The newest trend in online marketplaces for the transportation industry is the creation of "super sites" - electronic one-stop shopping centres that attempt to leverage technology to address chronic i...
The newest trend in online marketplaces for the transportation industry is the creation of “super sites” – electronic one-stop shopping centres that attempt to leverage technology to address chronic industry problems such as fragmentation, capacity constraint, and concern about supplies of equipment and drivers.
What makes “super sites” so super? They offer much more than the load-finding, logistics and straight buying services typical of other online marketplaces. Designed to attract both carriers and shippers, these sites offer a variety of features such as optimization software and auction platforms in real-time to increase efficiency and profitability in the industry and provide small-to-medium-sized carriers and shippers the opportunity to play in the big leagues.
The creators and administrators of today’s super sites also usually have past ties to trucking or logistics operations, which may help ensure their longevity in a market that virtually every week sprouts new competitors promising great new things.
The biggest challenge for the super sites will not be the online launch itself, but attracting and moving often fragile carrier-shipper relationships to what many see as the “intangible and unknown” Internet community. However, advocates say these sites may actually change the playing field by enhancing the existing relationships between carrier and shipper.
“I don’t think transportation will ever get away from being relationship-based. But, we need the efficiency and connectivity (of the Internet), and our capability and information needs will move more significantly up in priority order over relationships,” says Jim Ritchie, CEO of Transportation.com, a recently launched online marketplace.
Regardless, it’s unlikely all the super sites can survive. In fact, Transportal.com, which was to go live this fall announced October 6 that it was ceasing operations because of difficulty in securing its second round of funding. Atlanta-based Transportal was formed in March of this year, and was going to provide truckload motor carriers with tools to improve their operating ratios, including optimization decision-support software solutions offered over the Internet as well as volume purchasing when buying trucks, trailers, tires, parts and other goods. Thirty-three truckload carriers had become charter members.
Let’s take a closer look at the most visible of the remaining competitors starting with Ritchie’s Transportation.com.
According to Ritchie the Internet is just a competitive differentiator.”Carriers that are new school and Internet-savvy will embrace new technology. Time will tell who wins, but technology is not a fad,” he says. And if Ritchie has anything to do with it, neither is Transportation.com, which was launched June 30th. Transportation.com started as a project within the Yellow Corporation and four other registered carriers with an objective to help small to medium-sized trucking companies and shippers become more efficient. It’s in this aspect that Transportation.com sees itself as unique.
“A lot of companies are focused on either-or, but not both. Our concern is that these two market constituencies are related. We think the win-win can be done,” says Ritchie.
Transportation.com offers news and information services, financing, credit reports, loans, tax counseling, insurance and business advice. Users of the site can also buy, sell, and trade used equipment and locate hard-to-find parts. The site will act as an application software provider allowing carriers to access software with just a browser and an Internet connection. Equipment auctions enable carriers and private fleet operators to buy or sell used equipment in either public or private auction environments.
Shippers will be able to track shipments through the site with certain carriers, who, depending on their level of participation, will be provided with mobile communications equipment. The site also offers shipment management, which provides shippers access to rates pre-negotiated through a select group of carriers (request a quote, select a carrier, create a bill of lading).
Transportation.com’s most popular service thus far is real-time load matching. “Most load-matching sites are really fancy bulletin boards that usually require a phone call to see if a load is still available. When we did a focus group study, carriers said ‘I want to know when I see a load, that it’s still available.’ Also, our live chat customer-service features maintains (a bit of the old-style) relationship,” Ritchie says. Next, the site will launch a service to procure tires, batteries and other high volume items, giving small companies the opportunity to “play like the big boys.”
“We’ll offer the anchor companies revenue share in that procurement process, and there will be pre-negotiation of prices for smaller companies, with the supplier delivering direct to them,” Ritchie explains.
Transportation.com currently has some Canadian members on its site and is looking at a joint venture with a Canadian company. Ritchie says that although there is no discernible difference between the two markets, Canada does not have the same thrust with regard to entrants into the exchange market. Part of this may be explained by a more conservative outlook and difficulty obtaining venture capital in Canada. “In the transportation market in Canada, those who survive are those who go for more quality. In the American market, there’s a little more greed, perhaps. The Canadian market looks more at risk and experience in the industry,” says Ritchie. The real test of what makes some of these sites survive will be how this experience, or lack thereof, is used.
Meanwhile he says it’s “adult swim time” in the U.S. online market.”A lot of the kids will have to get out of the pool. The competitive advantage starts with the leadership team, and we have 125 years of combined experience in transportation. So we don’t believe it’s about the Internet. It’s about customers, and it’s like any other business – one customer at a time, and keeping them happy,” says Ritchie.
Another major player is Transplace.com, an Internet-centered logistics company created by six major truckload carriers: Covenant Transport Inc., J.B. Hunt Transport Services Inc., M.S. Carriers Inc., Swift Transportation Co. Inc., U.S. Xpress Enterprises Inc., and Werner Enterprises Inc. These carriers have combined revenues of close to six billion dollars, which makes the group the third largest trucking entity in the U.S. and virtually ensures the attention of shippers. The Internet marketplace combines and replaces the separate logistics operations of the six carriers and their developed optimization and e-commerce systems. Transplace, headed by Dr. Jun-Sheng Li who used to lead J.B. Hunt Logistics, will eventually involve other carriers and provide cooperative buying and other member benefits.
The site aims to build cooperative purchasing of products, supplies and services, offering a Web-enabled transportation logistics platform to bring together shippers and carriers worldwide to collaborate on their logistics planning.
It will initially concentrate on truckload, refrigerated and intermodal, and eventually less-than-truckload, package and parcel, air, cartage and home delivery.
Logistics.com, headed by Dr. Yossi Sheffi, director of the Center for Transportation Studies at the Massachusetts Institute of Technology, seeks to be a marketplace for both spot and long-term trucking deals that provides more than simple price comparisons. The site, launched in June, allows shippers and carriers to interact and bid for capacity. Soon they will be able to bid on spot loads and track and trace shipments in real-time. Carriers are rated using several different parameters such as capacity and performance, based on shipper-specific requirements.
It has also developed a spot market process which enables shippers to pluck out alternate carriers for a load when an initial carrier has refused a shipment.
“It’s sort of an electronic bulletin board of alternate, prospective carriers
which are e-mailed to the shipper, and this helps the shipper move loads within an hour and a half of posted bids. Then, you’ve saved hundreds of hours of manpower trying to cover the freight,” says John Lanigan, managing director and COO of Logistics.com. The shipper can basically hit a button and choose which carrier to go with. There will already have been a screening process by which rates and background information have been submitted by the carriers and filed on a database, along with shipper information.
“We have migrated from a carrier-centric to a shipping services-centric site in order to help shippers win short and long-term contracts,” Lanigan explains. Smaller carriers will be given access over the Internet to otherwise costly operations software, but carriers will largely be enticed to use the site by the opportunity to bid for the business of some of the largest shippers in North America.
Lanigan says Logistics.com will be participating in a rollout into the Canadian market, driven by one particular Canadian customer (as yet unnamed), and he anticipates broader rollouts of exchange capabilities into other markets down the road. “I think the Canadian business market in general seems to be very receptive to the processes as they become available. Frankly, I don’t see any lagging behind or reluctance at all. We’re a unique Internet company – we like to have our services up and running before we announce them,” he says.
Carrier Point.com, which became a live marketplace in March 2000, and now represents over 100 shippers and 150 trucking companies running over 200,000 trucks, works as both a spot market and a private market.
“We’re very much into de-commoditizing this business,”says Bill Falconer, vice president of business development, explaining that shippers are able to see a weighted average on carrier performance variables such as damage claims.
In the private market setup, there is auto-tendering for approved carriers where the shipper has done its own screening. “We integrate into the ERP and warehouse management of shippers,” says Falconer.
Ultimately, both shippers and carriers must believe there is something substantial to be gained by taking their business into cyberspace. Securing a critical mass of users is just as important as securing a steady injection of capital. Site administrators work on building a community of users way before attempting to muscle their way into the transportation neighbourhood. But the fight for survival doesn’t end there. Delivering on their promises of new enhanced efficiencies and reduced expenses for both carriers and shippers will be essential to survival.