The Route to Savings

By John S. McCright  |  Posted 2002-11-04 Print this article Print

Hosted apps spur collaborative logistics business processes.

Transportation logistics software has made its way online with hosted versions that promise to give enterprises greater visibility into the processes affecting the delivery of raw and finished goods.

Nistevo Corp., Elogex Inc. and Manhattan Associates Inc. are enhancing their respective hosted offerings, which link suppliers; their customers; and the truck, air and rail freight carriers that move among them in an online collaborative environment. As a result, companies will be able to plan better delivery routes, get near-real-time information on the status and location of shipments, and measure the performance of shippers, according to officials from the three companies.

Gaining better control of logistics costs is an important goal for many enterprises. U.S. companies will spend almost $600 billion on transportation this year, with some 65 percent of them outsourcing at least half of their transportation operations, according to Boston-based AMR Research Inc.

To manage that spending, many are deploying TMSes (transportation management systems) to work with their supply chain management software. AMR predicts that spending on TMS software will increase from $844 million last year to nearly $2.7 billion in 2006.

Nistevo, Elogex and Manhattan officials said they believe that connecting users of TMS software over their networks will enhance its value. Minneapolis-based Nistevo provides network connectivity, a software optimizer to set up the most efficient route for pickups and deliveries, and execution software to track and trace shipments. The company late last month announced that it was teaming with logistics outsourcing company The Arthur Wells Group, of St. Louis, to create what the two companies called one of the largest transportation information sharing networks for the grocery industry. Arthur Wells will move the 600 freight carriers and 150 grocery companies using its proprietary logistics software onto Nistevos Collaborative Logistics Network over the next nine months.

By uniting logistics constituencies on the network, retailers will be able to automate loading dock management, create and receive alerts, settle charges, and identify new opportunities with new members of the network, according to officials from both companies. As a result of the efficiencies provided by Nistevos Collaborative Logistics Network, Arthur Wells said it expects to orchestrate more than 550,000 shipments annually.

"The typical grocer has thousands of suppliers with hundreds of points of origin routing traffic to a distribution center," said Rick Parker, vice president of marketing at Nistevo. "You end up with lots of little suppliers sending less than a truckload. [The grocers] know if they could plan those shipments and pick them up with a multistop route, they could consolidate them into a full truckload. ... The savings can be enormous." By optimizing such multistop routes, Nistevo customers typically can save 7 to 15 percent on transportation costs, Parker said.

Hilton Kahn, a principal at Arthur Wells, evaluated several other network logistics software providers and said he liked the collegial atmosphere created on the Nistevo system. "Some of the other [logistics software] had a lot more adversarial roles where the shipper or the receiver was looked at as being the bad guy," Kahn said. "The only way to get cost reduction is to get both sides working together, to both utilize the equipment" to its fullest.

Manhattan has sold supply chain execution software for several years but plans to expand its footprint into the networked logistics business. The company, based in Atlanta, this month will buy Inc., of Burlington, Mass., in a deal valued at about $20 million. The acquisition should make current and potential customers feel more secure in Logistics.coms financial viability, analysts said. Manhattan plans to integrate Logistics.coms software into its offerings but will continue to provide them as stand-alone applications, officials said. Future development will address business process problems such as dynamic routing and will show up in new products next year, they said.

Separately, Elogex, of Charlotte, N.C., is expanding its management team and enhancing its namesake networked logistics software solution through a $17 million venture capital infusion announced late last month. On the development side, the next upgrade to the Elogex platform, due next quarter, will be expanded to include tools to manage the entire client life cycle, according to President and CEO Travis Parsons.

Part of the value proposition of these networked logistics software offerings is that, unlike packaged supply chain management software, there is little upfront cost because there is neither a software license fee nor a need to buy new servers to run the software. Enterprises, shippers and suppliers pay a monthly subscription, usually based on usage. Larger companies with existing EDI (electronic data interchange) infrastructures use that technology to connect to the Nistevo network, for instance. To save on the cost of connecting through an EDI value-added network, some users connect over the Web via XML or WebForms, Parker said.

Hosted logistics software providers look something like the business-to- business online trading hubs that were the rage two years ago, but Elogexs Parsons said that IT and procurement managers shouldnt make the mistake of thinking they offer the same value proposition as Web sites that traded office supplies.

"The key difference is, we focused on a business problem that was core to [an enterprises] problem," Parsons said. "We didnt try to alter the core way business was done between partners."


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