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Logistics.com Might Prove An Internet Success Story After All- Part 2: Market Impact

Written By: Predrag Jakovljevic
Published On: October 29 2001

Logistics.com Might Prove An Internet Success Story After All

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Market Impact 

The news from Logistics.com breathes an air of hope not only to embattled dot-com companies, but also possibly to the entire business community that has been particularly disconcerted with the latest economic and stock market slump especially in the wake of the terrorist attack on the WTC and the Pentagon. It is encouraging to see that, despite the softened economy, an Internet software company continues to announce a slew of new, high profile customers bundled with an impressive array of product initiatives, and to attract the interest of confidence-depleted corporate investors.

The e-logistics industry has been experiencing a significant shakeout, with many companies consolidating or disappearing. While transportation management services lend themselves well to the Internet, the adoption rate so far has been sluggish. One lingering issue has been the perceived focus of Internet exchanges and hosted services on cost and not necessarily on the quality and reliability of service. Also, the lack of established relationships with preferred carriers, which one typically develops only over the years, has plagued the higher growth rate. Another complaint has been the lack of integration with the shipper's ERP, supply chain planning, and execution (SCP/E) systems and other enterprise applications requiring visibility of the e-logistics supply chain.

Note:
This is Part Two of a two-part Event Note on Logistics.com. Part One is a summary of recent developments that make Logistics.com noteworthy.

How Logistics.com Fills A Need 

By being able to address the needs of all stakeholders across the board from shipper to transport provider, and with the marketplace/private trading exchange (PTX) tool in the middle, Logistics.com can connect trading partners at various levels. The company offers a comprehensive set of tools across the spectrum. Not many other companies offer shipper execution, carrier/transport provider execution, and marketplace tools altogether. This is the likely reason why the Internet Capital Group has apparently endorsed Logistics.com's business model.

Logistics.com offers 16 applications within three major software suites:

  1. OptiManage, an online shipper decision-support system for managing day-to-day transportation needs; it has been devised to automate and optimize processes and transactions between shippers and carriers, reducing transaction times and costs. It offers order consolidation, routing, scheduling, mode selection, optimal transportation service provider assignment, tendering, tracking and tracing.

  2. OptiBid, an e-procurement solution for shippers; it has been devised to assists shippers in identifying, securing, and monitoring optimal transportation provider for each movement worldwide and across multiple modes of transportation.

  3. OptiYield, an online supply chain execution (SCE) system for transportation service providers (carriers); it has been devised to automate and optimize the day-to-day decisions and strategic planning to improve efficiency, yield and profitability of truckload (TL), less-than-truckload (LTL), rail, air and sea transportation.

The company also offers Private Trading Exchange (PTX), which is enabled through the LEMA architecture, as an online communications and trading environment for soliciting bids and transportation contract awards. Logistics.com's endeavors might result in a splash as it offers value proposition to both shippers and carriers (buyers and sellers). Shippers should receive benefits of multi-mode transport optimization, shipment visibility, and improved customer service, inter alia.

Carrier Benefits 

Carriers, on the other hand, benefit from increased load volumes and asset utilization, improved customer and driver retention, and messaging, to name but a few. These go a lot further than the traditional incentive extended to carriers - the potential for new shipper business brought by a trade exchange channel. Through a private marketplace approach, Logistics.com offers a broader set of value propositions for carriers by using a multi-attribute approach to transportation services as opposed to merely speed and cost of delivery.

While generally supporting multiple modes of transport, Logisitics.com's expertise is mainly within the North American full truckload, with a focus on long backhauls rather than on "milk runs" (over 90% of business). To that end, the company's product will recommend the route with the cheapest fuel stops that also provide the best driver-friendly services (e.g., showers availability, food quality). Furthermore, during the holiday season, the route parameters can be set so that the truck drivers can be home for Christmas.

Logistics.com also offers carrier decision-support components that address yield and profitability for truckload carriers such as the following:

OptiYield Drop&Swap - which is a tactical real-time exception management and capacity creation component to maximize carrier utilization, one load at a time, over a short time horizon of a few days.

OptiYield Profit Analyzer - which is intended to perform off-line strategic profit analysis of carrier network costs by examining a macro-level view of profit by e.g., customer, region, or even lane and load levels.

Shipper Benefits 

OptiBid, a real-time collaborative solution that helps shippers rapidly acquire capacity from selected transport providers at contracted rates even during surge periods is likely the company's most successful product offering. Logistics.com uses proprietary algorithms to analyze shipping proposals based on e.g., service levels, benchmark transport rates, or cost fluctuations.

The company also supplies the shipping community with XML-based software with the necessary training tools they use to analyze and respond to the request for proposal (RFP). The product automates the entire process of obtaining capacity during surge periods such as month-end, quarter-end, and the fourth quarter holiday period by identifying shipments that cannot be moved by the customer's primary transport provider, and then using a special Web interface to simultaneously offer the shipment to multiple preferred transport providers. Within a matter of minutes, it collects transport providers' responses and determines the best carrier for each shipment, securing capacity at contracted rates. Finally, it can award the shipment to the transport providers using the customer's transportation execution system.

The costs can be driven down for shippers as they can bid on an holistic basis instead on simply bidding a single need of moving a load from point A to point B. Carriers, in turn, can now bid on a multiple-lane business and price cheaper and more aggressively based on the opportunity to generate backhaul cargo.

In a similar manner, Logistics.com excels at handling exceptions (e.g., returns and cancellations). The product can therefore save the shipper hundreds of phone calls a day, along with frustration, time and money, as it uses the bids and attributes gathered during the strategic and tactical bidding rounds to automatically tender loads to the most appropriate carriers. The company is thereby leveraging the business intelligence (BI) it gathers during e-procurement to facilitate the execution process.

Technology Initiatives 

In addition to a well-rounded functional product offering, Logistics.com has also embarked on some product technology related initiatives, which may promote it into the industry thought leader. The company's Logistics Event Management Architecture (LEMA) is envisioned as underlying interconnectivity technology and standard that should enable all participants and their applications to communicate information and optimize performance.

Tens of thousands of shippers, carriers, suppliers, third-party logistics (3PL) providers and other vendors use hundreds of different software programs and methods of communication, but very few of those methods work together. To that end, LEMA could provide business rules driven event-processing integration of multi-vendor applications via a special form of extensible markup language (XML), called tXML (transportation XML), which the company has been trying to propagate. The standard allows shippers and carriers to leverage their investment in EDI, although in that case the companies miss out on a wealth of information that tXML comprises outside of traditional EDI-based fields. The lack of standards has traditionally been one of the key barriers to the rapid adoption of e-logistics services, and through the introduction of LEMA, Logistics.com could be paving the way for more open, standards-based initiatives in the industry.

Challenges 

Sluggish economic times provide both threats and opportunities for software vendors. By apparently gaining significant traction, Logistics.com has grasped the opportunity. Nonetheless, the company faces a number of challenges. For one, it competes against a slew of companies with stronger brand names (not associated with currently unpopular dot-com connotation) and/or financial situations, such as i2, FreeMarkets, Descartes, AspenTech, Logility, Manugistics, Celerix, and G-Log. There are also a number of niche competitors like pFreight, Prophesy Transportation Solutions, and The Internet Truckstop in the realm of fuel and route management.

Moreover, the company's solution footprint needs improvements in terms of multi-national capabilities, International Trade Logistics (ITL) compliance, and contract management and payment processes. The company will also need to make acquisitions or partnerships to quickly provide a complete multimode transportation product. Also, given that only four components (OptiManage Capacity Finder, OptiManage Core, OptiBid Lane, and OptiYield Profit Analyzer) have so far been released as LEMA and tXML based, there is a large outstanding product delivery work in progress.

The company also acknowledges an undeveloped indirect channel and there are some indications of addressing it through partnerships with leading consulting companies. The partnership with J.D. Edwards announced in February may also help promote the company's enhanced transportation procurement and management capabilities and direct on-line connectivity to thousands of transportation-focused trading partners. The two companies will market collaborative supply chain solutions focused on global transportation procurement and execution activities. They also plan to develop standardized interfaces between Logistics.com's OptiManage transportation management system and J.D. Edwards' OneWorld transportation management and enterprise solution. The partnership, therefore, provides Logistics.com with the opportunity to penetrate new markets with its less known product, particularly in discrete manufacturing industries such as automotive where J.D. Edwards has a strong presence.

As the number of dot-com's dwindles, we see some examples of highly focused exchanges and hosted applications with growth and a path towards profitability. Logistics.com is an example of one such company. The transportation management area, which has been sluggish for some time, is showing signs of life as corporate executives look to cost containment as a key objective.

User Recommendations 

Medium and large companies with large shipping needs in the retail, consumer-packaged goods, high-tech equipment, and automotive industries should be especially attracted to these approaches. Enterprises seeking a transportation solution on a subscription basis for multi-mode, primarily but not exclusively North America based transport, should evaluate Logistics.com.

Large shipping companies typically get the lowest price available due to greater volume and market visibility. These large companies can also afford to invest in private exchanges. Web-based sourcing has proven to provide the mid-sized company with these same benefits at a fraction of the cost. At minimum, Logistics.com should be evaluated as a short term cost reduction effort and a learning experience in the new world of web-based transportation service sourcing.

Logistics.com should continue its focused approach to the online transportation service industry and its focus on profitability. It should increase its market awareness efforts to become a better know name within its target market. Users interested in the next generation of transportation and logistics software should keep an eye on Logistics.com. The company has built its team from well-versed people with decades of domain experience in transportation service and supply chain execution. Despite all the recent negative publicity, the Internet may still allow smaller, more technologically nimble companies to compete head-to-head with established vendors, giving clients a greater selection of competitive packages from which to choose.

 
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