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