and packet communication. In the four
years starting in 2000, there were a total of 37,400 vehicles equipped with GPS-based tracking systems andanother 86,000 (including 9,200 units of hybrid type withGPS) equipped with digital tachographs that provide
speed and other information to improve driving safety andeconomy, for a total of 114,200 vehicles7 (Table 2).
Table 2 Diffusion of in-vehicle equipment
Year

GPS

Digital Tachograph

2000

4,100

12,0002001

12,60029,0002002

21,40053,0002003

37,40086,000Source: Yano Research Institute (2004)

3.5

Hypothesis: Transportation demand can be
managed through government investment in information infrastructure
As the ICT is applied to logistics operations forshippers and logistics service providers, attention is turning to the role of government. In particular, there is a needto develop databases of digital road maps and road traffic information systems as a form of public infrastructure.
Development of inexpensive, easy-to-use databases would
lead the private sector to develop various e-logistics ande-fleet management services8.
There is also a need for government to better regulate transportation demand through information and communication technology. Applications might include
monitoring of hazardous materials transport or guiding
vehicles along low-risk routes using vehicle identification and mobile communication systems. This could contribute to improved safety and response in the event of
natural disaster or accident. Road pricing schemes could
be adopted that vary the amount charged based on vehicle type and level of congestion. Environmental roadpricing that directs large trucks, at a discount, to routes
with a lower environmental impact on the surroundingarea is being implemented on roads such as Tokyo’s Metropolitan Expressway.
The hypotheses described above can be summarized
as shown in Figure 4, which depicts how freight volume
measured in tons, ton-km, vehicle-km and urban vehicle-

THE IMPACT OF COMPUTERIZATION ON ROAD FREIGHT TRANSPORTATION

ICT(e-commerce)
more efficient transaction
internet EDI (B2B)
cyber mall (B2C)
more customized products
information sharing (B2B)
one-to-one marketing (B2C)

internet&

ITS(e-logistics)

R. YOSHIMOTO, T. NEMOTO

more value
added products

outsourcing
logistics

more efficient logistics operationroute planning (L2L)
cargo tracking (L2S)

–

+
+ +
ton-kmmore efficient transaction
courier, 3PL,4PL (L2S)
delivery & collection points (L2L)(e-fleet management)

freight
ton+

globalprocurement
small-sized/
JIT delivery(e-government)+

substituting
shopping trips

new business model
reverse auction (C2B)
auction (C2C)

advanced logistics market
matching cargos and trucks (S2L, L2L)
cooperative delivery system (L2L)

passenger car
vehicle-km

–

–

+
+
–

milk-runpick-up/delivery–

vehicle-km

–

–
+

urban
consolidation–––

vehicle-km
in urban areas

Information
Infra
e.g.
digital map,
traffic info,
Electronic
Registration
Identification
Transportation
DemandManagement
e.g.
monitoring
dangerous
goods,
road
pricing–

optimized routing+ : increasing effect– : decreasing effectFig. 4 Impacts of ICT on logistics system

km is influenced by other factors. Arrows marked with a“+” indicate a direct increasing relationship between one
variable and the other, while those marked with a “-” indicate an inverse relationship.

communication technology as well as the latest efforts byshippers and logistics providers, and for continued observation and evaluation of the changes in road freight transportation that result.

4. CONCLUSIONSREFERNECES

Information and communication technologies arehaving an enormous influence on road freight transportation. This paper has established a framework for evaluating their impact not only in terms of e-commerce but
also in terms of the computerization of the logistics market and the increasing sophistication of fleet management
systems.
The broad impact of ICT on road freight transportation combines a trend toward increase caused by thegrowth in e-commerce with a trend toward decreasecaused by improved transportation efficiency. A dearthof concrete examples and statistical data, however, makes
it difficult to reach clear conclusions about the overall
impact of ICT at the current time. In particular, it is impossible to determine the degree to which e-commerce
has increased the volume of parcel delivery and roadfreight transportation. There is a need for further monitoring of trends in the development of information and

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