Less than two years ago, it was still possible to say (aloud and in public) that your fleet was taking a "wait and see" approach to electronic commerce. Murmur that at a conference today, and you are an instant object of peer pity or jest. Almost overnight, "e-" has become the first letter of the word "business," and nothing will ever be the same again.
Electronic business means much more than just automating transactions, however.
It has become a powerful planning tool, a way for trading partners to work together to drive the remaining inefficiencies out of the supply chain, for the benefit of end users, shippers, and fleets.
"The first phase of e-commerce was transactional: the electronic execution of transactions, such as EDI (electronic data interchange)," notes Ken Nixon, general manager-sales for Tompkins Associates ("Collaboration: The Fuel of Supply Chain Synthesis," Competitive Edge, Summer 1999). "The second phase in the evolution of e-commerce was trading information electronically ... for example, exchanging catalogs on the Web ... We've now reached the third phase in the evolution of e-commerce, and our main focus is electronic collaboration on strategic, tactical, and operational plans."
"Shippers and carriers are both recognizing that they can use the information within their enterprise systems to improve supply chain throughput," observes Danny Slaton, vp-sales and marketing for SMC3, formerly Southern Motor Carriers. The company, owned by LTL carriers, provides transportation pricing, data, and technology. Back in 1935, that meant printing transportation tariff books. Today, it means interactive Web systems, such as the new "webRater" launched in late June of this year. The webRater is a tool designed to allow LTL carriers to rate shipments and provide quotes instantly to the shipping community.
"Today, when we meet with carriers and shippers, they are not just looking at individual transactions, they are looking at planning for better asset utilization and at pricing," says Slaton. "Electronic systems can capture transaction data over time to show patterns of shipments, and this history can be used to help carriers and shippers make highly intelligent decisions together about how to handle and how to price services."
Collaboration at every step "We really believe that there are tremendous opportunities for carriers and shippers to collaborate to improve productivity, to improve the throughput of the supply chain," agrees Matthew Menner, managing director-sales and marketing for Sabre Logistics. "Everyone benefits. Customers can see lower retail prices; shippers can reduce logistics costs; and carriers can improve their margins by making sure they are accepting the right business for their operation to maximize the yield from their invested assets.
"There are three basic points of contact between the shipper and the carrier," explains Menner. "There's the strategic planning phase, which includes activities like bidding. There's the operational phase, which is the execution or transaction step and involves activities such as load tendering, receiving, and billing. And finally, there's the post-transaction phase, which provides an opportunity for analysis, exception management, and modifying the characteristics of the process. Collaboration can yield benefits at each contact point."
Collaboration is also the watchword at Skyway Freight Systems, according to Chuck Lounsbury, its president. Although the company operates a truck fleet, he describes the Skyway of today as a nonasset-based supply chain management and vendor-neutral service provider.
"Our vision is one of collaboration to maximize supply chain performance," he explains. "Logistics has become information and cash management, not just, 'Can you pick up by X-day and deliver by Y-day, damage-free for this agreed-upon price?' Logistics used to be transactional in nature, a backroom operation. Now it is a strategic, boardroom function.
"We do a lot of joint planning for future requirements with our customers," Lounsbury adds. "We take a look at factors such as their product mix, where their customers are based, where distribution centers are located, and where new ones might be needed, the numbers of pallets they ship, timing, and so on.
To position the company for success today and in the "e-future," Skyway already offers customers a variety of Internet-enabled services, including on-line inventory visibility, purchase order management, and proof of delivery. "This dramatically shortens cash cycle times," notes Lounsbury. "It can mean that it takes our customers two or three days less to collect payments."
E-business tools for smaller fleets Until very recently, e-commerce capabilities were the exclusive tools of the largest fleets and logistics providers, those with the human and financial wherewithal to withstand the sometimes protracted and costly implementation process, where the fleet often functioned as a beta test site or even a co-developer.
Today, the largest fleets generally have e-business solutions in place, making the mid- to smaller-sized fleets the driving force behind the current developmental focus on Web-based solutions that are modular, scalable, and (most of all) affordable.
"The way for shippers and carriers to improve returns and reduce costs is to share information, and that is a collaborative process," says Danny Slaton of SMC3. "We have to make that value accessible to everyone, to $20-million carriers as well as the giant fleets. Even very small fleets are saying, 'We've got to transmit data electronically. We've got to have an interactive Web site. If we are going to continue to be competitive, we've just got to have it.' "
In response to these e-commerce needs, SMC3 is meeting with regional LTL carriers now concerning the creation of a common Web site for electronic bills of lading, according to Slaton. " Shippers just don't want to have to learn and use multiple systems and forms," he explains. "Here's how the system would work: Suppose a shipper uses carriers A, B, C, and D and has loads for C and D. He could go to one Web site and transmit one form to C and one to D. This would create a data file that has many potential uses. For instance, the electronic bill of lading information could feed directly into the carriers' electronic rating systems to automatically generate any number of documents, such as freight bills.
"Carriers with whom we've met are fairly aggressive about wanting us to get this system launched, and we already have a prototype of the bill of lading form," adds Slaton. Everybody recognizes that, from the carrier's perspective, this can reduce cost and the need for skilled workers in billing. It can also increase accuracy and throughput, allowing fleets to grow their businesses without adding backroom overhead. Shippers also support it because it can mean pricing reductions and improved accuracy."
Sabre's new Web-based bidding/ response tool is another good example of an electronic logistics tool that will be available to mid- and smaller-sized fleets. Scheduled to be launched later this summer, "OptiBid.com" (working name), uses the Internet not only as the means of communication between shippers that have decided to go through the bid process and truckload carriers that have been invited to respond, but also as a collaborative planning tool, according to Menner.
"Here's how the system will work," he explains. "A shipper using Sabre's OptiBid system will post all their requirements on a Web site. Then carriers that have been invited to respond to the bid will be able to use their passwords to access the shipper's information online. A 'wizard' accessible at the site will also enable fleets to enter some basic information about their own operation, such as: 'Where do you always have trucks that need loads?' and 'Where are you based?' Carriers can then do a high-level query of the whole bid against their own data to identify which lanes or which portion of the shipper's business is of the most potential interest.
"For a nominal extra charge, carriers can also use other, more functionally rich Sabre tools," Menner continues, "such as pricing models or capacity analysis, to give them more advice on how to craft their bid response. Responses, like bids, are also communicated via the Internet."
Systems like OptiBid.com have the potential to not only help shippers make the best carrier selections, but also to help carriers make sure they are capturing business that is a good fit for their company and will be profitable for their operation, according to Menner. An Internet-based operations management tool for truckload carriers is also rumored to be in the works at Sabre.
Mobile communications provider HighwayMaster currently offers a fleet management tool called Platinum Service, which is designed for private or for-hire fleets that are using or plan to use its mobile communications system and have a minimum of 50 trucks.
Platinum Service includes up to 14 modules, all operating from a single database on the company's secure AS/400 in Joplin, Mo., according to Bob LaMere, senior vp- transportation systems for HighwayMaster. This means it requires minimal hardware and no MIS support staff at user fleets.
The modules are divided into two tiers. Tier I includes accounts receivable, dispatching, rolling ETA, driver settlement/payroll, rating/ billing, customer service, DOT compliance/driver logs, driver recruiting, EDI, and electronic commerce. Tier II adds fuel management, vehicle maintenance, driver personnel management, safety/claims, and a marketing module, according to LaMere. "The Tier I modules are intended to enable a fleet to handle all the basics of fleet operation," he notes. "Tier II applications add the ability to do more analysis and planning.
"The EDI and electronic commerce module allows even smaller fleets to bid on business that requires EDI capability," adds LaMere. It helps to make the shipper-carrier relationship much more efficient."
Pricing for the Y2K-compliant system is on a per-mile, per-load, or per-truck per-month basis, notes LaMere. This modular pricing structure is intended to keep the cost of entry low and make it easier to budget. Tier I customers who average approximately 100,000 miles per truck per year can expect to pay around $42 per month per truck, exclusive of mobile communications, he adds. Adding the Tier II modules brings the monthly per-truck charge to about $54. HighwayMaster is also exploring Internet options, according to LaMere. "Everything is moving to the Internet," he observes, "and we are looking at it as well."
"The Internet has opened up the opportunity for trading partners to easily exchange information," observes Jeff Hill, vp-sales and marketing for TranSettlements Network Services, a leading provider of value-added EDI networks. "It has also opened up opportunities for us to add value around this information exchange. With services like forms-based EDI that can be transmitted over the Internet, smaller carriers can appear as big as UPS or FedEx."
TranSettlements recently announced the launch of their EDI-INT service, a new Internet-based method for exchanging electronic documents that enables companies with traditional EDI systems to do business with companies that use the Internet for e-commerce. "EDI-INT is essentially EDI data wrapped in an e-mail with security around it," explains Hill. "We originally developed the system at TranSettlements to help one of our premium service carriers, Watkins Motor Lines, accommodate a shipper's request for data exchange via the Internet."
The growing availability of e-business tools for all-sized fleets is good news for carriers, for shippers, and ultimately for the economy as a whole. Think about it: Fleets with fewer than 100 tractors and trailers operate most of the approximately 7-million total trucks in the U.S. To be more specific, there are about 610,500 fleets with 1-99 vehicles and only 14,500 with 100 or more vehicles. If the country is to continue making improvements in logistics productivity, it makes good sense to have effective e-business tools in use throughout the transportation industry.
According to Robert Delaney, vp for Cass Information Systems, a subsidiary of Cass Commercial Corp., and a consultant for ProLogis, logistics costs (as a percentage of the gross domestic product or GDP) have been on a 10.6% plateau following a 12-year period of improving or stable logistics productivity. This is reason for concern, Delaney says, because the drop in logistics costs correlates with a decline in inflation over the same 12-year period. (See news story, p. 10.)
While the causes of the current "stall" in productivity improvements are not clear, Delaney offers a good historical performance review that does shed some light on the future.
"The compound annual growth of logistics costs declined to 4.3% during the post-deregulation period between 1982 and 1989," he notes (as opposed to the 16.8% annual growth rate between 1977 and 1981).
"The introduction of supply chain management, third party logistics, and other innovations have reduced the compound annual growth rate to 3.7% during the 1990s. That is about 1.5 percentage points lower than the nominal growth rate of the gross domestic product," Delaney adds. "We need to preserve that performance and improve on it, if we can. It represents our logistics profession's contribution to controlling inflation in this country."
Electronically enabled collaboration on the part of shippers and carriers may be at least part of the answer for how to take productivity to the next level. Although in some ways, it's just the high-velocity version of a timeless truism. "Collaboration today may be supported by electronics, but the concept's not so new," observes 50-year trucking veteran, Charles McAlpin, president and CEO of the McAlpin Corp. "We've always believed that you've got to help others in order to help yourself."