BUSINESSWEEK ONLINE : NOVEMBER 20, 2000 ISSUE
BUSINESS WEEK E.BIZ -- SPECIAL REPORT

ONLINE EXTRA: Q&A with Nistevo CEO Kevin Lynch
"It makes sense that logistics needs to be more collaborative"

It took a Chicago options trader to put together a Web exchange for companies to share trucks. Kevin Lynch, president and CEO of Nistevo in Eden Prairie, Minn., expects to help companies save millions in logistics expenses every year. BW e.biz editor Faith Keenan spoke with him about the two-year-old company's prospects. Below are edited excerpts of their conversation.

Q: What made you think that an exchange like Nistevo could work when companies have a hard enough time sharing between internal divisions, let alone with outsiders or competitors?
A: Two years ago we looked at the problem of logistics in the supply chain. It's all about reducing standing inventory levels and working capital by coordinating supplies and customers' order-cycle times. As smaller packages move more often and there's less standing inventory in the warehouse and less in the truck during delivery, it makes sense that logistics needs to be more collaborative.

Q: The members of the current test are mostly food companies. Why?
A: We're targeting markets where logistics are a big part of cost of goods sold -- the bulk commodity industries like consumer packaged goods, food and beverage companies, personal product companies, and agricultural products. The consumer packaged-goods sector has a very compressed demand cycle -- half of the demand comes in the last three months of the year. People buy more food around the holidays, and there's a real capacity crunch at the end of the year [and a need to look at logistics]. Those folks were very interested in working together, especially during the peak period.

Q: How does Nistevo make money?
A: Companies sign up every year, like a magazine subscription. The amount varies by the number of locations they're delivering to. If you have 100 locations in the supply chain and you have to run logistics in those locations, it's $3,500 per connection. Our average deal size is $200,000 to $400,000.

Q: How are customers using the service now?
A: Most are using it internally, getting their house in order, finding different products that can...share trucks. One company has 80 divisions buying truckload capacity on their own. Their intention is to use the software inside their four walls to get the 80 divisions [working] together and to configure software to work with partners and competitors...for additional efficiencies.

Q: What about those who don't want to share?
A: If they're wary about sharing a truck with a direct competitor, they can share with someone [else] in the supply chain. A company that sells ice cream may [share a frozen vehicle] with one selling frozen meat.... There's a lot of that happening.

Q: How much can companies save by collaborating?
A: Most are spending between $300 million and $400 million a year on transportation and logistics. We estimate they can save 3%. General Mills expects to save 7%, or $800,000, in the first year. The savings vary among different players.



_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

BACK TO TOP
EBIZ Cover Image, link to ebiz table of contents
EBIZ Contents for issue dated Nov. 20, 2000


RELATED ITEMS
Logistics Gets a Little Respect

TABLE: The Evolution of Logistics

ONLINE EXTRA: Q&A with Nistevo CEO Kevin Lynch

One Smart Cookie

Warehouse Trouble

TABLE: How to Deliver?



INTERACT
E-Mail to Business Week Online

 
Copyright 2000-2009, Bloomberg L.P.
Terms of Use   Privacy Notice