i On the Market: Navigating the Asphalt Jungle

All the commerce in the world isn't commerce at all if it's not picked up from, and delivered to, the appropriate location. Transportation is a huge industry that is getting bigger by the minute, and the good news is that technology is increasing its efficiency.

[From iSource Business, November 2001] The concrete won't hide you any longer. Nor will the asphalt. Time was, the great American highway system was a collection of arteries that connected this far-flung country of ours, as well as some darned-good hiding places. Leaving the office for a vacation meant disconnecting from the incessant demands on your time and accessing some splendid isolation. It was just you, the wheel and the highway, with intermittent stops at tourist traps.

But, no more. Now, thanks to computers, satellites and semiconductors, you're as connected in Waycross Ga. as you are in Washington, D.C. Which is actually a good thing, if you're one of the many responsible for transporting goods across the fruited plain. Better connections mean better productivity and efficiency, no small consideration in a low-margin industry in which keeping wheels rolling, and rolling at optimum capacity, is crucial. So is aggregating spend and leveraging buying power, all of which can be helped by connectivity.

Transportation is indeed a huge business. According to Bob Costello, chief economist for the American Trucking Association, in 1998 the transportation industry hauled some 57 million tons of B2B freight. By 2008, that total is supposed to be over 2 billion tons. That's a lot of CDs, file folders, bearings or whatever the B2B community needs hauled. While that figure includes the entire transportation industry, for purposes of brevity, we'll focus largely on the trucking aspect in this column.

Let's Pull Together

Given that so many trucking companies are small (some 80 percent have 20 or fewer trucks, according to Costello), the Internet offers evident utility in the form of leverage for those smaller companies, once they can aggregate their spend into a formidable amount. And that's exactly what's happening. Costello says, "[Smaller companies] are setting up Web sites, and they're getting deals with fuel companies and tire companies. So, instead of Costello Trucking buying tires and fuel by itself, it's in a group of 200 other carriers, and the next thing you know, it carries some weight."

The Internet may well be where the smaller players' e-commerce efforts stay, since Web-hosted efforts are much less expensive than setting up hosting solutions in-house. Logging on to an exchange and placing an order requires only a browser and a PC. Hosting an extensive supply chain solution however, is an entirely different proposition. And while smaller companies might benefit from a lack of bureaucracy, they also lack the deep pockets of the trucking behemoths.

Costello gives the example of onboard computers that can provide the connectivity spoken of earlier. For all their utility, they're still used mainly by large companies. As he explains, "The small carriers have to wait for technology to become less expensive before they can implement it." Costello says the others will implement such technology once prices come down and they experience enough pressure from their customers. As much as cell phones went from being high-tech toys for the bored rich to everyday gewgaws dispensed to teenagers from mall kiosks, electronic trickledown eventually reaches all areas of business.

Sell You Some Visibility, Mister?

All this satellite connectivity leads to visibility, and that visibility will eventually become a commodity, according to Scott Rosenberger, managing director, Industrial/ Automotive/Transportation unit at KPMG Consulting. Rosenberger says that, while many companies promise such capabilities as stock alerts and the ability to scan data at the stock keeping unit level, it's the integration of all this connected information that will prove to be the true value.

He gives the example of APL Logististics, which is a roughly billion-dollar company that has Toyota as one of its clients. A company that's as big and widespread as Toyota 9 with plants in Japan and America, a network of dealers and a myriad of suppliers 9 has a truly intimidating supply chain. As Rosenberger puts it, "Managing Toyota's supply chain from manufacturing source all the way through to moving small parts onto an assembly line is really an art." That art has to have a large amount of technology behind it, giving Toyota demand, inventory data, and all the various and sundry metrics that makes up modern commerce.

If a company like APL is able to bring together the disparate pieces of data, manage it and present it in a workable form to a Toyota, it will drive down Totyota's costs and, in so doing, expand both its profit margin and its value proposition. As all the parts that make up a Camry are brought to the Camry plant, who better to keep Toyota apprised of the location of all those parts than its transportation provider? That transportation provider is also less likely to be pushed out the door by a bid from a competing company that is only able to deliver a lower price, but not visibility.

Providing this visibility is even more complex when you consider international trade. Not every country is as e-savvy as America. As Rosenberger says, the ability to provide "harmonized data, harmonized formats, data collection, and data access" will take some time. The companies that bite the electronic bullet and make the commitment to provide this visibility will benefit greatly in the end, however. Rosenberger adds, "Visibility for international data becomes not only a big challenge but also the stickiness that allows a low-margin business to be able to attract, maintain and grow the business that they have with their prized customers."