Executive Briefings

Budget Conscious Shippers Help E-Logistics Firms Gain Traction

E-logistics companies that survived the internet-bubble meltdown are experiencing a surge in business as shippers recognize the savings potential of their solutions and their hosted business model.

After a volatile and bubble-driven introductory period in which dozens of companies nearly simultaneously launched e-logistics initiatives - many of which have fallen by the wayside - the surviving entities continue to gain traction among corporate logistics managers as well as third-party service providers.

Three primary forces are driving this market growth: an increasingly sophisticated set of procurement and transportation management tools, the attractiveness of the quick-launch and fast-ROI capability of a hosted environment, and the lure of a pay-by-the-drink costing model.

Logistics.com, Burlington, Mass., started this year with a bang, achieving 80 percent year-over-year growth during the first quarter, including 23 new deals. On the shipper planning side, use of the company's OptiBid e-procurement tool for the negotiation of transportation contracts grew 300 percent over the total volume of transportation procured during all of 2001. Real-time transportation management using OptiManage added 700,000 hosted shipment transactions in the first quarter, delivering 325 percent growth relative to all of last year. The company says its impressive growth is attributable to continued demand for best-in-class, fully integrated transportation procurement and management solutions that deliver rapid ROI.

Other companies in the space make similar claims. "We're doing great," reports Greg Johnsen, vice president of products, GT Nexus, Long Beach, Calif. "At a time when the economy is trying to find its way out of the bag and enterprise software purchases are taking a bit of a hit, the ASP model and the ability for us to quickly launch networks is finding favor in the eyes of corporate managers who want to make progress without picking up huge license deals to make the concept fly."

"One of the things we keep hearing over and over again in the software industry is that the notion of selling huge, multimillion-dollar umbrella initiatives is completely dead," says Rick Parker, vice president of sales and marketing for Minneapolis-based Nistevo. "The companies that are doing the best have a more focused solution with good ROI numbers, and the ones that are doing the very best are selling subscriptions as opposed to licenses. That all falls into our business model, so we've been weathering the storm pretty well."

 

 

 

 

 

"We were able to automate our transportation network and see an almost immediate return on our investment."
- Mike Woods of Benjamin Moore

 


 

 

 

Although the weak economy provides good leverage for a by-the-drink sales pitch, it makes it harder to close deals, as corporate financial officers scrutinize all but the obviously necessary expenditures, he adds. "The economic climate clearly creates longer sale cycles, but we're hitting all our numbers and we're very happy with how our pipeline looks. But it hasn't been easy; we're working for our money."

At Logistics.com, the shipper side of the equation has substantially outpaced the carrier side of the company's business offerings. Carrier business remains somewhat stagnant and probably will until the economy begins to turn, according to Joe Wagner, senior vice president of global sales and marketing for the Burlington, Mass.-based company. "The carrier business is cyclical, and it generally predicts good economic times and bad economic times," Wagner explains. "We're seeing that cycle at the bottom of the reconciliation. The economy is still lumbering along, and the carriers' fortunes are directly related to that economic turnaround. When the economy is stagnant, carrier business is stagnant."

But while Logistics.com expects an ordinary year on the carrier side, managers are enthusiastic about the activity on the shipper side of the equation, as evidenced by the first quarter figures cited above. This activity is ironically attributable in part to the tight economy. "It's an interesting relationship," adds Wagner. "The execution area that we're involved in isn't exactly recession-proof, but it's one of those industries that could be described in financial terms as having a low beta, or volatility factor. In good economic times, shippers are trying to control transportation costs and are focused on supply-chain efficiencies. And in bad economic times, they do the same thing. Accordingly, many shippers in the present market have re-focused efforts to re-engineer the supply chain one more time because it's reached its maximum efficiency in its current design." In the logistics technology world, there's been a movement through the ERP systems, followed by a movement through the planning systems. "Now we're seeing a movement through the execution systems to drive the next gain in efficiency, and that's where we live."

Transportation costs in the United States approach $600bn annually, and nearly 80 percent of all shipments are moved under contract, according to ARC Advisory Group. Given that enormous transportation spend, e-logistics companies know they can carve out substantial efficiencies for their customers. And while the numbers for many of these e-logistics ventures are impressive, there's always the caveat that with fledgling companies, year-to-year gains can be somewhat misleading. A greater indicator of progress may be from the quality of the companies embracing the hosted logistics solution.

"We typically find that we are gaining traction in places where people tend to be early adopters - the people who already have gotten over the hurdle of recognizing that transportation is part of the supply chain and is something that can be managed to the company's advantage both from a cost perspective as well as from a competitive perspective in terms of customer relations," says Steve Gaines, vice president of global marketing for G-LOG of Shelton, Conn. For example, G-LOG went live late last year with the first phase of a four-stage project with Tesco Stores Ltd., the largest retailer in the United Kingdom, and has programs under way with DuPont, Exel, Crowley Logistics, United Airlines and Eastman Chemical.

Other e-logistics companies are landing big customers as well. FreightMatrix, the hosted service offered by i2 Technologies of Dallas, is in the process of implementing a solution for Michael's Stores and has been live with Kmart for several months, transacting the company's inbound domestic freight movements.

GT Nexus recently landed Home Depot and will create a private logistics network for the building products company, adding the retail giant to a customer list that includes Procter & Gamble and Hewlett-Packard. Nistevo provides solutions for International Paper, Land O'Lakes and Georgia Pacific. Logistics.com's 35 Fortune 500 shippers include Colgate-Palmolive, Wal-mart, Target and Menlo Logistics. Descartes Systems Group announced earlier this summer a host of new signings for the Waterloo, Ont.-based company, including Kraft Foods, Nabisco and Southwire. These are large, global companies that consistently can be found on the leading edge of logistics technology.

Pay-as-You-Go a Natural
The hosted logistics solution is a natural fit for many such companies, whether they are retailers, manufacturers or third-party logistics service providers, says Nistevo's Parker. "We're a network-based service, so there isn't anything to install on the customer's site. We have a modular subscription based pricing plan, so customers only buy the components they are going to use, and they buy them on a pay-as-you-go program. The technology enables retailers, manufacturers and carriers to collaborate, and it can be implemented very quickly."

"Much of our success comes down to time-to-value, and that's not just being driven from a competitive perspective, but rather from the customer's side," adds Razat Gaurav, director of transportation and distribution solutions for i2. "At the end of the day, the customer is looking for a solution that can deliver quantifiable value in 60 to 120 days, and that's what we're shooting for. With a footprint like ours, we can't implement everything in 60 to 120 days, but the first release and the first phase of that project should start delivering tangible value in 60 to 120 days."

Therein lies an interesting shift in supply-chain management trends that is being felt by all the major e-logistics solution providers. "The things we are seeing with our clients is that we're being asked to come in and find a good, focused area of small scope to start in without compromising the bigger picture in the future," says Gaines. He cites as an example the program under way with Tesco. In the first phase of this project, G-LOG began handling Tesco's inbound-to-distribution center activity, helping to position the retailer to take down the cost of its goods by separating the transportation cost from the material cost and allowing Tesco to manage that transportation expense, leveraging the retailer's economies of scale.

That's only one tiny part of Tesco's supply chain, says Gaines, who adds that Tesco plans in subsequent phases of the project to expand the use of G-LOG technology to manage DC-to-store activity as well as the international transport of inbound goods from vendors in the Pacific Rim.

According to Gaines, customers continuously come to G-LOG and say: "Help me find an element of our supply chain that is small and will show value right now, something we can get our hands around very quickly so people can see the value and I won't have to be in management meetings trying to justify large projects that only promise long-term paybacks." Customers still want the promise of a long-term payback from a full, comprehensive implementation, but first and foremost they want a quick start-up and rapid ROI, says Gaines. Tesco aims to slice its inbound logistics costs by 10 percent to 15 percent over the next two to three years using G-LOG in a phased-in program, while DuPont, which launched a worldwide rollout of the technology, expects to cut $50m per year out of its supply chain.

Companies often are not willing to provide specific numbers, though they will acknowledge having achieved their ROI goals. Benjamin Moore, a Logistics.com customer, for example, says its use of the OptiBid transportation e-procurement tool enabled "significant" early savings and a rapid return on investment. The paint company currently uses OptiBid for the self-service negotiation and securing of its North American truckload transportation contracts.

"After a well-executed six- to eight-week implementation, we were able to automate our transportation network and see an almost immediate return on our investment," says Mike Woods, corporate logistics manager of Benjamin Moore. "By providing us with unmatched control over the procurement process, OptiBid has maximized our ability to contract quality transportation services for the best price and drive costs out of our transportation network." On a cumulative basis, Logistics.com reports that it has enabled the procurement of $8bn in freight transportation services, resulting in more than $500m in hard-dollar savings for customers.

Greater Visibility Nistevo customer Land O'Lakes wanted to internalize its transportation management and bring the process under house control while improving visibility and opening up channels to collaborate with General Mills and other trading partners. Land O'Lakes uses Nistevo's collaboration tool as well as the company's network, contract and execution modules for supply-chain event management, online tendering and visibility. It has managed more than 4,300 shipments since September 2001, boosted its visibility to nearly 75 percent of freight in transit, has all core carriers online, and reports a return on investment of approximately 400 percent.

Delta Apparel of Duluth, Ga., which manufactures and sells high-quality knit apparel to distributors, screen printers and private label accounts, sought a mechanism other than costly EDI technology to conduct business electronically with its global suppliers and transportation providers. Delta's processes for managing its ocean transportation suppliers were typical of many importers and exporters - manual-based systems that relied almost exclusively on phone, fax, a modest amount of e-mail, and the occasional use of individual carrier online web services. The company's challenge was to identify and implement a standard shipment execution strategy that would bring to Delta more efficient processes and technology which would help streamline transportation transactions and deliver better visibility and management to its supply chain, which stretches from the U.S. to Mexico and Central America.

Delta chose to implement the web-based applications offered by GT Nexus and was registered for and trained to use the GT Nexus applications within a week. The online technology gave Delta the ability to analyze sailing schedules and select routings; submit shipment bookings to carriers and receive booking confirmations electronically; submit shipping instructions electronically, and prepare, edit and negotiate key shipping documents to completion in a standardized, online platform; get timely, accurate in-transit shipment status from its carriers; and automatically create and submit regulatory documents, such as export declarations, to U.S. Customs.

Widespread Savings
As a result, Delta reduced its dedicated international logistics staff by 50 percent, while handling increasing shipping volumes and improving cycle time performance. Bookings receive immediate confirmations from carriers, and Delta has far greater visibility to shipments in transit. In addition, the quality of data has improved dramatically.

 

 

 

 

 

"And we expect to save an estimated $60,000 annually in direct costs through filing our Shipper's Export Declarations over the automated interface."
- Ray Allen of Delta Apparel

 


 

 

 

"We've seen savings in direct costs, personnel and productivity," says Ray Allen, Delta's traffic and logistics coordinator. "The amount of time it takes to manage the typical shipment transaction process with carriers is reduced by more than half. At the same time, we're managing higher business volumes as well." Since the data flows through the network, there are fewer errors due to reduced re-keying of data, and documents are more accurate, which means fewer delays, he adds. "And we expect to save an estimated $60,000 annually in direct costs through filing our Shipper's Export Declarations over the automated interface provided by GT Nexus. Previously, we had to hire a broker to perform this task for us."

Some of the e-logistics enterprises have undergone a considerable metamorphosis since they first burst upon the logistics scene. For example, Logistics.com started by embracing the concept of the digital transportation marketplace, says Wagner. "That was our attempt to explain the efficiencies that could be gained utilizing internet technologies and having buyers and sellers of transportation interact with each other much more efficiently than phoning and faxing," he explains. "That message has morphed over time, and we relatively quickly shut down anything having to do with exchanges in transportation.

"We quickly determined that big buyers of transportation don't go to the open market to buy transportation - it's much too critical to their supply chain. Instead, the company went in a much more private-oriented way to create private networks for shippers that enabled them to interact with their contracted carriers. "Our goal was to make those interactions between customers and their existing business partners much more effective and efficient, rather than trying to go outside of their community," he adds. "When you try to go outside, you create all kinds of issues that you don't think about up front, some of them contractual, legal and, for some people in some cases, emotional."

i2 also implemented a significant change in approach for FreightMatrix, says Gaurav. "In the fall of last year, we basically collapsed the development teams as well as the sales organizations that were taking FreightMatrix and the licensed transportation solutions to market," he says. Now, the operations are vertically aligned, FreightMatrix is an integral part of i2, and "all the sales and pre-sales folks who position the solution are doing both the FreightMatrix service solution as well as the transportation industry license solutions." In practical terms, Gaurav adds, "that means that as we go to market, we position the generic i2 transportation industry solution, then we let the customer decide whether they would like to go to the hosted service offering via FreightMatrix or license the software and host it behind their own firewalls. FreightMatrix no longer is a separate entity that we are incubating."

E-logistics services still have some substantial obstacles in their growth path, but the future looks bright, says Wagner.

"In a business where a lot of small companies have come and gone since the turn of the century, there's a healthy amount of due diligence our customers must undergo before making a decision like this. And many of the larger companies are tied up trying to decide if they ever want to spend money in the current business climate. They are looking at the economic forecasts and their own sales numbers, and for some of our largest customers, sales are down 30 percent to 40 percent. If we were operating today in the economic climate of two years ago, we'd be soaring."

Collaborative Bidding on Freight Contracts

A new approach to transportation procurement called Combined Value Auction (CVA) has been introduced by Schneider Logistics, Green Bay, Wis. The product, SUMIT CVA, enables collaborative bidding for long-term freight contracts between shippers or third-parties and motor, rail and ocean carriers.

The major difference between CVA and other products on the market is that it allows carriers to create custom lane packages and conditional bids, taking into account operational realities like seasonal spikes in freight volume, says Paul Schneider, general manager for SUMIT CVA.

"This concept has been used successfully in other industries. but we believe we are the first to bring it to the transportation market," Schneider says. "It is much more collaborative than other products out there."

Schneider has been using the software since the fall of 2001 to procure the $2.5bn of freight services that it purchases each year as a lead logistics provider for various clients. It now is offering the software and associated consulting services to others interested in improving their transportation procurement process.

"The key to this product is the ability to leverage the networks of both shippers and carriers," says Schneider. "Rather than just asking for rates on a lane-by-lane basis, we take a cost/value approach to the total combined network." If a carrier can balance its network with particular movements, for example, it should be able to provide a better cost/service equation and capacity commitment for those particular lanes. The software also enables tiered bidding where seasonal spikes are an issue, and takes into account such factors as equipment type and preferences for existing core carriers.

Schneider cites two examples of how the software has saved clients money. In one instance, a shipper bidding its entire network reduced the number of carriers it was using from 104 to 22 and saved 8 percent on its total freight bill. In a second case, an initial network analysis by Schneider revealed an opportunity to convert substantial truckload freight to intermodal. When the final bid, covering inbound freight to three distribution centers, was complete, the savings amounted to nearly 30 percent.

Overall, Schneider Logistics reports that it has delivered transportation cost savings of between 5 percent and 50 percent per bid on more than $200m in long-term freight contracts so far awarded using SUMIT CVA.

After a volatile and bubble-driven introductory period in which dozens of companies nearly simultaneously launched e-logistics initiatives - many of which have fallen by the wayside - the surviving entities continue to gain traction among corporate logistics managers as well as third-party service providers.

Three primary forces are driving this market growth: an increasingly sophisticated set of procurement and transportation management tools, the attractiveness of the quick-launch and fast-ROI capability of a hosted environment, and the lure of a pay-by-the-drink costing model.

Logistics.com, Burlington, Mass., started this year with a bang, achieving 80 percent year-over-year growth during the first quarter, including 23 new deals. On the shipper planning side, use of the company's OptiBid e-procurement tool for the negotiation of transportation contracts grew 300 percent over the total volume of transportation procured during all of 2001. Real-time transportation management using OptiManage added 700,000 hosted shipment transactions in the first quarter, delivering 325 percent growth relative to all of last year. The company says its impressive growth is attributable to continued demand for best-in-class, fully integrated transportation procurement and management solutions that deliver rapid ROI.

Other companies in the space make similar claims. "We're doing great," reports Greg Johnsen, vice president of products, GT Nexus, Long Beach, Calif. "At a time when the economy is trying to find its way out of the bag and enterprise software purchases are taking a bit of a hit, the ASP model and the ability for us to quickly launch networks is finding favor in the eyes of corporate managers who want to make progress without picking up huge license deals to make the concept fly."

"One of the things we keep hearing over and over again in the software industry is that the notion of selling huge, multimillion-dollar umbrella initiatives is completely dead," says Rick Parker, vice president of sales and marketing for Minneapolis-based Nistevo. "The companies that are doing the best have a more focused solution with good ROI numbers, and the ones that are doing the very best are selling subscriptions as opposed to licenses. That all falls into our business model, so we've been weathering the storm pretty well."

 

 

 

 

 

"We were able to automate our transportation network and see an almost immediate return on our investment."
- Mike Woods of Benjamin Moore

 


 

 

 

Although the weak economy provides good leverage for a by-the-drink sales pitch, it makes it harder to close deals, as corporate financial officers scrutinize all but the obviously necessary expenditures, he adds. "The economic climate clearly creates longer sale cycles, but we're hitting all our numbers and we're very happy with how our pipeline looks. But it hasn't been easy; we're working for our money."

At Logistics.com, the shipper side of the equation has substantially outpaced the carrier side of the company's business offerings. Carrier business remains somewhat stagnant and probably will until the economy begins to turn, according to Joe Wagner, senior vice president of global sales and marketing for the Burlington, Mass.-based company. "The carrier business is cyclical, and it generally predicts good economic times and bad economic times," Wagner explains. "We're seeing that cycle at the bottom of the reconciliation. The economy is still lumbering along, and the carriers' fortunes are directly related to that economic turnaround. When the economy is stagnant, carrier business is stagnant."

But while Logistics.com expects an ordinary year on the carrier side, managers are enthusiastic about the activity on the shipper side of the equation, as evidenced by the first quarter figures cited above. This activity is ironically attributable in part to the tight economy. "It's an interesting relationship," adds Wagner. "The execution area that we're involved in isn't exactly recession-proof, but it's one of those industries that could be described in financial terms as having a low beta, or volatility factor. In good economic times, shippers are trying to control transportation costs and are focused on supply-chain efficiencies. And in bad economic times, they do the same thing. Accordingly, many shippers in the present market have re-focused efforts to re-engineer the supply chain one more time because it's reached its maximum efficiency in its current design." In the logistics technology world, there's been a movement through the ERP systems, followed by a movement through the planning systems. "Now we're seeing a movement through the execution systems to drive the next gain in efficiency, and that's where we live."

Transportation costs in the United States approach $600bn annually, and nearly 80 percent of all shipments are moved under contract, according to ARC Advisory Group. Given that enormous transportation spend, e-logistics companies know they can carve out substantial efficiencies for their customers. And while the numbers for many of these e-logistics ventures are impressive, there's always the caveat that with fledgling companies, year-to-year gains can be somewhat misleading. A greater indicator of progress may be from the quality of the companies embracing the hosted logistics solution.

"We typically find that we are gaining traction in places where people tend to be early adopters - the people who already have gotten over the hurdle of recognizing that transportation is part of the supply chain and is something that can be managed to the company's advantage both from a cost perspective as well as from a competitive perspective in terms of customer relations," says Steve Gaines, vice president of global marketing for G-LOG of Shelton, Conn. For example, G-LOG went live late last year with the first phase of a four-stage project with Tesco Stores Ltd., the largest retailer in the United Kingdom, and has programs under way with DuPont, Exel, Crowley Logistics, United Airlines and Eastman Chemical.

Other e-logistics companies are landing big customers as well. FreightMatrix, the hosted service offered by i2 Technologies of Dallas, is in the process of implementing a solution for Michael's Stores and has been live with Kmart for several months, transacting the company's inbound domestic freight movements.

GT Nexus recently landed Home Depot and will create a private logistics network for the building products company, adding the retail giant to a customer list that includes Procter & Gamble and Hewlett-Packard. Nistevo provides solutions for International Paper, Land O'Lakes and Georgia Pacific. Logistics.com's 35 Fortune 500 shippers include Colgate-Palmolive, Wal-mart, Target and Menlo Logistics. Descartes Systems Group announced earlier this summer a host of new signings for the Waterloo, Ont.-based company, including Kraft Foods, Nabisco and Southwire. These are large, global companies that consistently can be found on the leading edge of logistics technology.

Pay-as-You-Go a Natural
The hosted logistics solution is a natural fit for many such companies, whether they are retailers, manufacturers or third-party logistics service providers, says Nistevo's Parker. "We're a network-based service, so there isn't anything to install on the customer's site. We have a modular subscription based pricing plan, so customers only buy the components they are going to use, and they buy them on a pay-as-you-go program. The technology enables retailers, manufacturers and carriers to collaborate, and it can be implemented very quickly."

"Much of our success comes down to time-to-value, and that's not just being driven from a competitive perspective, but rather from the customer's side," adds Razat Gaurav, director of transportation and distribution solutions for i2. "At the end of the day, the customer is looking for a solution that can deliver quantifiable value in 60 to 120 days, and that's what we're shooting for. With a footprint like ours, we can't implement everything in 60 to 120 days, but the first release and the first phase of that project should start delivering tangible value in 60 to 120 days."

Therein lies an interesting shift in supply-chain management trends that is being felt by all the major e-logistics solution providers. "The things we are seeing with our clients is that we're being asked to come in and find a good, focused area of small scope to start in without compromising the bigger picture in the future," says Gaines. He cites as an example the program under way with Tesco. In the first phase of this project, G-LOG began handling Tesco's inbound-to-distribution center activity, helping to position the retailer to take down the cost of its goods by separating the transportation cost from the material cost and allowing Tesco to manage that transportation expense, leveraging the retailer's economies of scale.

That's only one tiny part of Tesco's supply chain, says Gaines, who adds that Tesco plans in subsequent phases of the project to expand the use of G-LOG technology to manage DC-to-store activity as well as the international transport of inbound goods from vendors in the Pacific Rim.

According to Gaines, customers continuously come to G-LOG and say: "Help me find an element of our supply chain that is small and will show value right now, something we can get our hands around very quickly so people can see the value and I won't have to be in management meetings trying to justify large projects that only promise long-term paybacks." Customers still want the promise of a long-term payback from a full, comprehensive implementation, but first and foremost they want a quick start-up and rapid ROI, says Gaines. Tesco aims to slice its inbound logistics costs by 10 percent to 15 percent over the next two to three years using G-LOG in a phased-in program, while DuPont, which launched a worldwide rollout of the technology, expects to cut $50m per year out of its supply chain.

Companies often are not willing to provide specific numbers, though they will acknowledge having achieved their ROI goals. Benjamin Moore, a Logistics.com customer, for example, says its use of the OptiBid transportation e-procurement tool enabled "significant" early savings and a rapid return on investment. The paint company currently uses OptiBid for the self-service negotiation and securing of its North American truckload transportation contracts.

"After a well-executed six- to eight-week implementation, we were able to automate our transportation network and see an almost immediate return on our investment," says Mike Woods, corporate logistics manager of Benjamin Moore. "By providing us with unmatched control over the procurement process, OptiBid has maximized our ability to contract quality transportation services for the best price and drive costs out of our transportation network." On a cumulative basis, Logistics.com reports that it has enabled the procurement of $8bn in freight transportation services, resulting in more than $500m in hard-dollar savings for customers.

Greater Visibility Nistevo customer Land O'Lakes wanted to internalize its transportation management and bring the process under house control while improving visibility and opening up channels to collaborate with General Mills and other trading partners. Land O'Lakes uses Nistevo's collaboration tool as well as the company's network, contract and execution modules for supply-chain event management, online tendering and visibility. It has managed more than 4,300 shipments since September 2001, boosted its visibility to nearly 75 percent of freight in transit, has all core carriers online, and reports a return on investment of approximately 400 percent.

Delta Apparel of Duluth, Ga., which manufactures and sells high-quality knit apparel to distributors, screen printers and private label accounts, sought a mechanism other than costly EDI technology to conduct business electronically with its global suppliers and transportation providers. Delta's processes for managing its ocean transportation suppliers were typical of many importers and exporters - manual-based systems that relied almost exclusively on phone, fax, a modest amount of e-mail, and the occasional use of individual carrier online web services. The company's challenge was to identify and implement a standard shipment execution strategy that would bring to Delta more efficient processes and technology which would help streamline transportation transactions and deliver better visibility and management to its supply chain, which stretches from the U.S. to Mexico and Central America.

Delta chose to implement the web-based applications offered by GT Nexus and was registered for and trained to use the GT Nexus applications within a week. The online technology gave Delta the ability to analyze sailing schedules and select routings; submit shipment bookings to carriers and receive booking confirmations electronically; submit shipping instructions electronically, and prepare, edit and negotiate key shipping documents to completion in a standardized, online platform; get timely, accurate in-transit shipment status from its carriers; and automatically create and submit regulatory documents, such as export declarations, to U.S. Customs.

Widespread Savings
As a result, Delta reduced its dedicated international logistics staff by 50 percent, while handling increasing shipping volumes and improving cycle time performance. Bookings receive immediate confirmations from carriers, and Delta has far greater visibility to shipments in transit. In addition, the quality of data has improved dramatically.

 

 

 

 

 

"And we expect to save an estimated $60,000 annually in direct costs through filing our Shipper's Export Declarations over the automated interface."
- Ray Allen of Delta Apparel

 


 

 

 

"We've seen savings in direct costs, personnel and productivity," says Ray Allen, Delta's traffic and logistics coordinator. "The amount of time it takes to manage the typical shipment transaction process with carriers is reduced by more than half. At the same time, we're managing higher business volumes as well." Since the data flows through the network, there are fewer errors due to reduced re-keying of data, and documents are more accurate, which means fewer delays, he adds. "And we expect to save an estimated $60,000 annually in direct costs through filing our Shipper's Export Declarations over the automated interface provided by GT Nexus. Previously, we had to hire a broker to perform this task for us."

Some of the e-logistics enterprises have undergone a considerable metamorphosis since they first burst upon the logistics scene. For example, Logistics.com started by embracing the concept of the digital transportation marketplace, says Wagner. "That was our attempt to explain the efficiencies that could be gained utilizing internet technologies and having buyers and sellers of transportation interact with each other much more efficiently than phoning and faxing," he explains. "That message has morphed over time, and we relatively quickly shut down anything having to do with exchanges in transportation.

"We quickly determined that big buyers of transportation don't go to the open market to buy transportation - it's much too critical to their supply chain. Instead, the company went in a much more private-oriented way to create private networks for shippers that enabled them to interact with their contracted carriers. "Our goal was to make those interactions between customers and their existing business partners much more effective and efficient, rather than trying to go outside of their community," he adds. "When you try to go outside, you create all kinds of issues that you don't think about up front, some of them contractual, legal and, for some people in some cases, emotional."

i2 also implemented a significant change in approach for FreightMatrix, says Gaurav. "In the fall of last year, we basically collapsed the development teams as well as the sales organizations that were taking FreightMatrix and the licensed transportation solutions to market," he says. Now, the operations are vertically aligned, FreightMatrix is an integral part of i2, and "all the sales and pre-sales folks who position the solution are doing both the FreightMatrix service solution as well as the transportation industry license solutions." In practical terms, Gaurav adds, "that means that as we go to market, we position the generic i2 transportation industry solution, then we let the customer decide whether they would like to go to the hosted service offering via FreightMatrix or license the software and host it behind their own firewalls. FreightMatrix no longer is a separate entity that we are incubating."

E-logistics services still have some substantial obstacles in their growth path, but the future looks bright, says Wagner.

"In a business where a lot of small companies have come and gone since the turn of the century, there's a healthy amount of due diligence our customers must undergo before making a decision like this. And many of the larger companies are tied up trying to decide if they ever want to spend money in the current business climate. They are looking at the economic forecasts and their own sales numbers, and for some of our largest customers, sales are down 30 percent to 40 percent. If we were operating today in the economic climate of two years ago, we'd be soaring."

Collaborative Bidding on Freight Contracts

A new approach to transportation procurement called Combined Value Auction (CVA) has been introduced by Schneider Logistics, Green Bay, Wis. The product, SUMIT CVA, enables collaborative bidding for long-term freight contracts between shippers or third-parties and motor, rail and ocean carriers.

The major difference between CVA and other products on the market is that it allows carriers to create custom lane packages and conditional bids, taking into account operational realities like seasonal spikes in freight volume, says Paul Schneider, general manager for SUMIT CVA.

"This concept has been used successfully in other industries. but we believe we are the first to bring it to the transportation market," Schneider says. "It is much more collaborative than other products out there."

Schneider has been using the software since the fall of 2001 to procure the $2.5bn of freight services that it purchases each year as a lead logistics provider for various clients. It now is offering the software and associated consulting services to others interested in improving their transportation procurement process.

"The key to this product is the ability to leverage the networks of both shippers and carriers," says Schneider. "Rather than just asking for rates on a lane-by-lane basis, we take a cost/value approach to the total combined network." If a carrier can balance its network with particular movements, for example, it should be able to provide a better cost/service equation and capacity commitment for those particular lanes. The software also enables tiered bidding where seasonal spikes are an issue, and takes into account such factors as equipment type and preferences for existing core carriers.

Schneider cites two examples of how the software has saved clients money. In one instance, a shipper bidding its entire network reduced the number of carriers it was using from 104 to 22 and saved 8 percent on its total freight bill. In a second case, an initial network analysis by Schneider revealed an opportunity to convert substantial truckload freight to intermodal. When the final bid, covering inbound freight to three distribution centers, was complete, the savings amounted to nearly 30 percent.

Overall, Schneider Logistics reports that it has delivered transportation cost savings of between 5 percent and 50 percent per bid on more than $200m in long-term freight contracts so far awarded using SUMIT CVA.