Executive Briefings

Logistics Exchanges Struggle to Cross Modal Divide

Logistics exchanges will continue to have a vertical focus for the near term, but some will develop a horizontal, multi-modal approach as more freight migrates to these marketplaces. In the meantime, exchanges of all types are under pressure to add services and value.

Most of the 150 or so logistics exchanges that Andersen Consulting estimates have been started in the U.S. over the past 18 months deal with domestic truck movements. Using exchanges for intermodal planning and execution remains largely an issue for the future.

"The number of trucking exchanges is multitudes the number of exchanges in other modes," says Shawn Gregor, a senior manager at Andersen, who notes that the highly segmented nature of the trucking market offers huge opportunities for exchanges.

On the other hand, very little has happened in the express sector. "There you have two suppliers and a million buyers. There's no reason for them to bid in an open exchange for that traffic," says Mike Galardi, an Andersen Consulting partner. Instead, UPS and FedEx have been cultivating links to vertical exchanges and e-tailers.

The same rationale applies in the rail sector, Galardi continues. With only six major players in North America, an exchange doesn't offer much value to the railroads. In Europe national rail companies have no competition in their home markets and hence have no incentive to look for exchanges.

 

 

 

 

 

"Everybody talks about multi-modal because it's a cool thing to do. Most shippers don't need multiple modes of transportation. " - Mike Bittner of AMR

 


 

 

 

There are some players in the maritime sector, but developments in that mode have been much slower than in the trucking arena. Mike Bittner, research director of supply chain e-fulfillment at AMR Research, attributes this partly to the more complex nature of the business. "Maritime is normally a global situation. You face trade logistics issues that you don't have with an intermodal shipment from Louisville to Anaheim."

The same applies to the air cargo sector, where a relatively small number of players have been battling - with limited success so for. Given that freight forwarders control much of that market, it's harder for exchanges to muscle in on the act, notwithstanding earlier predictions about e-commerce leading to disintermediation and the demise of the agent. One provider, U.K.-based Global Freight Exchange (GFX), targets squarely the wholesale market between air carriers and agents.

Nonetheless, a growing number of players are striving to develop a full portfolio that covers all modes. "They're all talking about going multi-modal, but only a handful are offering that at the moment," says Bittner. In most cases the bulk of the business will remain in an exchange's core mode, he says. For example, NTE, the former National Transportation Exchange, one of the oldest and largest trucking exchanges, is talking about a multi-modal offering, but it is unlikely to become a big player in the maritime trade, Bittner says.

Running a multi-modal exchange is a challenge, as different modes have different requirements, he adds.

Einat Steklov, vice president of business development of maritime exchange GoCargo, reasons that the ambition to provide everything - multiple modes and a host of functions - is a major reason why many exchanges have not had much success, or even disappeared. "At GoCargo we're fairly aggressive people, and we work long hours, but we realized that we couldn't do everything at the same time. In the long run it's very important to offer this one-stop concept, but that's not going to happen in under a year," she comments.

Bittner doubts if multi-modal exchanges are really what the market needs. "Everybody talks about multi-modal because it's a cool thing to do. Most shippers don't need multiple modes of transportation. Those who do are very large shippers who have service contracts with logistics providers."

Tom Dowd, vice president of marketing at nPassage, which offers an internet-based execution management system to shippers and exchanges alike, thinks it's only a matter of time before exchanges become multi-modal. At this stage of the game shippers are trying exchanges out with spot shipments, he says. Down the road, as they take the main body of their traffic to exchanges, they will have greater need for multi-modal offerings.

One factor that holds back multi-modal as well as air and ocean cargo sites is the fact that e-commerce in North America is far ahead of other parts of the world. Although exchanges are increasingly offering services that span borders, the amount of web-facilitated traffic that moves in the international arena is still low, Bittner observes. The psychological barriers are considerably higher than with domestic surface shipments, he says. "Shippers are not going to jump into global logistics with this."

Gregor remarks that Asia and Europe are catching up. In September and early October, two exchanges catering to the ocean sector opened up in Singapore. South America, on the other hand, has yet to see exchanges emerge as a factor. "There's almost no one there, but a number of plans are in development," says Gregor.

The approach of exchanges depends to a large extent on where they are coming from, if they are buyer-centric or seller-centric models. What they have in common is that they are either about value creation or value transfer, Gregor says. Value creation is about creating marketing efficiencies or liquidity, reducing transaction cost and allowing people to offer new products and services; value transfer is more about buying leverage, about eliminating third parties or changing their role.

While the buy-sell function is at the core of transportation exchanges, most offer additional features, predominantly information - about routings, schedules, airport and customs opening hours, container specifications and other matters. Some dotcoms offer transportation-related news flashes on their sites. In terms of hands-on functionality, most have embraced track-and-trace elements.

Steklov says that such functions need not be offered by the exchange itself. GoCargo, which has signed on some 11,000 shippers and more than 2,000 service providers, is running some functions with partners, including track and trace. In a recent move it teamed up with trade software vendor Vastera to provide landed-cost calculations on cross-border shipments. Steklov expects this to be up and running before the end of the year.

 

 

 

 

 

"We have to have global pricing; we're not looking for ad-hoc rates."
- Lynn Ofner, of Creo Products

 


 

 

 

The exchange function itself tends to be increasingly two-way. Shippers can post their traffic and invite bids from carriers, and carriers in turn can offer empty space. Either way, this model is primarily suited for ad-hoc traffic. In the air and ocean sectors, this is a relatively small part of the overall volume. According to Brian Clancy, principal of cargo consultancy MergeGlobal, only 15 percent of air cargo traffic is on an ad-hoc basis; the rest moves on long-term contracts. During the peak season it is virtually impossible to secure space on a flight from Asia to North America, as all capacity has been booked in advance.

If exchanges want to make a lasting impact in the air sector, they have to find ways to embrace long-term freight allocations. Global Freight Exchange, which recently completed its pilot phase, will add such a model in the near future, according to CEO Todd Morgan.

Bittner says that others are working to accommodate allocations, but no exchange is there yet. "It's a tough nut to crack, but everybody realizes that these capabilities will show up. It's going to be a slower cycle."

According to Steklov, two-thirds to three-quarters of traffic in the maritime sector is moved under long-term contracts. For this reason GoCargo spent the past six months augmenting its approach, adding an application that can handle this type of traffic.

Reach New Shippers
Advocates say there are tangible benefits for carriers to work with exchanges, both for ad-hoc and contract traffic. First of all, exchanges provide an additional sales channel for space that might not be filled. Secondly, they extend the reach of a carrier. Mark Haeussler, director of e-commerce at United Airlines Cargo, says that exchanges can allow carriers to tap into traffic from shippers who normally wouldn't consider this higher-priced mode of transportation.

Exchanges also offer the potential of significant savings in transaction costs, Haeussler notes. Airline sales staff currently spend far too much time answering status inquiries for shipments and requests for rates, he says. If this process can be automated, employees can spend more time fostering relationships with existing customers and soliciting new business.

He has no doubt that this is going to be a long haul, as automation hasn't made much headway in the air cargo industry when it comes to bookings. Worldwide EDI and online booking account only for about 7 percent of air cargo transactions today, Haeussler says; most transactions are still handled by fax or phone. "I think it's going to take a couple of years for that to change," he comments.

United is currently in bed with "a handful of exchanges," according to Haeussler. He won't disclose how many dotcoms the carrier works with. To some extent this is because of confidentiality agreements that are often in place during the pilot phase of a partnership. But there is another reason, too. At this stage of the game dealing with exchanges means primarily marketing excess capacity, and most airlines don't want their competitors to know how much empty space they have, says Pete Diefenbach, assistant director of marketing and sales of Nippon Cargo Airlines.

This cloak-and-dagger atmosphere makes it difficult to gauge how many airlines are using exchanges at the moment. Freightgate has four airlines on board, according to CEO Martin Hubert, but he is not at liberty to disclose who they are. Steve Gibbs, general manager of cargo sales for the U.S. and southern region at Air Canada, thinks that the picture will become clearer over the coming 12 months. "Most carriers have one foot in but are still uncertain which [exchanges] are best and where it will go," he comments. At this point it looks like GFX has attracted the greatest number of participants. German airline Lufthansa actually took a 10 percent stake in the exchange in the spring. A number of large airlines, such as Northwest or Nippon Cargo, are not dealing with exchanges at the moment but prefer to wait and see how the picture unfolds.

Shippers may have flocked to transportation exchanges in greater numbers, but that doesn't mean they are booking space through them. First and foremost they use the exchange for tracking, according to Hubert.

In Bittner's eyes, track and trace is definitely part of the value proposition online exchanges offer to shippers, but Galardi thinks it's the wrong approach to take exchanges to the next level. "Track and trace is more pizzazz than value. It's the wrong place to start. The hard core benefits come from automation from the moment the shipper agrees on a transaction," he argues.

Rating Carriers
In Dowd's opinion, track and trace goes some way to meeting a key issue for shippers. They want better visibility of the supply chain and they want to be able to measure carrier performance, he observes. To date, a great deal of performance reports actually come from the carriers, he says. GoCargo has incorporated a ratings function in its system. Shippers rate carriers they have used by specified parameters, and those ratings are open to all participants in the exchange.

When it comes to booking freight through exchanges, shippers have serious reservations. Security and quality of service are concerns that have to be addressed, Bittner says. "Velocity of the supply chain is another one. What can the exchange do in terms of process efficiency?"

While cost benefits and business process efficiency are attractions to shippers, they are still overshadowed by a fundamental concern: What happens if a shipment gets lost or delayed? Who is responsible? "If something goes wrong, track and trace doesn't solve it. What do you do about it?" Bittner asks.

Some shippers categorically rule out booking freight through exchanges. "We would never use that, we're too large for that. We have to have global pricing; we're not looking for ad-hoc rates," comments Lynn Ofner, head of logistics at Creo Products, a maker of computer-to-plate print machines in Vancouver. Other than for occasional tracking, Dole Fresh Flowers has no need for web-based transportation exchanges either. "Almost everything we ship goes out collect. If the customer wants a special rate, he'll have to negotiate with the truck line. If I decide where to pay for freight - when we need a dedicated truck-most of the trucking firms I deal with don't have a web site," says distribution manager John Rau.
Hardly any shipper has linked his ERP system with an exchange so far, observes Galardi, adding that this is not likely to change quickly. Integration is a costly exercise, and on top of the concerns mentioned earlier, there is another big question mark: Which of the logistics exchanges that are in the market today will be around 12 months down the road?

It is universally agreed that the transportation exchange arena is facing a massive shakeout. To make it worth shippers' and carriers' while, there has to be a relatively small number of players with a strong portfolio of clients, says Claude Morin, managing director of cargo for Air Canada. Bittner reckons that over the next couple of years the number of online transportation exchanges will drop by 50 percent. Some exchanges will go down, some will be taken over, some form alliances with logistics providers, and some will merge with other exchanges.

As investor's ardor for dotcoms waned in recent months, it's been tougher to secure financing, and profitability still remains elusive. "No one's making any money. The expected break-even dates are moving out," Galardi says.

What is adding to the pressure on transportation exchanges is the trend among vertical e-marketplaces to embrace logistics as part of their product offering. A recent study by AMR indicates that e-commerce platforms increasingly are teaming up with supply-chain software vendors, a move that it suggests is necessary for those platforms to survive. "Logistics support is perceived by exchange operators and infrastructure vendors as a required ingredient for a successful business model," the study concludes. This means more competition for transportation exchanges, although in some cases vertical e-markets and logistics exchanges may partner, as Florida-based e-Fruit, an exchange for fruit and juice, has done with Freightgate.

If transportation exchanges want to stay on the scene, they have to develop their business model further; pure exchanges won't survive, Galardi predicts. "If an exchange is nothing more than an exchange, it's dead. You don't add value by just getting buyer and seller together."

 

 

 

 

 

"I don't think auctions and bulletin boards are going to last. They don't offer enough value." - Tom Dowd of nPassage

 


 

 

 

John O'Brien, airfreight director of the Canadian International Freight Forwarders Association, agrees that the price focus of an exchange is a lost cause. Large forwarders concentrate on aspects like business relationships and value-added components rather than price, he remarks.

"I don't think auctions and bulletin boards are going to last. They don't offer enough value," adds Dowd. nPassage is planning to add a billing audit and freight payment function to its system through a partnership. However, the company has no ambition to turn into a transportation exchange but prefers to serve shippers and exchanges instead. "We're glad to be the Intel inside," Dowd quips.

Clancy, too, sees little point in playing the price game through exchanges. "Shippers are not interested in coming to work every day and bidding out their freight. They want to bring their costs down, but in a more systematic way. That's what they have forwarders for," he says, adding that the notion of shippers getting involved with the transactional side of logistics runs counter to what's been happening in corporate America in recent years.

AMR discerns a trend to more sophisticated exchanges that are moving in the direction of providing supply-chain optimization tools. "The real game is going to be played in integration," Galardi says. He compares the development to the shaving accessories business, where manufacturers give away razors for free in order to sell blades. "The exchange is like a razor. You want to do the integration, handle the automation for the shipper and link everybody to global trade."

Most of the 150 or so logistics exchanges that Andersen Consulting estimates have been started in the U.S. over the past 18 months deal with domestic truck movements. Using exchanges for intermodal planning and execution remains largely an issue for the future.

"The number of trucking exchanges is multitudes the number of exchanges in other modes," says Shawn Gregor, a senior manager at Andersen, who notes that the highly segmented nature of the trucking market offers huge opportunities for exchanges.

On the other hand, very little has happened in the express sector. "There you have two suppliers and a million buyers. There's no reason for them to bid in an open exchange for that traffic," says Mike Galardi, an Andersen Consulting partner. Instead, UPS and FedEx have been cultivating links to vertical exchanges and e-tailers.

The same rationale applies in the rail sector, Galardi continues. With only six major players in North America, an exchange doesn't offer much value to the railroads. In Europe national rail companies have no competition in their home markets and hence have no incentive to look for exchanges.

 

 

 

 

 

"Everybody talks about multi-modal because it's a cool thing to do. Most shippers don't need multiple modes of transportation. " - Mike Bittner of AMR

 


 

 

 

There are some players in the maritime sector, but developments in that mode have been much slower than in the trucking arena. Mike Bittner, research director of supply chain e-fulfillment at AMR Research, attributes this partly to the more complex nature of the business. "Maritime is normally a global situation. You face trade logistics issues that you don't have with an intermodal shipment from Louisville to Anaheim."

The same applies to the air cargo sector, where a relatively small number of players have been battling - with limited success so for. Given that freight forwarders control much of that market, it's harder for exchanges to muscle in on the act, notwithstanding earlier predictions about e-commerce leading to disintermediation and the demise of the agent. One provider, U.K.-based Global Freight Exchange (GFX), targets squarely the wholesale market between air carriers and agents.

Nonetheless, a growing number of players are striving to develop a full portfolio that covers all modes. "They're all talking about going multi-modal, but only a handful are offering that at the moment," says Bittner. In most cases the bulk of the business will remain in an exchange's core mode, he says. For example, NTE, the former National Transportation Exchange, one of the oldest and largest trucking exchanges, is talking about a multi-modal offering, but it is unlikely to become a big player in the maritime trade, Bittner says.

Running a multi-modal exchange is a challenge, as different modes have different requirements, he adds.

Einat Steklov, vice president of business development of maritime exchange GoCargo, reasons that the ambition to provide everything - multiple modes and a host of functions - is a major reason why many exchanges have not had much success, or even disappeared. "At GoCargo we're fairly aggressive people, and we work long hours, but we realized that we couldn't do everything at the same time. In the long run it's very important to offer this one-stop concept, but that's not going to happen in under a year," she comments.

Bittner doubts if multi-modal exchanges are really what the market needs. "Everybody talks about multi-modal because it's a cool thing to do. Most shippers don't need multiple modes of transportation. Those who do are very large shippers who have service contracts with logistics providers."

Tom Dowd, vice president of marketing at nPassage, which offers an internet-based execution management system to shippers and exchanges alike, thinks it's only a matter of time before exchanges become multi-modal. At this stage of the game shippers are trying exchanges out with spot shipments, he says. Down the road, as they take the main body of their traffic to exchanges, they will have greater need for multi-modal offerings.

One factor that holds back multi-modal as well as air and ocean cargo sites is the fact that e-commerce in North America is far ahead of other parts of the world. Although exchanges are increasingly offering services that span borders, the amount of web-facilitated traffic that moves in the international arena is still low, Bittner observes. The psychological barriers are considerably higher than with domestic surface shipments, he says. "Shippers are not going to jump into global logistics with this."

Gregor remarks that Asia and Europe are catching up. In September and early October, two exchanges catering to the ocean sector opened up in Singapore. South America, on the other hand, has yet to see exchanges emerge as a factor. "There's almost no one there, but a number of plans are in development," says Gregor.

The approach of exchanges depends to a large extent on where they are coming from, if they are buyer-centric or seller-centric models. What they have in common is that they are either about value creation or value transfer, Gregor says. Value creation is about creating marketing efficiencies or liquidity, reducing transaction cost and allowing people to offer new products and services; value transfer is more about buying leverage, about eliminating third parties or changing their role.

While the buy-sell function is at the core of transportation exchanges, most offer additional features, predominantly information - about routings, schedules, airport and customs opening hours, container specifications and other matters. Some dotcoms offer transportation-related news flashes on their sites. In terms of hands-on functionality, most have embraced track-and-trace elements.

Steklov says that such functions need not be offered by the exchange itself. GoCargo, which has signed on some 11,000 shippers and more than 2,000 service providers, is running some functions with partners, including track and trace. In a recent move it teamed up with trade software vendor Vastera to provide landed-cost calculations on cross-border shipments. Steklov expects this to be up and running before the end of the year.

 

 

 

 

 

"We have to have global pricing; we're not looking for ad-hoc rates."
- Lynn Ofner, of Creo Products

 


 

 

 

The exchange function itself tends to be increasingly two-way. Shippers can post their traffic and invite bids from carriers, and carriers in turn can offer empty space. Either way, this model is primarily suited for ad-hoc traffic. In the air and ocean sectors, this is a relatively small part of the overall volume. According to Brian Clancy, principal of cargo consultancy MergeGlobal, only 15 percent of air cargo traffic is on an ad-hoc basis; the rest moves on long-term contracts. During the peak season it is virtually impossible to secure space on a flight from Asia to North America, as all capacity has been booked in advance.

If exchanges want to make a lasting impact in the air sector, they have to find ways to embrace long-term freight allocations. Global Freight Exchange, which recently completed its pilot phase, will add such a model in the near future, according to CEO Todd Morgan.

Bittner says that others are working to accommodate allocations, but no exchange is there yet. "It's a tough nut to crack, but everybody realizes that these capabilities will show up. It's going to be a slower cycle."

According to Steklov, two-thirds to three-quarters of traffic in the maritime sector is moved under long-term contracts. For this reason GoCargo spent the past six months augmenting its approach, adding an application that can handle this type of traffic.

Reach New Shippers
Advocates say there are tangible benefits for carriers to work with exchanges, both for ad-hoc and contract traffic. First of all, exchanges provide an additional sales channel for space that might not be filled. Secondly, they extend the reach of a carrier. Mark Haeussler, director of e-commerce at United Airlines Cargo, says that exchanges can allow carriers to tap into traffic from shippers who normally wouldn't consider this higher-priced mode of transportation.

Exchanges also offer the potential of significant savings in transaction costs, Haeussler notes. Airline sales staff currently spend far too much time answering status inquiries for shipments and requests for rates, he says. If this process can be automated, employees can spend more time fostering relationships with existing customers and soliciting new business.

He has no doubt that this is going to be a long haul, as automation hasn't made much headway in the air cargo industry when it comes to bookings. Worldwide EDI and online booking account only for about 7 percent of air cargo transactions today, Haeussler says; most transactions are still handled by fax or phone. "I think it's going to take a couple of years for that to change," he comments.

United is currently in bed with "a handful of exchanges," according to Haeussler. He won't disclose how many dotcoms the carrier works with. To some extent this is because of confidentiality agreements that are often in place during the pilot phase of a partnership. But there is another reason, too. At this stage of the game dealing with exchanges means primarily marketing excess capacity, and most airlines don't want their competitors to know how much empty space they have, says Pete Diefenbach, assistant director of marketing and sales of Nippon Cargo Airlines.

This cloak-and-dagger atmosphere makes it difficult to gauge how many airlines are using exchanges at the moment. Freightgate has four airlines on board, according to CEO Martin Hubert, but he is not at liberty to disclose who they are. Steve Gibbs, general manager of cargo sales for the U.S. and southern region at Air Canada, thinks that the picture will become clearer over the coming 12 months. "Most carriers have one foot in but are still uncertain which [exchanges] are best and where it will go," he comments. At this point it looks like GFX has attracted the greatest number of participants. German airline Lufthansa actually took a 10 percent stake in the exchange in the spring. A number of large airlines, such as Northwest or Nippon Cargo, are not dealing with exchanges at the moment but prefer to wait and see how the picture unfolds.

Shippers may have flocked to transportation exchanges in greater numbers, but that doesn't mean they are booking space through them. First and foremost they use the exchange for tracking, according to Hubert.

In Bittner's eyes, track and trace is definitely part of the value proposition online exchanges offer to shippers, but Galardi thinks it's the wrong approach to take exchanges to the next level. "Track and trace is more pizzazz than value. It's the wrong place to start. The hard core benefits come from automation from the moment the shipper agrees on a transaction," he argues.

Rating Carriers
In Dowd's opinion, track and trace goes some way to meeting a key issue for shippers. They want better visibility of the supply chain and they want to be able to measure carrier performance, he observes. To date, a great deal of performance reports actually come from the carriers, he says. GoCargo has incorporated a ratings function in its system. Shippers rate carriers they have used by specified parameters, and those ratings are open to all participants in the exchange.

When it comes to booking freight through exchanges, shippers have serious reservations. Security and quality of service are concerns that have to be addressed, Bittner says. "Velocity of the supply chain is another one. What can the exchange do in terms of process efficiency?"

While cost benefits and business process efficiency are attractions to shippers, they are still overshadowed by a fundamental concern: What happens if a shipment gets lost or delayed? Who is responsible? "If something goes wrong, track and trace doesn't solve it. What do you do about it?" Bittner asks.

Some shippers categorically rule out booking freight through exchanges. "We would never use that, we're too large for that. We have to have global pricing; we're not looking for ad-hoc rates," comments Lynn Ofner, head of logistics at Creo Products, a maker of computer-to-plate print machines in Vancouver. Other than for occasional tracking, Dole Fresh Flowers has no need for web-based transportation exchanges either. "Almost everything we ship goes out collect. If the customer wants a special rate, he'll have to negotiate with the truck line. If I decide where to pay for freight - when we need a dedicated truck-most of the trucking firms I deal with don't have a web site," says distribution manager John Rau.
Hardly any shipper has linked his ERP system with an exchange so far, observes Galardi, adding that this is not likely to change quickly. Integration is a costly exercise, and on top of the concerns mentioned earlier, there is another big question mark: Which of the logistics exchanges that are in the market today will be around 12 months down the road?

It is universally agreed that the transportation exchange arena is facing a massive shakeout. To make it worth shippers' and carriers' while, there has to be a relatively small number of players with a strong portfolio of clients, says Claude Morin, managing director of cargo for Air Canada. Bittner reckons that over the next couple of years the number of online transportation exchanges will drop by 50 percent. Some exchanges will go down, some will be taken over, some form alliances with logistics providers, and some will merge with other exchanges.

As investor's ardor for dotcoms waned in recent months, it's been tougher to secure financing, and profitability still remains elusive. "No one's making any money. The expected break-even dates are moving out," Galardi says.

What is adding to the pressure on transportation exchanges is the trend among vertical e-marketplaces to embrace logistics as part of their product offering. A recent study by AMR indicates that e-commerce platforms increasingly are teaming up with supply-chain software vendors, a move that it suggests is necessary for those platforms to survive. "Logistics support is perceived by exchange operators and infrastructure vendors as a required ingredient for a successful business model," the study concludes. This means more competition for transportation exchanges, although in some cases vertical e-markets and logistics exchanges may partner, as Florida-based e-Fruit, an exchange for fruit and juice, has done with Freightgate.

If transportation exchanges want to stay on the scene, they have to develop their business model further; pure exchanges won't survive, Galardi predicts. "If an exchange is nothing more than an exchange, it's dead. You don't add value by just getting buyer and seller together."

 

 

 

 

 

"I don't think auctions and bulletin boards are going to last. They don't offer enough value." - Tom Dowd of nPassage

 


 

 

 

John O'Brien, airfreight director of the Canadian International Freight Forwarders Association, agrees that the price focus of an exchange is a lost cause. Large forwarders concentrate on aspects like business relationships and value-added components rather than price, he remarks.

"I don't think auctions and bulletin boards are going to last. They don't offer enough value," adds Dowd. nPassage is planning to add a billing audit and freight payment function to its system through a partnership. However, the company has no ambition to turn into a transportation exchange but prefers to serve shippers and exchanges instead. "We're glad to be the Intel inside," Dowd quips.

Clancy, too, sees little point in playing the price game through exchanges. "Shippers are not interested in coming to work every day and bidding out their freight. They want to bring their costs down, but in a more systematic way. That's what they have forwarders for," he says, adding that the notion of shippers getting involved with the transactional side of logistics runs counter to what's been happening in corporate America in recent years.

AMR discerns a trend to more sophisticated exchanges that are moving in the direction of providing supply-chain optimization tools. "The real game is going to be played in integration," Galardi says. He compares the development to the shaving accessories business, where manufacturers give away razors for free in order to sell blades. "The exchange is like a razor. You want to do the integration, handle the automation for the shipper and link everybody to global trade."