Opinion: The Internet and Its Effect on the Supply Chain
By Max Stevens-Guille The Internet. The word conjures up both praise and scorn. Just a year ago, it seemed that everywhere we turned, one dot.com or another was trying to sell us something new over the Internet. Today, with the Nasdaq’s slide, the market has sobered. While it is now clear that the world is not yet ready to embrace the FedExing of dog food as a business model, it is undeniable that the Internet has changed the way business communicates. 
The Internet is first and foremost about communications. Communications that affords commerce by connecting buyers and sellers, and fulfillment by connecting shippers and carriers. In 2000, more than $700 billion was spent globally on telecommunications — a large portion building the next generation of global Internet switching infrastructure capable of supporting highly reliable data communications at very low cost. Much to the chagrin of some members of the logistics community, business-to-consumer e-commerce companies learned about logistics the hard way in 1998 when they were caught unprepared for the Christmas demand. Adding a “buy button” to a site was easy. Adding a “ship button” and having confidence in meeting a customer’s expectations proved significantly more of a challenge. E-tailers learned the hard way that customers don’t buy products, they buy delivered products. While business-to-consumer opportunities have received the lion’s share of the media’s focus, the business-to-business market has quietly grown into a multitrillion-dollar market. The GE TradeXChange market, for instance, now connects more than 100,000 trading partners. Originally built on a proprietary electronic data interchange platform, this system has been transitioned to take advantage of the lower costs inherent in the Internet. Using technologies such as XML, GE is greatly simplifying the process of integrating disparate systems, thus lowering both upfront and ongoing operational costs. The Internet provides the ability to offer centrally hosted services — so-called Application Service Providers — at a fraction of the cost of hosting the service locally. Take, for example, House2Home, a chain of home decorating stores. With more than 900 suppliers, the retailer was spending $2 million a year to process EDI and paper transactions. Using the Internet it built a multi-tiered system. Its large trading partners directly integrate their systems to gain insight into forecasts and inventory. To support its smaller suppliers, House2Home provides ASP-hosted tools to replace paper-based transactions. House2Home claims to not only have reduced its operational costs significantly, but also the costs of goods as its suppliers’ costs have decreased in the process. One of the biggest trends in logistics is the movement of information in tandem with goods and services. Supply chain “visibility” systems enable shippers to gain improved control of inventory, reduce out-of-stock scenarios, maximize supply chain efficiency and, ultimately, increase customer satisfaction through order fulfillment. ASP-hosted systems such as Descartes’ eFrame, for example, interconnect trading partners to provide detailed line-item visibility to all members of the value chain. The Internet is changing the way in which motor carriers communicate. New generation 2.5G packet-based networks such as those from AT&T and NexTel will soon enable low-cost “always on” Internet-based voice and data communications between drivers and fleet managers. Not only will this provide better visibility into the supply chain, it will enable carriers to have better control over how their resources are deployed. Some of the earliest transportation ASPs focused on providing load-matching services to the less-than-truckload market. As up to 30% of the trucks on the road at any time are empty — driving dead-head miles — freight-matching services such as those offered by 3Plex and NTE.net enable transport companies to find jobs close by. NTE.net has recently enabled its site to provide independent owner-operators with wireless access while on the road. ASPs are providing carriers of all sizes access to fleet optimization tools. In fact, some carriers are providing their in-house services to smaller carriers for a fee. Schneider Logistics’ claims that its Supply Chain Integrator tool set was created to provide “cost-efficient and effective ways to lower the freight dollars spent, use fewer people to do the work, reduce inventory and improve customer service.” Schneider says that companies can save up to 15% in supply chain costs if the integrator is properly used. For carriers and shippers alike, boosting margins in a competitive marketplace comes down to one thing: operating leaner. More and more, nodes of the supply chain will be integrated to provide even greater inventory visibility. Shippers will demand that their suppliers and carriers adopt supply chain tools based on open Internet standards to enable rapid integration. Carriers will utilize this information about their customers’ needs to more effectively manage their resources – perhaps messaging their mobile fleet using the wireless Internet. Internet-based ASPs will provide even the smallest shipper the same capabilities as the industry leaders, increasing their competitiveness and lowering prices. Online dog food aside, the Internet is delivering on the promise of cost savings to the transportation marketplace. The writer is senior vice president of product management for Maptuit Corp., Burlington, Mass., a supplier of electronic geography services that are built around the global network of roads. This story appeared in the Dec. 3 print edition of Transport Topics. Subscribe today.
The Internet is first and foremost about communications. Communications that affords commerce by connecting buyers and sellers, and fulfillment by connecting shippers and carriers. In 2000, more than $700 billion was spent globally on telecommunications — a large portion building the next generation of global Internet switching infrastructure capable of supporting highly reliable data communications at very low cost. Much to the chagrin of some members of the logistics community, business-to-consumer e-commerce companies learned about logistics the hard way in 1998 when they were caught unprepared for the Christmas demand. Adding a “buy button” to a site was easy. Adding a “ship button” and having confidence in meeting a customer’s expectations proved significantly more of a challenge. E-tailers learned the hard way that customers don’t buy products, they buy delivered products. While business-to-consumer opportunities have received the lion’s share of the media’s focus, the business-to-business market has quietly grown into a multitrillion-dollar market. The GE TradeXChange market, for instance, now connects more than 100,000 trading partners. Originally built on a proprietary electronic data interchange platform, this system has been transitioned to take advantage of the lower costs inherent in the Internet. Using technologies such as XML, GE is greatly simplifying the process of integrating disparate systems, thus lowering both upfront and ongoing operational costs. The Internet provides the ability to offer centrally hosted services — so-called Application Service Providers — at a fraction of the cost of hosting the service locally. Take, for example, House2Home, a chain of home decorating stores. With more than 900 suppliers, the retailer was spending $2 million a year to process EDI and paper transactions. Using the Internet it built a multi-tiered system. Its large trading partners directly integrate their systems to gain insight into forecasts and inventory. To support its smaller suppliers, House2Home provides ASP-hosted tools to replace paper-based transactions. House2Home claims to not only have reduced its operational costs significantly, but also the costs of goods as its suppliers’ costs have decreased in the process. One of the biggest trends in logistics is the movement of information in tandem with goods and services. Supply chain “visibility” systems enable shippers to gain improved control of inventory, reduce out-of-stock scenarios, maximize supply chain efficiency and, ultimately, increase customer satisfaction through order fulfillment. ASP-hosted systems such as Descartes’ eFrame, for example, interconnect trading partners to provide detailed line-item visibility to all members of the value chain. The Internet is changing the way in which motor carriers communicate. New generation 2.5G packet-based networks such as those from AT&T and NexTel will soon enable low-cost “always on” Internet-based voice and data communications between drivers and fleet managers. Not only will this provide better visibility into the supply chain, it will enable carriers to have better control over how their resources are deployed. Some of the earliest transportation ASPs focused on providing load-matching services to the less-than-truckload market. As up to 30% of the trucks on the road at any time are empty — driving dead-head miles — freight-matching services such as those offered by 3Plex and NTE.net enable transport companies to find jobs close by. NTE.net has recently enabled its site to provide independent owner-operators with wireless access while on the road. ASPs are providing carriers of all sizes access to fleet optimization tools. In fact, some carriers are providing their in-house services to smaller carriers for a fee. Schneider Logistics’ claims that its Supply Chain Integrator tool set was created to provide “cost-efficient and effective ways to lower the freight dollars spent, use fewer people to do the work, reduce inventory and improve customer service.” Schneider says that companies can save up to 15% in supply chain costs if the integrator is properly used. For carriers and shippers alike, boosting margins in a competitive marketplace comes down to one thing: operating leaner. More and more, nodes of the supply chain will be integrated to provide even greater inventory visibility. Shippers will demand that their suppliers and carriers adopt supply chain tools based on open Internet standards to enable rapid integration. Carriers will utilize this information about their customers’ needs to more effectively manage their resources – perhaps messaging their mobile fleet using the wireless Internet. Internet-based ASPs will provide even the smallest shipper the same capabilities as the industry leaders, increasing their competitiveness and lowering prices. Online dog food aside, the Internet is delivering on the promise of cost savings to the transportation marketplace. The writer is senior vice president of product management for Maptuit Corp., Burlington, Mass., a supplier of electronic geography services that are built around the global network of roads. This story appeared in the Dec. 3 print edition of Transport Topics. Subscribe today.
