Who's Who? Sorting Out the e-Logistics Players
The fundamental promise of e-commerce is to empower the customer. In transportation, logistics and other "behind the scenes" aspects of e-commerce, new services and capabilities are beginning to fulfill this promise, not just for Fortune 500 companies but for small and medium firms and for those with specialized requirements as well. These solutions range from "e-gistics" auctions and marketplaces, through software and support tools available over the Internet, including a whole new category of Internet Logistics Operators.
This article outlines some of the latest developments in this fast-moving field, and provides background and context to help companies better understand the alternatives available to them today and identify which approaches provide them the greatest value.
This is a three-part note. Part One covered the current situation with respect to transportation and logistics.
This part discusses traditional solutions.
Part Three covers new solutions designed to address today's changing e-commerce environment.
No wonder then that so many new "e-gistics" companies have entered the fray with offerings of different kinds to address the situations covered in Part One. Which ones best meet your needs, especially if you are smaller or have specialized needs? Smaller and medium sized companies need to look at two primary kinds of questions:
- What type of solutions do they offer? Contractual solutions that involve multi-year decisions and sometimes, substantial capital, versus transactional approaches that provide value on a more "virtual" one-situation-at-a-time basis, with minimal investment.
- What kinds of companies are providing the solutions? Solutions offered by intermediaries and others that focus on process improvements and better transportation and logistics support, versus direct solutions offered by companies who actually take responsibility for transportation, warehousing, and order fulfillment.
Categories of Services and Solutions
The following table outlines these dimensions and the types of services offered in each category. The discussion that follows will address each of these categories and provide examples of traditional and/or "e-gistics" solution providers.
The problems noted in Part One are not new for most companies. Fortune 500 and other large companies in particular have devoted substantial effort to addressing them over the past several years, both through process improvements and through direct provider services.
The major process improvement techniques and resources that have been devoted to these transportation and logistics issues include:
- Software and IT systems to handle a wide range of key transportation and logistics decisions, covering everything from determining the most cost effective truck, air, rail or ocean routes to use; optimizing warehouse location networks and product flows across the country or around the world; and providing visibility and tracking of shipments while they are in-transit.
- Management consulting services to help companies apply "best practices" and better, often more streamlined, processes for handling inventory, shipping products, and fulfilling orders, including making best use of the software above, and
- Internal staffing and infrastructure development, upgrading the capabilities and expertise of their transportation and logistics departments, and giving them broader responsibility at an executive level.
What do these approaches have in common? They all require a substantial commitment of resources and a multiyear time period to implement - and most smaller and specialized companies have neither the money nor the time to utilize them effectively.
There have also been significant efforts to improve transportation and logistics directly through the trucking companies, warehouses, and other industry players who move and handle freight:
- "Core carrier" contracts that use volume leverage to obtain better pricing from a handful of selected transportation providers in return for a promise that they will get to move most of the company's freight and achieve efficiencies that justify the discounted rates that are provided.
- Distribution facilities and networks, basically new construction, realignment and expansion or closure of warehouses to meet the changing needs of the shippers' customer base in the most efficient way.
- Outsourcing transportation and logistics activities that are not "core competencies" to Third Party Logistics (3PL) companies who provide the full range of staffing, IT systems, transportation equipment and contracts, and distribution facilities, to meet a client's needs.
Again, these approaches are most effective for the Fortune 500 companies who have the market clout to drive better pricing, and the money to attract the attention of warehousing, 3PL and other providers.
Conclusion of Part Two
Rather than leveling the playing field, these expensive, long-term oriented contract-based solutions have typically widened the gap between the Fortune 500 companies and everyone else. Clearly, a new set of solutions is needed to fulfill the promise of e-commerce in transportation and logistics for medium and smaller companies operating in specific niche markets or geographies. Part Three explores these new solutions.
About the Author
Scott A. Elliff is President of Capital Consulting & Management, Inc. (CCMI) and specializes in helping companies improve their overall effectiveness in supply chain operations - procurement, manufacturing, inventory management, logistics, and transportation and related activities.
He can be reached by email at scott_elliff@CCMIservices.com, through www.CCMIservices.com or by phone at (703) 370-2607.
This article first appeared in "The State of E-logistics," April 2001 supplement to Logistics Management and Distribution Report. Copyright 2001 by Cahners Business Information, a division of Reed Elsevier Inc. Reprinted with permission.