Who's Who? Sorting Out the e-Logistics Players
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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.
Traditional
Solutions
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.
Contractual
approaches
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.