Logistics Logic

Managing logistics and reigning in transportation costs have proved to be ongoing challenges for today's corporations.

Until now, managing logistics processes meant that transportation agreements or contracts were kept in notebooks on a shelf and shipments were tracked via phone, fax or e-mail -- all time-consuming, expensive manual tasks. With logistics accounting for about $720 billion annually in the U.S., according to one report, improving the process is crucial. The Internet provides the next step.

Driven to Find the Right Tool
For some time, General Mills has formed alliances with supply chain partners that collaborate purchases and shipments. At any given time, the company has between 3,000 and 4,000 trucks on the road, eventually traveling to 10,000 locations to move products inbound to plants or outbound to customers. But this process is time-consuming and not as efficient as it could be due to technological constraints. Within the past year, they have been searching for a technological tool to optimize their distribution and logistics network with their partners. "The difficulty we had with the tools on the market was they were very costly to change to accommodate collaboration with other companies," says Kevin Schoen, director of strategic alliances at General Mills.

One dot com is helping resolve the challenges of accommodating data from various organizations and moving business toward a more coordinated logistics function. Nistevo.com provides alliance partners with visibility across the entire carrier base and has the ability to handle different modes of transportation9truck, rail, intermodal, air and ocean.

The Fundamentals
Nistevo, a B2B Internet company, has developed a Web-based tool with which companies can efficiently procure and manage logistics services. How exactly does it work? The Nistevo Corporation recently announced an alliance between General Mills, The Pillsbury Company, Land O' Lakes, Graphic Packaging Corporation and Fort James Corporation. These alliance partners, through private and semiprivate exchanges, will not only move their products, but will also fill backhauls, manage contracts and monitor shipment electronically. "That¹s the fundamental premise. It allows companies to configure themselves and their partners to share excess capacity and logistics created by virtue of their contracts," explains Jon Niess, COO for Nistevo.

The Nistevo tool has three components: contract management, exchange and collaborative execution. Currently, Schoen says, General Mills' transportation department is home to 100 to 150 (5-inch-thick) notebooks detailing the lane agreements and complex carrier charges for all of their routes across the United States. The contract management component of the Nistevo tool allows all of that information to be stored and managed electronically, providing buyers and sellers access to an electronic catalog of rates and carriers across the various lanes. "Right away we see a huge amount of efficiency by turning all of those manual notebooks and processes into an electronic catalog," says Schoen.

The exchange component provides alliance partners (shippers and carriers) with a real-time trading market, where they can determine price and excess capacity for a particular lane. "Exchange looks for opportunities to save money based on capacity generated by myself or my partners," explains Niess.

Once the load has been booked, collaborative execution allows an alliance partner to monitor that load as it travels to its destination. So, through the Nistevo site, a shipper or carrier can track the progress of the delivery. An alliance partner can determine whether a shipment has been loaded, if the driver is on the road and whether any driver detention or stop charges are involved, according to Niess. "At the end of the load or service, it bundles all of those charges together and feeds it back into the contract system," he says. The Nistevo system is designed to automate the entire process as much as possible. If a problem occurs along the route, the system alerts the shipper and/or carrier. Schoen compares the system to a chat room with live dialogue between multiple trading partners -- the carrier, the original shipper, the receiving location and possibly another manufacturer looking for capacity. There's no doubt about it -- the concept is unique, allowing multiple companies to manage contracts, collaborate their logistics and selectively share capacity all through a single Web site. In addition, the integration costs and risk factors are minimal, because no capital investment is required for either hardware or software. The system is based on an annual subscription fee that can be renewed from year to year. "Unlike a lot of other applications that have been sold throughout the years, we had to install the software, spend the time and hire the people. You just configure it on the Internet and then you're off and running," says Niess.

Bottom Line Impact
"There are huge inefficiencies in the transportation field. With Nistevo, we can eliminate the inefficiency and all share in that productivity," says Dick Hanson, vice president of distribution and logistics at General Mills. General Mills spends approximately $300 million a year on truckload transportation. The company projects a minimum savings of at least 5 percent as a result of using the Nistevo tool.

Sound too good to be true? "The biggest challenge for Nistevo is that they're a new company. They are going to have to continually innovate and come up with new product ideas beyond this existing tool," says Schoen. As a company that has expanded from 11 employees to 80 in under a year, growth certainly seems to be on Nistevo's mind. And Niess predicts that by the end of 2000, several hundred organizations could be online with the system. Nistevo seems eager to meet the challenge not only to grow, but to remain a leader in logistics technology.