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.
One covered the current situation with respect to transportation and logistics.
Two discussed traditional solutions.
Part Three covers new solutions designed to address today's changing e-commerce
Armed with just a mouse and a web browser, both businesses and consumers can now access an almost unlimited choice of products and services, compare prices and features on a real time basis, and execute transactions nearly instantaneously. In many industries, this increased competition has helped squeeze out inefficiencies, lowered prices, and in effect leveled the playing field for the "little guys" - medium and small businesses and individual consumers - who did not previously have the time or resources to manually access the full potential of the marketplace. Now they can use the Internet to more effectively "pick and choose" what best meets their needs.
you've sold it, but now you have to ship and deliver it. What services
and methodologies are available to help shippers meet these e-commerce challenges?
Fortune 500 corporations have long employed a variety of approaches to help them gain a competitive advantage in managing their supply chains and satisfying customer needs. But many of the "traditional" approaches are expensive and simply out of reach for most companies. What's new is that e-commerce is bringing transportation and logistics services and capabilities that are available to everyone - big and small - and are thus helping to fulfill the real promise of e-commerce.
As in most other segments of the economy, in transportation and logistics numerous start-up companies have emerged to improve the process of bringing buyers and sellers together to execute individual transactions. Compared to the contractual solutions covered in Part Two, these involve no long-term commitments and are both low cost and widely available for companies of any shape and size to use.
While some of these marketplace services are owned or backed by transportation carriers, the expectation is that they do not actually transport any products themselves. Rather they are intermediaries and information sources that help improve the competitiveness of the market. Many also provide supporting services and software tools that help users better manage their transportation and logistics activities - as a substitute to some extent for the more comprehensive IT systems discussed in Part Two.
The transactional support available through "e-gistics" intermediaries falls into three primary types:
- Freight exchanges
and auctions. Historically if you needed to ship product from your New Jersey
location to a new customer in Oregon, you had to identify carriers that serve
that market, contact them each by phone to outline your needs, wait for price
and service quotations, check their references, and then select one of them
to handle your shipment - a time consuming, often manual process. Many individual
carriers have established their own websites, of course, but accessing them
one at a time is a time consuming process and does nothing to increase the
competitiveness of the overall marketplace. Using transportation.com, GoCargo.com
or many others you can now enter your requirements on-line and then receive
price quotations from a number of participating carriers simultaneously, make
your selection, and issue the purchase order, all on a quick and easy electronic
and logistics marketplaces and aggregators. These approaches to e-commerce
provide improvements in transportation and logistics by offering easy access,
all in one place, for viewing and using pre-determined rates from a variety
of carriers. Rather than using a real-time approach to decide which carrier
will get which shipment and at which price, and all varying from day to day,
services such as National Transportation Exchange and freightquote.com facilitate
comparison shopping and the ongoing selection and use of carriers at pre-set
- Process improvement
technology providers. In some cases, versions of the e-commerce information
technology systems and tools traditionally used by Fortune 500 companies are
being developed for use by smaller and more specialized companies. New entrants
such as Arzoon and Celarix are building "virtual shipping departments" through
the Internet, with "best practices" processes and capabilities made available
right on the computer desktops of customers. These new offerings can help
companies with a wide range of day-to-day "best practices" activities and
decision-making to improve the transportation and logistics process, and in
many cases include the auctions or marketplace functions outlined above.
the highly fragmented nature of the transportation marketplace, these "market
making" and process improvement mechanisms offer significant potential for increasing
efficiency and reducing costs. By accessing a wider range of carriers and involving
a broader set of customers, and then establishing pricing on a more competitive
basis - they may ultimately perhaps fulfill the e-commerce promise of empowering
In order to be successful, however, they will need to attract a high volume of carriers and shippers, so that they provide a competitive marketplace that really results in lower pricing and has broad geographic coverage. In addition, since these services do not handle the actual freight or take responsibility for the shipment, separate follow ups are needed with each carrier covering the myriad of issues associated with billing, insurance, damage, shipment status visibility, proof of delivery, and others. In addition, they do not handle the other services that a shipper may need to be fully successful - such as warehousing space and inventory management, and specialized order fulfillment activities.
Internet Logistics Operators (ILOs) - a new category of services
In contrast to the intermediaries that facilitate improvements in transportation and logistics processes, a new category is emerging that directly offers a broad range of services transportation and logistics services. These Internet Logistics Operators (ILOs), as they are beginning to be called, provide one-stop shopping for customers who want the promise of e-commerce - in a simple and comprehensive way and dealing directly with a single provider that takes responsibility for meeting their shipping, warehousing and fulfillment needs.
Internet Logistics Operators provide a unique combination: a physical network of appropriate carriers and distribution centers to move and handle shipments, personnel and expertise to optimize the process and achieve high service levels and efficient operations, and the software and other tools to handle the real-time flow of information on the status of orders and shipments - all behind the scenes and transparent to the user.
(LTL) shipments for smaller and medium sized shippers: These shippers face
dual challenges of finding ways to reduce their transportation costs in order
to stay competitive, and finding providers of warehousing, order fulfillment
and other activities on an as-needed basis for particular situations that
they may face. To meet these needs, freightPro.com has recently been launched,
offering an innovative, flexible, and low-cost solution. By creating a network
of carriers to move shipments across the country and a set of local providers
to handle pick-up, delivery and warehousing services in each metropolitan
area, freightPro.com has created a virtual "core carrier" program - available
on a transaction-by-transaction basis, with no assets or long-term contracting
software tools and industry expertise to consolidate shipments from different
customers and move them efficiently from origin to destination, freightPro.com
can typically obtain savings of 15-20% for its customers, while taking full
responsibility at every stage in the process. When warehousing or other services
are needed - for seasonal or one-time promotional situations for example -
freightPro.com can use its network to seamlessly provide these added services
fulfillment and specialized services: Increasingly, companies need to respond
faster and faster to changes in their own operations, developments at their
customers, and changes in the overall supply chain. When spare parts are needed
to prevent a manufacturing plant from shutting down, for example, overnight
air and other "regular" services simply are not adequate. To meet these needs,
Sameday.com has recently been launched, offering a unique set of high value,
high-speed fulfillment, and related services. Using a network of distribution
centers carefully positioned to deal with the traffic congestion in metropolitan
areas today, and backed by sophisticated software to monitor and manage the
flow of information and inventory between suppliers and their customers, Sameday.com
is providing significant value in fulfillment, inventory management, returns
and repairs processing, and related functions.
in high tech industries such as computers, electronics, aerospace, and telecommunications,
as well as major brick-and-mortar retailers of consumer products and related
merchandise, stand to benefit especially from these services. With flexible
warehouse configurations, high service standards, and a strong backbone of
information technology, Sameday.com can address the requirements for the fast-moving,
high value, or fragile component of transportation and logistics that just
about every shipper faces today.
In both of these situations, the "e-gistics" companies themselves are the providers that take direct responsibility for shipping product and managing inventory, rather than acting simply as intermediaries. In addition to offering their services to Fortune 500 and other large companies, they are bringing to smaller shippers and special situations the pricing and capabilities previously available only to the big boys - and doing it in a way that is flexible and low cost for the customer.
than any other model, these Internet Logistics Operators may offer the best
means yet of fulfilling the promise of e-commerce in transportation and logistics:
empowering the customer and leveling the playing field.
The Last Word
There is a wide range of new "e-gistics" players emerging to address today's transportation and logistics challenges, and different solutions will be appropriate for different kinds of situations. Sure, you've sold it, but now you have to ship and deliver it. The new "e-gistics" services that best fulfill the promise of e-commerce will be those that both directly provide transportation and logistics services - and responsibility - and do it in a low cost, flexible, "virtual" way matched to the individual transactions that you face every day.
Websites for companies mentioned in this article:
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.
can be reached by email at scott_elliff@CCMIservices.com,
or by phone at (703) 370-2607.
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