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:
- 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.
- 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.
- 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.