Pioneering Uses of Information Technology in Trucking Research by Thomas N. Hubbard
Wireless networking applications in trucking have yielded significant
increases in productivity.
The economic value of many applications of information technology
(IT) rest on the same principles: information improves decision
making, and better systems of communication enable people to
implement those decisions more efficiently.
For every industry, productivity reflects not only how well
inputs are transformed into outputs, but also how well information
is applied to resource allocation decisions. Information technology
can improve productivity by improving such decisions.
The trucking industry, usually perceived as low-tech, was one
of the first industries to effectively use wireless networking
applications to enhance productivity. While businesses today
are developing wireless networking applications around laptop
computers, cell phones, and PDAs, the trucking industry was
using wireless technology as early as the late 1980s.
In trucking, IT has offered solutions to the long-standing
challenge of matching trucks to hauls. Since the late 1980s,
operators of trucking fleets have used on-board computers (OBCs),
which allow dispatchers to more accurately match supply to demand
via enhanced information processing and communication capabilities.
Trucks' on-board computers were among the first commercially
important applications of wireless networking technology. The
on-board computers with the biggest impact have been electronic
vehicle management systems (EVMS), which transmit geographic
position to dispatchers and allow dispatchers and drivers to
send short text messages to each other.
"I see the work of truck dispatchers as a metaphor for
the types of resource allocation decisions made by white-collar
managers," says Thomas N. Hubbard, an associate professor
at the University of Chicago Graduate School of Business. "Information
empowers dispatchers to make better decisions."
In the new study, "Information, Decisions, and Productivity:
On-Board Computers and Capacity Utilization in Trucking,"
Hubbard offers strong evidence of productivity gains from adopting
Estimates from 1997 suggest that on-board computers enabled
adopters to increase trucks' utilization rate by 13 percent
on average. In the aggregate, this led to 3.3 percent higher
capacity utilization in the trucking industry. This increase
in productivity contributed on the order of $16 billion in benefits
to the economy.
"What wireless networking applications provide is the
ability to communicate important information at the right place,
at the right time-which can yield huge benefits in many industries,"
High Quality Matches
Industries involving intermediate goods, such as trucking,
tend to fly under the radar of public consciousness. However,
while the trucking industry is relatively invisible to consumers,
it is highly visible to any company involved in manufacturing
or shipping goods.
The American Trucking Association estimates that trucking (including
private fleets) was a $486 billion industry in 1998, which equals
approximately 6.1 percent of Gross Domestic Product.
"Trucking makes up a significant part of the economy,
so even small improvements in the industry's productivity levels
are important," says Hubbard.
In trucking, the output of the production process is the movement
of cargo. All else being held equal, the cost per unit of output
decreases as capacity utilization increases. Firms bear opportunity
costs when trucks, and therefore drivers, are idle. Capacity
utilization is high when trucks haul a series of full loads,
with each haul starting soon after the previous one finishes.
Individual shippers usually do not have demands for both legs
of a round trip, and shipments typically do not fill trailers.
In such situations, high capacity utilization requires trucks
to haul different shippers' cargo on the same run. Capacity
utilization depends largely on how well individuals can identify
and organize the demands of various shippers for individual
trucks. Higher quality matches increase capacity utilization
by keeping trucks on the road and loaded more-therefore raising
truck drivers' productivity.
Truck dispatchers are the people directly involved in matching
capacity to demand, and information is a critical input to dispatchers'
decisions. Dispatchers work in a highly dynamic environment-supply
and demand in trucking change constantly. Dispatchers have to
forecast when and where trucks are available, and when and where
shippers will demand service-usually with only a few hours notice.
Dispatchers are constantly trying to ensure that each truck
in their fleet is filled on its way from point A to point B,
in addition to trying to find good "backhauls" for
each truck's return trip.
Before the introduction of wireless applications, dispatchers
had no way of initiating communication with drivers-they had
to rely on drivers calling in every few hours in order to keep
track of the status and location of each truck, an inefficient
process for both dispatchers and drivers.
Not knowing the available resources or capabilities at any
given moment can cause inefficiencies, especially when filling
backhauls. Dispatchers might turn down an order they could actually
fill, take an order they can't fill, or assign a distant truck
to a haul when a closer truck is available.
For over a decade, two types of on-board computers have been
used in the trucking industry:
1. Trip recorders: These low-end devices serve as a truck's
black box, and allow dispatchers to monitor how drivers operate
trucks-providing information such as when trucks were turned
on and off, and whether drivers were speeding. Since information
from the trip recorders can only be downloaded once a truck
has returned to its base, these devices are not as useful for
matching trucks to hauls.
2. Electronic vehicle management systems: These high-end devices
contain all the capabilities of trip recorders, but also provide
dispatchers real-time information about a truck's location via
"With the use of electronic vehicle management systems,
dispatchers can now tell a potential customer 'Yes, I have a
truck 30 minutes away from you, expect them at this time,' because
dispatchers will know exactly where the driver is, and can relay
this new request to the driver," says Hubbard.
Hubbard's study addresses the question: Do on-board computers
enable firms to get more loaded miles out of their trucks than
they otherwise could? The results indicate that they do, especially
in contexts where real-time scheduling is important.
Hubbard used data from the U.S. Bureau of the Census' 1992
and 1997 Truck Inventory and Use Surveys. These surveys
are taken every five years as part of the Census of Transportation,
and provide variables which can be used to evaluate how on-board
computers affect truck utilization. In particular, the survey
includes questions about trucks' loaded miles, and whether trucks
have trip recorders or EVMS installed.
Using this data, Hubbard investigated whether trucks with on-board
computers obtained higher loaded miles per period in use, holding
constant a set of variables that indicated how trucks were used
(e.g., whether they were used for long or short hauls).
Hubbard found that in 1997, loaded miles per period in use
were 13 percent higher among trucks with EVMS than without.
This is roughly equivalent to getting an extra 200-mile haul
per week out of each truck. Other evidence indicated that this
improvement was mostly due to the advanced capabilities of EVMS-dispatchers
could determine trucks' position in real time and communicate
with drivers while they were on the road.
In contrast, there is little evidence that this improvement
reflects dispatchers' increased ability to oversee drivers.
Other evidence indicates that on-board computers were more
beneficial in some circumstances than others: three-quarters
of the capacity utilization gains appear in the segment of the
industry that hauls goods long distances in nonspecialized trailers.
The matching between the trucks and hauls in this segment tends
to be done far less in advance than in other segments that haul
goods shorter distances or use specialized equipment; it follows
that on-board computers' value in helping dispatchers match
trucks to hauls is higher.
Finally, Hubbard found evidence that it took time for firms
to obtain returns from their IT investments. Hubbard found no
evidence that on-board computers improved capacity utilization
in 1992-even though many firms had adopted them by that time.
The fact that positive returns appear in the 1997 data but not
the 1992 data suggest that returns lagged adoption, which supports
the conventional wisdom that it takes time to realize the full
benefits of IT.
"After a few years, trucking firms figured out how to
best exploit the technology-adapting software packages to better
use real-time information," says Hubbard. "As in many
industries, technology has improved productivity, but it took
much longer to realize those gains than people expected."
The Wireless Future
Wireless networking applications are expected to diffuse more
broadly in the near future. This study helps illustrate the
economic implications of the new technology.
"Information technology can have wide productivity benefits
by improving managers' ability to make resource allocation decisions,"
While Hubbard's study focuses on trucking, his findings can
be applied to a broad range of industries. Hubbard uses the
example of a multinational manufacturing firm: Wireless networking
applications allow a manager sitting in a firm's Chicago office
to know what is happening in the firm's manufacturing plants
around the globe. Managers can gauge how full capacity is at
each plant, so that orders can be allocated to the appropriate
plant and completed efficiently.
Hubbard notes that for CEOs, while the investment in wireless
applications is important, it should be perceived as a long-term
rather than short-term investment.
"When firms consider how to best exploit these wireless
platforms, the question is what information is needed at what
time," says Hubbard. "If firms can get that question
answered, then these wireless applications can have significant
Thomas N. Hubbard is associate professor of economics and
strategy at the University of Chicago Graduate School of Business.