f e a t u r e s t o r y
E-COMMERCE AND THE INTERNET
More delivery trucks, more information and consolidation in cyberspace.
"You don’t have to be Bill Gates to recognize that e-commerce will have a profound impact on our industry, perhaps even more profound than deregulation,” says Bob Davidson, vice president of marketing and pricing, ABF Freight System.
It’s hard to find anyone who doesn’t agree with Davidson — and harder yet to find anyone who can say, with certainty, how or where those changes will come.
For instance, many believe e-commerce will cause significant shifts in distribution and freight patterns.
“There is a dynamic business process going on right now with the Internet and people buying things directly — cutting out the middle person, so to speak — or buying through fulfillment houses as opposed to buying direct from a company or a store,” says John DuBiel Jr., vice president of Global Transpor-tation, Revlon Consumer Products Corp., and chairman of provider relations for the National Small Shipments Traffic Conference.
Parcel carriers like UPS, Federal Express and the U.S. Postal Service are the logical beneficiaries of any e-commerce stampede. But should less-than-truckload carriers move in that direction?
“We just can’t see ourselves delivering books for amazon.com,” confided one. “That’s not what we’re set up to do.”
“Certainly, business-to-consumer e-commerce is huge,” says Davidson. “But business-to-business, which is generally recognized to be seven or eight times larger and growing faster, is home territory for motor carriers.”
B2C and B2B may also open some new opportunities for another big trucking segment: truck rental and leasing.
Dick Whitney, NetOne Truck Rental & Leasing System, says its members (mostly truck dealers with lease/rental operations) report increased demand for Class 6 and smaller trucks from companies setting up new delivery operations.
Lease/rental and logistics giant Ryder System recently formed e-Channel Solutions, offering transportation, warehousing, inventory management and other support services to companies selling goods on the Internet.
Many companies go into e-commerce well-armed with technical and marketing savvy, explains Vice President Sandy Orr, but they “greatly underestimate” the complexities of order fulfillment and distribution.
Through alliances with other companies, e-Channel Solutions will even offer non-Ryder specialties like web site design. And if a customer already has a carrier of choice, “that’s fine, we can integrate with them,” Orr says. “We already work with several LTL and parcel shipment carriers. We’ll use whoever is the most cost-effective for that shipment.”STREAMLINING PAPERWORK
Even if carriers don’t move into B2C or B2B fulfillment, they can confidently expect more customer demands for Internet transaction processing and communications.
“It’s quicker. It’s less expensive than having people talk to one another on telephones. And it’s certainly the way we want to do business,” says DuBiel of his company’s routine use of the Internet to communicate with carriers.
Marketing on the web is a good start, but carriers will need customer service capabilities like rate quotes and shipment tracking. ABF’s system, recognized by CIO magazine as one of the top 50 in the world, automatically e-mails a customer when a shipment has been delivered or has been delayed. Soon that information will be fed automatically into the shipper’s own system so customers can check delivery status without leaving the home web site.
Such quick, convenient access to information is good service, notes Davidson, but it’s also good for ABF’s own efficiency and productivity.
“A lot of the functions that salespeople used to do, like tracing shipments, are now available over the Internet,” he explains, “so they are able to move into a problem-solving and consulting role.”BUYING AND SELLING FREIGHT
Say “auction” and most truckers cringe. Say “exchange” and they’re a bit more friendly, but still skeptical.
“We will never provide a price to exchanges so they can sell against us in the marketplace,” says Davidson. “We’re not going to be a wholesaler of our services.”
There is good reason for concern. Even “nonauction” sites open the door to bidding simply by making price information so easily accessible. Yet proponents say price shouldn’t be all users get.
“The worst thing you can do is just build an auction,” says Cliff Isaacson, co-founder of CarrierPoint, one of the so-called “super sites” offering a broad array of services for shippers and carriers.
Exchanges, he explains, ought to offer nonprice information such as a carrier’s on-time performance or a shipper’s payment history so users can make better informed decisions.
And while “spot market” freight is by nature price-sensitive, exchanges can facilitate more service-based contract negotiations.
Example: A shipper, through an Internet exchange, offers loads to designated carriers in given traffic lanes. The first to accept gets the job. The exchange automates the booking process but also logs data on loads offered and accepted. When it’s time to renegotiate contracts, both carrier and shipper have some history to work from.
“Driving down prices just adds confusion for shippers,” says Tim Barton, chairman and CEO, freightquote.com. “They get a backhaul opportunity one day and the rest of the day it’s all headhaul price. They think they’re getting ripped off.”
Unlike many Internet exchanges and load matching services, freightquote.com acts as a broker. Shippers enter load characteristics and are given carrier options, including transit time, price and even a selection of modes. Freightquote.com schedules the shipment, tracks its movement, and handles billing and payment to carriers. The company will even private-label its Internet service for carriers and other brokers.
One benefit for carriers: flexibility. They can vary their rates by lane, time of month, day of week and/or season, Barton points out. Moreover, adjustments can be made quickly and easily.
“It’s traditionally been tough to change prices because it’s done through a sales force,” he notes. “Once a new rate goes into the marketplace, it’s tough to reel it back.”
Freightquote.com can also provide traffic pattern and pricing data to help carriers determine where they want to haul and for how much.
“We can show them the regions they cover, what they haul for us and what they don’t haul for us,” he says. “We can show them at what price points loads shifted to someone else.”WAREHOUSING DATA
The ability to accumulate large amounts of data and feed it back in a variety of forms may turn out to be one of the major benefits of Internet exchanges.
All carriers collect data, in one form or another, on their own business: who they haul for, where and for how much. But, Isaacson points out, exchanges like CarrierPoint can collect traffic and pricing data on all freight that comes through their system.
Bidding on a contract? Your freight exchange ought to be able to give you price trends and backhaul opportunities in the customer’s traffic lanes. Shippers might use the information to help determine the best locations, from a transportation standpoint, for a new warehouse or plant.
Data warehouses aren’t a new concept, notes Orr: “What’s new is visibility to the data and ease of getting that information quickly. If you have the information readily available, you can make much better decisions.”CUTTING EMPTY MILES
“People don’t want more trucks,” says Landstar System chairman, president and CEO Jeffrey Crowe. “On any given day in North America, there are trucks traveling empty or half empty, while loads that could have filled those trucks are sitting, waiting for somebody else to haul them the next day.
“You’re going to see a movement — and I think it is going to cause dramatic restructuring within our industry — of systems that will give us that matching capability process.”
The movement started at Landstar several years ago when the company set up an intranet load-matching service that allows owner-operators from its four carrier divisions — Gemini, Inway, Ligon and Ranger — to search the entire system for available loads.
“We really opened it up, so a Ranger guy isn’t only looking at Ranger loads or a Ligon guy isn’t only looking at Ligon loads,” explains Crowe.
“They’re looking at all the carrier loads, so there’s greater availability. We have a link between the universe of capacity seeking the universe of loads.”
The result has been a steady increase in average revenue per owner-operator, which Crowe says is due primarily to better, more timely load information. The next technological step for Landstar owner-operators is wireless Internet access, due to be rolled out late this year or early 2001.
But increased productivity and equipment utilization can’t stop at each carrier’s door. “If they have any empty space they should haul anybody’s freight who’s going to pay the bill,” Crowe says. “And that includes all private carriage.”
Efforts to link that larger “universe of capacity” are being led by some big names in trucking. For instance:
• Landstar’s own subsidiary, Signature Technology Services, last year launched its own freight information service, eFR8.com.
• CarrierPoint’s drive to form an Internet trucking community is led by former Landstar executive Brian Kinsey. Logistics.com is headed by former Schneider National COO John Lanigan and Dr. Yossi Sheffi of Sabre Logistics.
• Yellow Corp., parent of Yellow Freight, Saia Motor Freight, Jevic Transportation, WestEx and Action Express, is a major investor in transportation.com. Ryder System is an investor in Internet load matcher pFreight.com.
• Transportal Network’s “virtual fleet” has over 30 carriers, including Dick Simon Trucking, FFE Transportation Services, Boyd Bros. Transportation, Cornhusker Motor Lines and May Trucking.
• Six of the country’s biggest trucking companies have joined forces to create transplace.com: J.B. Hunt, Covenant Transport, M.S. Carriers, Swift Transportation, U.S. Express and Werner Enterprises.
“The efficient optimization of large volumes of freight can accomplish the three things every customer wants and deserves: lower cost, better service and capacity when and where they need it,” says Kirk Thompson, president and CEO, J.B. Hunt Transport Services.
Individual carriers can continue to all of the above on their own, but as Thompson notes, cooperative efforts like transplace.com have “the unique ability to bring size and density together as never seen before.”
Actually, the industry has seen consolidation — but never in cyberspace.— Oliver Patton, Washington Editor
and Patricia Smith, Senior Editor