Metro Express is always on the highest state of alert for loads. Dispatchers monitor the Web day and night. The moment potential new loads arrive, they submit bids and alert drivers, via cell phone, to stay put and wait for further instructions. Shippers decide within 15 minutes.
“It’s a busy process,” says Jon Jenkins, operations manager of the St. Louis-based carrier with 64 company trucks and more than 300 owner-operators. “You have to know what you are doing.” Metro Express uses National Logistics Management Inc. (www.nlmi.com), a third-party logistics company for several automobile manufacturers. Dispatchers also use UrgentFreight.com to find time-sensitive freight, Jenkins says.
To secure spot loads online, managers like Jenkins realize the importance of speed – both in Internet connectivity and decision-making. A fast connection alone, however, doesn’t help carriers and shippers make good decisions. For this reason, many websites continue to develop advanced freight-matching and optimization tools.
But perhaps just as significant as what technology has done is what it hasn’t. Contrary to the fears of skeptics, online freight matching has not turned all transportation into a commodity. Although transactions in the spot market may be more competitive than ever, it appears that Internet-based “markets” have done little to disrupt long-standing relationships and business practices. Rather, technology is helping supply-chain partners become more efficient.
Several online freight-matching systems were developed before the Internet became a household word. The rise of the Web, however, represented a major boost to load matching. For the first time, shippers, carriers and brokers had access to a common technology that allowed for open communication. The telephone, fax machine and even e-mail were closed systems that required one party to select another before commerce could begin. The Web offered the potential for public freight markets.
As the Web continued to show promise as a marketplace for backhaul freight, load-matching sites resolved some lingering concerns among users. Perhaps the biggest issue was credit history. On the Web, it was difficult to know whether a third party offering a load was a good risk.
To address that worry, some load-matching sites integrated searches of leading transportation credit information from CompuNet Credit Services (www.compunetcredit.com) and TransCredit (www.transcredit.com) and business credit information like Dunn & Bradstreet (www.dnb.com). Other online freight matching services required a fairly rigorous application process for membership to ensure quality participants.
Another initial drawback of the Web was time. Unless a carrier had a dispatcher searching websites continuously, a posted load often was gone by the time the carrier found it.
“If a load shows it’s available, I’d like it to be available,” says Matt Metzger, office manager of Metzger Trucking, a 29-truck carrier in Silver Lake, Ind. “With some services I’ve used, 75 percent of the time I call on a load, it’s already gone.”
Well aware of this frustration, freight-matching services work hard to make their information as fresh as possible. The Internet Truckstop (www.truckstop.com), for example, offers instant load notification, a service that sends a carrier an e-mail automatically if a certain load matching criteria becomes available. The DAT Partners and DATConnect.com systems offer alarm matches, giving audible and visual signals that a match has been made. Another approach toward speeding the process is linking Web-based load databases with carrier dispatch systems. (See “Efficiency squared” below.)
Because so many transportation-related services are now available on the Web, integrating those services into one portal has become the trend. The Internet Truckstop, for example, has developed relationships with other companies that offer credit checks, fuel-tax reporting, routing and fuel optimization, among other services. “We have a whole lot of things that support the exchange process other than a freight board,” says Doug Moscrip, Internet Truckstops’s COO.
Often, one of the most powerful tools offered by a freight-matching system is information generated by the system’s operation. As systems grow in volume they build valuable databases. Most systems offer users an opportunity to review aggregated data to help them identify trends in freight movements. Users of DAT Partners, for example, have access to DAT Lanemakers, which provides historical lane activity and information for the past 12 months.
Some freight exchanges go beyond aggregate data to provide a tracking tool for supply-chain partners. John McCarthy has found this feature valuable in using NTE (www.nte.com). McCarthy, logistics manager for Toshiba’s Houston-based heavy machinery division, began using NTE two years ago.
“When we started, we used them strictly as a freight market,” McCarthy says. “But like any good dot-com that’s still around, they started to evolve.” One thing McCarthy discovered was a goldmine of data. He began using NTE’s information gathering and reporting tools to benchmark carriers. NTE member carriers are required, for example, to provide on-time performance data to NTE, which also tracks the number of load offers versus load acceptance and “just about anything you want,” McCarthy says.
No way for eBay?
For Toshiba, enhanced data is valuable, but the benefits of such intelligence are hard to quantify. McCarthy can quantify, however, the impact on costs. For the first six or seven months as an NTE member, Toshiba exposed about 4 percent of its freight to the NTE Exchange. McCarthy figures that his company saved between 8 and 25 percent on that transportation.
NTE Exchange may, in effect, set the market price, but it’s far from a public auction. Trading is reserved for prequalified companies that agree to governing rules and certain standards. In addition, shippers and carriers submit profiles that determine the conditions under which they will accept a transaction.
As online commerce grew in the late 1990s, many observers predicted that shippers would use freight exchanges to drive freight rates – and, in turn, carriers – into the ground. Indeed, some online companies initially tried to run exchanges as commodity markets. The concept hasn’t been successful, says Rick Frio, vice president of BestTransport.com. Several developers of online freight-matching systems use the word “exchange” broadly, but Frio uses it to describe a reverse auction in which carriers bid on freight during a specified time period – sort of an eBay for freight.
“A few years ago, exchanges were a hot topic for public companies,” Frio says. “It sounded good to investors but not to the people in the trenches doing the work.” Frio isn’t just criticizing competitors; BestTransport.com has been there.
“We started out as an exchange, but we found that the exchange model brings carriers together to beat each other up,” Frio says. Shippers weren’t satisfied either. “Shippers are looking for a tool – a better way to interact with their carrier base. Very few wanted to participate in the exchange model.”
BestTransport.com isn’t alone. Several industry leaders have focused their most recent efforts on building private “exchanges.” NTE, for example, considers NTE Exchange to be its flagship service, but it now offers private trading communities. And TransCore’s DAT Services recently introduced TransCore Exchange (www.transcoreexhange.com), offering shippers and carriers private-label exchanges as well as access to the company’s DAT Live freight/equipment database.
The breakthrough with private communities is maximum customization. Rather than follow the rules of a public exchange, carriers and shippers write their own rules. The exchange, therefore, really becomes just a more efficient way to conduct the business supply-chain partners would have conducted anyway. And in some cases, they have the option of “going public” with freight or equipment if necessary.
“We’re a communications tool,” says Donna Brookshier, sales and marketing manager for TransCore Exchange. “We provide the technology platform that shippers and carriers use to communicate their offers. Shippers can post privately to a limited number of customers or they can escalate their bids to the spot market.”
“Shippers give carriers information about a load, and we electronically facilitate that transaction,” says BestTransport.com’s Frio. “We’re like the junction box, with a bunch of wires going in and out. We translate and facilitate the exchange.”
Threat or opportunity?
When a shipper launches a private exchange, its carriers typically must sign up as well. An exchange – whether it’s public or private – speeds transactions, at least in theory, by eliminating time-consuming phone calls to determine whether parties have freight or capacity. The parties can view available loads and equipment on a real-time basis. This efficiency might save time for all parties, but it can also create more competition in lanes a carrier had previously controlled. That can be troubling if you are the entrenched incumbent, but competition also breeds opportunity.
When Alcoa Aluminum, a major customer of Amhof Trucking, began tendering its loads with BestTransport.com, the 85-truck carrier in Eldridge, Iowa, noticed an immediate increase in competition.
“It’s like throwing birdseed out in the middle of a park and having birds flock after it,” says President Roger Amhof. But despite the increased competition, Amhof says BestTransport.com has benefited his business by giving him new exposure to Alcoa’s freight in other lanes.
“We’re going to other shipping locations we didn’t have before,” Amhof says. “It gives us access to more plants, and we get a shot at more freight.” Alcoa Aluminum still tenders many oversize and overweight loads exclusively to Amhof Trucking through BestTransport.com.
The next level
It’s already becoming standard for online freight exchanges to execute transactions automatically based on criteria set by the shipper and carrier. More sophisticated still are systems, such as Logistics.com, that analyze historical and current data to help set and fine-tune those criteria.
For carrier clients, Logistics.com offers strategic planning, dispatch optimization and yield management tools, says company President Chris Caplice. The yield management tools perform activity-based and opportunity costing. “They are online tools that give quick responses that help in the pricing of loads,” he says.
Another player in the optimization future of online exchanges is Integrated Decision Support Corp. (www.idscnet.com). The company developed Netwise, a profitability system based on yield optimization. It also developed an automatic notification system for dispatchers to know what types of loads to look for. Netwise integrates with the major dispatch systems to tell dispatchers what shippers to contact. With a product called E-solicit, carriers can automatically send an e-mail to a shipper requesting a load, says company President Rick Murphy.
“Carriers do not want to spend lots of time looking for freight over a browser,” Murphy says. “We interfaced into the customer’s dispatch system and automate the exchange among parties. Individual sites cannot do that.”
An end to humans?
The Internet is great for transferring information and analyzing data. But when it comes down to the final deal making, the value of personal interaction, for many carriers, is irreplaceable.
“I want a phone call. I want to talk to people responsible for accepting or rejecting a load,” says Michael Horton, load manager for Horton Trucking, a 16-truck carrier in Springfield, Ill. True, it’s possible to tender and accept loads entirely online. But the integrity of the data is only as good as the person entering it.
“It’s still important to have some kind of relationship face to face,” says Metro Express’s Jenkins. Knowing the people who enter the data builds the relationship at both ends, Jenkins says. First, you are able to trust the information they put on the screen. And second, shippers will be less punitive when you don’t hit your marks, Jenkins says.
“The [trucking] industry lends itself to problems,” Jenkins says. “I’ve found that no matter how computerized you get, the business still relies on the computer user.”
Phone, fax still tops
The Web has become a significant tool for finding freight, but a majority of carriers rarely or never use Internet-based systems for that purpose, according to a CCJ survey of for-hire carriers conducted in December. The telephone and fax machine remain the No. 1 tools for communicating with shippers and brokers. More than 90 percent of the 373 for-hire trucking companies responding said they use the telephone to bid on and accept loads. About 40 percent of carriers use e-mail, and approximately 30 percent use freight boards or exchanges based on the Internet or private networks. Although electronic data interchange is essential in certain freight markets, its use elsewhere in the for-hire segment would appear to be relatively slight.
Surfing several different websites for loads and re-entering load searches wastes valuable time. Realizing this, some dot-com companies have developed integration tools to speed information flow from their dispatch systems to the Web. Also, once you accept a load online through an interface, the load information can be entered into your dispatch software automatically for further analysis.
Using electronic data interchange and XML technology, NTE can put loads directly into dispatching systems, says CEO John Murphy. “Carriers can then look at the freight and easily accept it or decline.” There are programming costs involved, he says. In many cases, especially at smaller companies, dispatchers may only use a few sites to find loads. The cost of customizing your system in this way may be a bit expensive for your needs.
Instead of hiring a programmer to integrate your system, some online exchanges have developed off-the-shelf software interfaces to translate information into files that can be sent from and downloaded into many dispatch systems. One such product is called Pintac, developed by the Internet Truckstop, says Doug Moscrip, COO.
Webhauler (www.webhauler.com), a new freight exchange and matching tool by PCS Software, integrates directly with PCS Software’s dispatch module, Express 11.0. PCS Software offers Webhauler for free to all Express 11.0 customers, says Mike Till, president of PCS Software. “It’s not a geek’s world anymore. Someone needed to bring this to carriers for free.”