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Industrial Management: Trucking
Making Sure Big Rigs Have Something to Carry
The Net may help reduce the number of half-empty trucks
You might say Benjamin Gordon hates empty trucks. Gordon discovered this back in 1997 when, while working as a consultant, he learned that thousands of smaller trucking and logistics companies across the company face the same problem: how to find, mix, and match shipments so that every truck is as full as possible. Ultimately, partial loads mean higher prices and too many big rigs on the road, not to mention excess pollution.
Gordon, who was then just 23, turned his energies to the project of creating software that could help truckers, shippers, and the brokers in between to match up their needs better. Now, three years later, Gordon is among a growing convoy of entrepreneurs who hope to solve this problem with a network of Web sites that will streamline the consolidation and outsourcing of freight trucking. Seeded with $15 million in venture financing, he launched a service for so-called third-party logistics providers (3PLs). Gordon's 3PLex.com aims to sell software kits to help trucking brokers set up online matching systems. "There are literally thousands of of these 3PLs out there," says Gordon. If he can help them all Web-ify their businesses, it may mean fewer, fuller trucks on the road.HODGEPODGE. These new e-businesses face a daunting task: truck-load schedules are byzantine. To begin with, the trucking industry remains a hodgepodge of big and small companies with few dominant players. Companies tend to be minutely segmented and highly specialized: Some outfits serve a single city, while others, though regional, may transport nothing but produce. Then there are the thousands of logistics providers. To date, they have relied on a patchwork of phones, faxes, e-mails, and bulletin boards to match shippers with smaller trucking companies--many of which are one-man operations.
At best, the system is inefficient. The paperwork to track, ship, bill, and arrange customs is endless. Yet the logistics providers annually mop up more than $25 billion worth of business in the U.S., Gordon says. Even so, empty trucks still account for one-fifth of the miles logged annually by truckers, say industry experts.
Dozens of startups besides 3PLex.com are rolling out Web sites, and each hopes it will be the one that transforms the transportation and logistics market. Transplace.com, for instance, is considered by some industry insiders to be a leading contender in online logistics services. It is backed by six of the 20 largest trucking companies in the country, including J.B. Hunt. Industry giants FDX Corp. and Yellow Freight Systems Inc. are also putting money behind a number of these initiatives.SUPER NETWORK. If all goes according to plan, these sites will match shippers with cargo more efficiently and eliminate the mountain of paperwork. Moreover, sophisticated wireless-communications equipment will soon allow the sites to interact in real time with their clients. Customers can check out what routes trucks are taking--and even the temperature of their containers--on a minute-by-minute basis. Industry experts say that this could cut losses by more than 30%.
The shift to the Web will allow anyone with a computer to gain access to these services. In the past, only the big players could afford this technology, explains Timothy A. Barton, CEO of Freightquote.com, a Web-based freight broker. Now even small independent truckers will be able to check on the status of their next dispatch via an inexpensive Web browser. In Gordon's ideal world, the various Web services will eventually join forces, sharing customers in a super network so efficient that fewer trucks would be needed.
The potential for the business is so huge, some analysts wonder if the titans of the $500 billion trucking and transport industry--such as United Parcel Service Inc. and FedEx--might be threatened by this high-tech groundswell at the margins of their market. Others say that's unlikely, because large shippers will be skittish about turning their freight over to companies they know little about. But many of the majors are playing it safe by taking strategic stakes in some of the new logistics startups. Which means the race for the $25 billion third-party logistics market will only continue to gather speed.By Alex Salkever in New York