2001: The Year of E-Commerce - Bricks & Clicks

(For related articles, please see Taking the Plunge and Decision Time.)

There's no question that e-commerce — economic activity powered by the Internet — is an exciting and lucrative development for freight haulers.

As the volume of goods bought, sold or traded over the Internet increases, so will the number of deliveries made to homes and businesses — deliveries ultimately completed by carriers.

Many experts regard the impact of e-commerce on business-to-business (B2B) transactions as far greater than its effect on business-to-consumer (B2C) sales. For example, analysts at Deutsche Banc Alex. Brown peg the potential for B2B e-commerce as nine times that for B2C activity.

Just because motor carriers will be hauling much of the freight originating on the Internet doesn't necessarily mean trucking fleets — of every vocation — will themselves be generating electronic B2B traffic.

That's because purely Internet-based retailers or wholesalers (“e-tailers”) will remain hard-pressed to effectively deliver and stand behind the critical big-ticket items fleets need to stay in business and keep their trucks on the road.

But that's not to say e-commerce doesn't have a significant role to play in helping fleet executives manage the procurement of parts, maintenance and repair services. Shoot, already whole vehicles can be spec'd out over the Internet.

The times are changing, but what hasn't is the unique, complex but very real-world support infrastructure of original-equipment and aftermarket vendors and distributors that has grown up and flourished alongside trucking.

A CLICK AWAY

So, how will e-commerce assert itself within trucking? Undoubtedly, the Internet is giving fleet managers a faster, right-at-their-fingertips means of getting the information they need to make effective purchasing decisions.

The electronic marketplace will surely help some fleets save money on the bulk purchase of consumables, including everything from paper for their copiers to oil filters for their trucks.

What the Internet won't do is replace or circumvent the aftermarket parts and service channels that have served trucking for decades.

For one thing, original equipment and component manufacturers have a vested interest, and in many cases a legal responsibility, to preserve and protect the dealerships, distributorships and other aftermarket sales channels that have taken root over the last 70 or 80 years.

What's more, of all businesspeople fleet managers know what it takes to deliver the goods. They also depend on getting what they need far more than the consumer shopping for toys or sundry doodads on the 'Net.

Therefore, it's safe to say truckers won't quickly or thoughtlessly abandon suppliers with whom they have built up trustworthy business relationships.

It stands to reason that the dot-com operations — be they independent setups or marketing arms of suppliers — that succeed in selling to truck fleets will be those solidly grounded in the real world trucking knows so well.

Industry experts concur that when it comes to e-procurement, it's not a matter of “bricks vs. clicks.” It's much more a matter of clicks supporting bricks.

“The technology needed to sell parts, even vehicles, online is easy to do,” says Susan Alt, vp-e-business & business planning for Volvo Trucks North America. “But truck dealers are understandably resistant to doing anything that might seem to interfere with their customer relations.

“Ordering parts online,” she continues, may make sense for a fleet that does its own service and warranty work. But for other fleets there may be a problem. If online ordering becomes common, even just for commodity-type parts, dealers may feel forced to raise their service rates to make up for lost parts sales.”

Alt points out an even more down-to-earth reality that will deflate airy Internet business models for truck-parts sales.

“A lot of people have underestimated the complexity of the truck aftermarket,” she points out. “There's a fulfillment issue that's often overlooked when people go online to look for parts. It's real easy to do the front end and get the order placed. But the aftermarket distribution system is still set up for truckloads of parts. Shipping individual, break-bulk items is another matter.”

Warming up to the subject, Alt goes on to say that “an MBA would see the aftermarket as we know it as an inefficient system. Yes, it's inefficient; but it works. Trucks are not stationary; you have to get the part to where the truck is.

“And pragmatically,” she continues, “if a service guy needs a part, he will call the person he knows that he has an established relationship with.”

Despite all that, Alt sees real advantages to leveraging the undeniable strength of the Internet as a communications channel. “It's an information tool,” she explains. “It helps in tracking parts usage and forecasting demand. Going online can also be very effective for commodity buying.”

Alt points out that it doesn't make sense for an OEM to go outside the “established loop” for selling parts. “Most truck dealers already have web sites up and running of various levels of sophistication — some even offer real-time availability of parts. These sites let buyers and sellers get together electronically.”

Across the industry, other OEMs and component manufacturers are taking to the web in varying degrees. For example, over its web site Kenworth is offering a proprietary yet all-makes parts cross-reference dubbed SmartSearch.

Originally available only to Kenworth dealer personnel, SmartSearch lets customers identify parts by supplier name, product category or actual part number.

Another KW online feature that started out limited to dealer access now enables fleets to locate used and rebuilt cabs, hoods and sleeper units of all makes.

It's accessed at a special web site (www.serviceunitlocator.com). According to David Danforth, national parts sales manager, the site lets Kenworth dealers advertise units for sale to customers beyond their local markets.

Kenworth also offers fleets the ability to have their daily parts inventories replenished by dealers using an electronic link called PremierCare Connect. “As parts are used at a customer location,” explains Bill Kozek, dealer development manager, “the information is sent to a dealership so the parts can be replaced. It takes the guesswork out of inventory.”

Yet another Internet application is a password-protected web site that gives fleet managers repair updates on trucks being serviced by KW's roadside-assistance center.

“The web site allows viewing — in real time — the status of any breakdown being managed by our customer center,” explains customer center program manager Dick Von Lehman. “It provides information as well on the progress taking place to get the truck back on the road.”

According to general manager Ed Caudill, these e-commerce developments are part-and-parcel of KW's longstanding approach to the aftermarket. “We feel the best combination of service and support is to have independent dealers backed by unified Kenworth programs.”

Another OEM that's hot and heavy about the Internet is Freightliner LLC. This month, the OEM is launching a trio of interlinked customer-support web sites: MyTruck.com, MyTruckShop.com, and Dream Machine (located at D-Machine.com).

While MyTruck.com is a portal site with lots of features aimed at truck drivers, MyTruckShop.com focuses on maintenance and repairs, including making service appointments at dealerships and tracking data on multiple trucks.

Dream Machine is an online catalog of truck parts and accessories. It provides access to part numbers and includes a locator function for ordering from the nearest dealer. In the second quarter, a “shopping cart” feature will be added for ordering parts online.

According to Carlo Nardini, director of technical support-customer support division, the sites are aimed primarily at fleets that have not already established electronic links with Freightliner's service network.

“These fleets, which might run from 10 to 100 trucks,” Nardini explains, “can't afford systems like EDI-based parts ordering that the largest fleets enjoy. But capitalizing on the Internet gives us a mechanism to reach them as well.

“The whole idea,” he continues, “is for the OEM, the dealers and the truck fleet to work together more efficiently. The web sites provide extensive communication capability to enable dealers to interact with customers.”

Nardini emphasizes that while the Internet speeds the flow of information across the supply chain, Freightliner is ensuring the dealer network remains the fulfillment channel for its aftermarket parts and service efforts.

“The key for us is making sure that when someone needs a part, that part is in the dealer location that customer wants to use,” he asserts.

ELECTRONIC ICEBERG

But Freightliner's new web sites are really the tip of an electronic iceberg, according to Nardini. “For quite some time,” he explains, “we have had electronic parts ordering capability in place for our dealers. Our DealerLink system, which launched 18 months ago, gives dealers visibility to parts inventories system-wide, so one dealer can get parts from another if that's faster. The system also helps us help dealers better manage their inventories so there's better parts availability at the point of customer contact.”

Of course, anyone who knows the aftermarket knows that every truck OEM has been working diligently in recent years to help dealers expand their parts and service offerings. The Internet is certainly helping them to do that more efficiently.

But the impact of the worldwide web — whose free-for-all nature surely mirrors trucking's — on the fleet shop is by no means limited to what OEMs are doing.

For example, HD America, one of the largest heavy-duty truck-parts marketing groups, is enhancing its Internet capabilities at www.hd america.com with the help of PartsRiver Inc., a leading developer of B2B e-commerce systems.

Specifically, PartsRiver is supplying HD America with a private electronic procurement system that will let HD America members and their customers “see” online, real-time inventory, pricing, and shipping information on one branded web site.

This setup, according to HD America president Pat Biermann, will eliminate the “time-consuming phone calls to multiple warehouse-distributors” parts buyers typically make.

“Using only a partial description, the generic name of the assembly, or just a picture of what's needed, PartsRiver's software leads customers to the right part or assembly,” Biermann reports.

“Other unique features of the site include substitute part identification, cross-referencing and automatic parts assembly based on application and compatibility,” he adds.

Derek Berry, director of business development for PartsRiver (www.partsriver.com), points out that HD America is but one customer of the Cupertino, Calif.-based firm.

“What we specialize in,” he explains, “is building electronic databases out of paper parts catalogues that fleet shops have always relied on and then using taxonomy [the science of classification] to determine how the parts relate to each other so that we can enable a highly intuitive search function.

“Our claim to fame,” Berry continues, “is that our system searches for parts the way a parts user would, intuitively. Once a customer identifies a needed part, the system lists available, substitute, and alternate parts as well as related parts. So, searches are not limited to one part number at a time.”

Berry points out the advantages of this high-tech alternative are speed and accuracy. “Having access to parts information in a database is a huge time-saver for fleets. The data is also timely, unlike paper catalogues that might get updated once a year.”

Another way fleets can leverage the Internet to save time and money in the aftermarket is by checking out services offered by dot-com operations that fall under the conceptual umbrella of “purchasing aggregators.”

A leader in this corner of the web is TruckersB2B.com, an operation that was launched as a separate business by truckload carrier Celadon Trucking Services last year.

According to Mike Archual, vp-sales & marketing, the dot-com's business model is to deliver buying power to smaller fleets that typically don't enjoy “national account” status with aftermarket suppliers.

“This organization brings small fleets together so they can become eligible for volume rebates and various point-of-sale discounts,” Archual explains. “Since there are no membership fees, there is no risk for fleets to join TruckersB2B.com.”

The dot-com does not compete with traditional aftermarket sales channels. “That's critical,” says Archual. “The transactions themselves still take place between the fleets members and the vendors.”

Archual says fleets of 400 or 500 trucks usually can negotiate for themselves. On the other hand, he says 80% of the fleet marketplace is comprised of smaller companies that can benefit from the rebates and discounts TruckersB2B.com can arrange.

“The vendors pay us to bring them to this highly fragmented market,” Archual points out. “Through us, vendors can easily reach more fleets — and all at once.

“Our web site provides fleet members with information on how to access the products and services,” he continues. “Some items, such as office supplies, can be purchased more efficiently over the Internet. On the other hand, diesel fuel must be bought at the pump. But the Internet can tell you where to buy at the best price.”

Summing up, Archual says TruckersB2B.com essentially “combines the informational advantages of the Internet with the traditional aftermarket channels that are well-suited to serve fleets.”

From the supplier side of the equation, the Internet is and will be a boon to how fleets buy parts and get service for their vehicles.

But for fleet managers — who must always remain firmly rooted in the ground their trucks roll over day after day — it's important not to be overly wowed by technology's promise.

That's the contention of Darry Stuart, an experienced trucking executive whose Wrentham, Mass.-based firm (darrywst@aol.com) provides management services to fleets.

Stuart takes a decidedly common-sense approach to the benefits the Internet offers equipment managers. “The thing I see that's most helpful about the Internet is using it as an electronic Yellow Pages when equipment breaks down on the road,” he advises.

“Using a search engine and a mapping program,” Stuart points out, “you can find exactly where a truck is down and then determine how best to get it back on the road.

“On the other side of the coin,” he continues, “a fleet manager can spend too much time surfing the 'Net just looking for stuff. Besides, if someone just goes searching for the best price, he'll miss out on the valuable relationship that can be built with a local vendor who can maintain inventories and ensure parts are delivered on time.

“The Internet won't solve big shop issues like dealing with employee motivation for you either,” Stuart adds. “Working on those is the real route to success. When you get right down to it, Internet or not, trucking is still a very, very basic business.”

In other words, use the clicks — but mind the bricks, too.