Companies want to strengthen supply chains while cutting costs. Can E-logistics deliver?
By Scott Leibs
While there have been some glorious moments in the field of logistics–think of the Pony Express and the Berlin airlift, not to mention St. Nick’s annual trek–on a day-to-day basis, most CFOs will happily let line managers sweat the details. The fine art of getting things from one place to another usually has more to do with crunching boxes than crunching numbers.
But as several recent deals highlight, the emerging field of E- logistics is saving companies money while also helping them streamline and enhance their supply-chain operations. By moving the acquisition of various transportation and related services (which account for 60 percent of the $1.1 trillion that companies will spend on logistics this year) onto the Internet, companies can often find better deals, and in some cases tackle logistical complexities in new ways. With more companies pinning their success on the efficiency of their supply chains, logistics is now a hot topic in the boardroom as well as the warehouse.
In July, the logistics arm of retail giant The Limited Inc. said it had saved $1.24 million by acquiring transportation services through the Optibid Network, operated by Logistics.com. The network acts as an online exchange, allowing shippers (that is, companies that have goods to be shipped) and carriers to hammer out annual contracts for recurring routes by posting a shipper’s needs and allowing carriers to bid.
Nistevo Corp., Digital Freight Inc., and other companies offer similar services, which vary by type of transportation and geographic region(s) covered. Nistevo, for example, limits its network to goods traveling by truck in North America. At $450 billion, that’s hardly a niche market, and Nistevo CEO Kevin Lynch argues that by focusing on a mode of transport that handles 85 percent of all goods shipped in North America, Nistevo not only provides the cost efficiencies that a logistics network makes possible, but also helps drive hidden costs out of transportation. “Trucks move goods from point A to point B,” he says, “and then search for more business. That creates an inefficiency that shippers and carriers pay for, similar to the costs of a line changeover in manufacturing.” Nistevo’s network not only lets shippers haggle with carriers, it also allows them to collaborate with one another. If one company ships cereal from Minneapolis to Atlanta, for example, and another regularly ships building supplies from Atlanta to Minneapolis, Nistevo provides a forum in which the two companies can find each other and share the costs on that route.
Lynch claims that companies will be quick to adopt such services, because the underlying business process is decades old. “What two companies once did with 10 trucks,” he says, “multiple companies can now do with hundreds, because the Web allows you to coordinate and manage a range of relationships.”
Many analysts agree. “While there has been a tendency to slap an ‘E’ in front of anything pertaining to logistics,” says Chris Newton, a senior analyst at AMR Research Inc., in Boston, “the Web has undoubtedly created innovative ways for shippers and carriers to work together.”