Stuck in the Middle With You

[From iSource Business, December 2000] There's one in every crowd. One rebel (or in this case, one rebellious company) that refuses to play by the rules, that happily bucks convention and makes its own way through the business wilderness, letting the corporate lemmings trod the well-worn corporate paths. While it might seem odd that there are still rebels in the e-commerce world, where the only rule seems to be the commandment "Thou Shalt Be Loopy and Odd," there's actually still a staggering amount of conformity. The same Internet connections that allow ideas to germinate quickly allow those same ideas to be co-opted quickly. True rebels are rare.

Freightdesk.com is one of the rebels of B2B. They have taken the unusual step of continuing to work with middlemen, despite the allure of "disintermediation," the buzzword for cutting out the middleman. Why go to a supermarket to get eggs, when the farmer can FedEx them to your doorstep in designer egg cartons? Or so goes the prevailing logic. It's an interesting principle, one with merit, but there's also a downside to this middleman slaughter: Lose the middleman and you lose the middleman's knowledge and expertise. No software, no matter how sophisticated, can know that the paperwork at one company goes more smoothly when you personally call a forwarder first thing in the morning, or that the customs office in Kuala Lumpur prefers faxes to e-mail.

Freightdesk CEO Rob Quartel has reasons for this bucking of conventional wisdom. According to him, there are a lot of companies making the jump to a disintermediated Web presence, but not always for the right reasons, or with the right business model. "If you look out there and you think about what the Internet has traditionally done, most of it is aimed at disintermediating the guy in the middle. Everybody thinks the guy in the middle is friction," Quartel states, naming stock trading companies and travel agencies as industries that have indeed benefited from disintermediation. But it's one thing to log onto a travel site, check out the fare and flight schedule and click on the one that strikes your fancy. It's another thing entirely to try to negotiate the international labyrinth that is shipping.

"A typical international trade of whatever size, whether it's a $50 move of a carton all the way up to millions of dollars in a couple of containers, involves typically anywhere from 20 to 30 individual parties in the transaction, anywhere from 30 to 40 documents, 200 + data elements and 90 percent repetitive re-entry of that data, with 30 percent re-entered as many as 10 times. The typical Web perspective is, 'Well, we can just automate it on the Web so that the shipper and the receiver can just punch a button and get it all done.' But the reality is it's so complex that 80 percent of trade has an intermediary in it. And outsourcing isn't going down, it's actually increasing." Quartel says this increase in outsourcing is due to the fact that most businesses have neither the time nor the inclination to master the complexities involved in trade.

Freightdesk continues to work with middlemen because, as Quartel puts it, they can supply the human touch that can't be accomplished with computers. "It may be as simple as going down to the dock to check to see that a container really got off the ship. It involves dealing with an agent who may only work with a cell phone in China. It involves dealing with government agencies, which vary tremendously in their efficiency." (As former federal maritime commissioner, Quartel who tried to abolish his own agency knows a little about government efficiency or the lack thereof.)

What Freightdesk has done is to automate only what needs automating. Their product line consists of three products: Freightdesk Office, an automated backend; Freightdesk Pro, which Quartel describes as a collaboration layer that "allows those 20-25 parties I've mentioned to collaborate on the Web in real-time"; and a vertical desktop, My Freightdesk, "an interface into the rest of the system for the freight forwarder on the one hand, and on the other, a pipe for services." My Freightdesk, which will be operational later this year, may offer everything from port conditions to insurance to buying office supplies. "Ultimately, our goal is to be the complete outsourced IT solution for the forwarding industry," Quartel says.

Peter Powell Sr., CEO of C.H. Powell, international freight forwarders with 250 employees and $250 million in gross sales annually, says his company's relationship with Freightdesk actually began a few years ago, when C.H. Powell began outsourcing some of their software requirements to Accurate Computer Services, a company that was eventually acquired by Freightdesk. But it was more than the standing relationship that drew Powell to Freightdesk. Powell says, "I also was very interested in Freightdesk's concept of focusing on the intermediary as opposed to the shipper direct, because obviously it is protection of turf for us and all the members of our industry. So the marriage of our former software provider, together with the concept of Freightdesk, fit into our plans very nicely."

So nicely, in fact, that Freightdesk now handles between 2,000 and 2,500 transactions a month for Powell. And Powell is quite happy partnering with a rebel. "We find Freightdesk very responsive and aggressive in innovative techniques on the Internet as far as the transportation and logistics industry is concerned, and we work with them very well."

Powell says that he was drawn to Freightdesk because they were able to handle his company's biggest logistics concerns, tracking of shipments. "Obviously, the marketplace is most interested in real-time tracing and tracking, down to the SKU level, because as you deal with major customers, they're not interested in hearing that a shipment should be in one place some day and in another place another day."

Ever the rebel, Freightdesk is continuing to change the face of shipping. Quartel expects to offer real-time tracking of shipments in two to three years, and is using large-caliber brainpower from institutions like MIT to reach that goal in order to satisfy the needs of their clients. Quartel has also brought on such personnel as Michael Krause, formerly with Amazon.com and one of the key logisticians of the Gulf War, now chief logistics officer at Freightdesk. And Bill Ansley, senior vice president, product development and strategic relations, is a third-generation freight forwarder. All to help customers move freight as smoothly as possible.

Where does Powell see Freightdesk taking his e-business? "Obviously, Web-enabled processing is growing exponentially, and Freightdesk has focused on Web-based applications in the processing of international transactions. That could have a positive expense scenario, as opposed to each company having their own internal applications and components.

As Quartel puts it, "What we're doing is really virtualizing their business for them. We're automating and virtualizing as much as possible, and that allows them to free up their people to concentrate on their customer. And the customer is the cargo owner." Call him a rebel with a cause.

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