Transportation and the Net: What's hot, what's not
By Sarah Stone -- Purchasing, 4/22/1999
The one thing that doesn't change about the Internet is that it's always changing. The newest and most exciting Internet applications from last year are old hat, and new uses have come along to grab the attention of transportation and logistics executives. Here's our rundown of some of the hottest issues:Keeping Uncle Sam happy
One use of the Internet that promises to have an impact on transportation and logistics is the recognition on the part of several U.S. government agencies that by making it easy for shippers to get information or deal with necessary paperwork online, they can increase compliance and streamline their own infrastructures.
Two examples are the U.S. Customs Service and the Census Bureau. Customs has put more information on its Web site (www.customs.ustreas.gov), including a new 144-page book called "Importing Into the United States," which outlines import regulations. The agency hopes that by making the information easily available and accessible to any shipper with a browser, compliance will improve.
Ever since the 1993 Customs Modernization Act was enacted by Congress, the agency has had an obligation to keep the public informed as to new rules and regulations and to make existing regulations accessible. At the same time, more of the legal burden of complying is now on the shippers themselves. Compliance rates are still low, however.
Customs is taking the view that most importers want to comply but don't know exactly what is required of them. This new online publication, and others planned for the immediate future, are intended to inform shippers of exactly what they are required to do and when.
Meanwhile, the Census Bureau is responding to the need for streamlined export filings by setting up a Web site for free AES (automated export system) filing. The new site should be ready this fall. Until now, the only ways to file via the AES were either to install an elaborate (and usually expensive) software system or to file via an intermediary (for a fee). Last year, only about 6% of shippers' export declarations (SEDs) were filed via AES. The Bureau hopes to see the number go up to about 25% next year with the new system.
The Bureau says it is not entering into direct competition with the various companies that currently provide filing for a fee, such as Flagship's Export 2000. Those services offer much more than what Harvey Monk, chief of the Census Bureau's foreign trade division, calls its "plain vanilla" service. Probably the biggest users of the new service will be small firms that don't have the need for extensive statistical options and logistics services that the private companies offer.
The old Automated Export Filing Program is slated to shut down on Dec. 31, 1999, so a large number of SEDs that were filed through the aefp will most likely now be filed via the AES.
E-commerce order delivery a growing issue
A mere year ago, some companies were dismissive of e-commerce, viewing it as at best a fad. Now those same companies, both consumer and business oriented, are hastening to jump into what is rapidly becoming the market of choice. But who is delivering all those orders? Is there a difference between online ordering and more traditional POs? If so, are the carriers prepared for it?
There is no question that consumer-oriented e-commerce brings with it a number of new problems for the carriers making the deliveries, such as having to deal with lots of stops to deliver single packages instead of large truckloads going to one site, such as stores or distribution centers. But what about the kind of ordering purchasing departments do? Are delivery requirements different if goods are ordered via the Internet?
From the point of view of shippers, say carriers, there is not that big a difference, but the differences that do exist can have a big impact on shippers' expectations and on carriers' strategies. For example, several carriers, especially among express services and LTLs, say that the climate of speed created by online ordering is prompting a lot of shippers to expect deliveries on time within a certain hour, instead of within a day or two as before. Because of the interactivity of online ordering, also, more and more companies are taking advantage of JIT or similar inventory strategies and requiring higher and higher percentages of on-time safe deliveries.
At the same time, many companies, especially the express services, are finding their resources strained by having to balance the very different requirements of consumer deliveries, which are increasing at a rapid rate due to an explosion of online ordering--and using more and more of the carriers' resources--and business/manufacturing deliveries, which often involve larger shipments but more accuracy of delivery time.
The match game: underwhelming results
Matching cargo and truck space sounds like a natural for the Internet, and indeed, the National Transportation Exchange is dedicated to getting shippers and carriers together via the Web. The company has been in existence since 1996 and is trying to get enough participants involved to make it a success. At present, it is one of the only ways shippers with "orphan" shipments to cope with can find carriers willing to take the cargoes cost-effectively.
As logical as the service sounds, in the unaccountable way Web businesses have shown since the beginning of the Internet revolution, it has not taken off. One reason may be that shippers are leery of any type of "auctioned" shipping, where they do not have control over the quality of the carrier. Also, most shippers want to have a clearly established policy for dealing with claims and other insurance issues.
One major user that has signed on with this service, Menlo Logistics (a subsidiary of CNF), does not care to comment at this point on how well the company has served its needs--a sign that it may not be meeting expectations. Other users, such as a rail car manufacturer in Illinois, are reticent as well about the success of their experience.
However, with the increase in online ordering from suppliers, interest in this type of service may also increase, since its greatest strength is in transporting one-shot (no long-term contract) less-than-truckload cargoes. As companies experiment with the business-to-business e-commerce solutions that can involve fairly sophisticated bidding among suppliers, it is entirely possible that some of the long-term contracts with both suppliers and carriers will become a thing of the past, thus paving the way for less formal relationships like cargo "dating services."
Not new, but still news: Y2K
Even the most diligent of companies, having taken care of its own internal Y2K problems well before the deadline, may still face serious problems if it does any overseas trade at all, or even depends on companies that do. The reason: Internet linkages between countries may well collapse on January 1st as a result of other nations' lack of resources to eliminate the bug in time.
Among the most likely sectors to be hit are shipping, customs, and air transport. According to Jacqueline Williams-Bridgers of the U.S. State Department, there will be Y2K problems in "virtually every sector of the globe."
China is likely to be very hard hit, in large part because most of its software is pirated, so vendors are not about to provide any fixes. Also, its technical resources are strained and the costs in time and money to get all systems ready are beyond its capabilities. The Suez Canal is another area that may well find its operations disrupted or shut down altogether, as is the Panama Canal. And Eastern Europe and the Soviet Union may face massive energy crises as a result of nuclear power shut-downs, which will necessarily affect every aspect of their economies.
Even within the U.S., customs and air traffic control may not be ready in time. No matter how ready every other link in the supply chain is (including the importer, the exporter, the forwarder, and the carrier), if customs experiences massive bottlenecks, shipments will be seriously affected.
Microsoft launches e-commerce effort
In case there was any doubt that business-to-business e-commerce is here to stay, the beginning of March saw Microsoft's announcement that it plans to make a major entry into the market with new products and services geared toward doing business on the Internet.
Microsoft has often, in the past, waited to see if a new technology or system was going to take off, and then entered the arena with its marketing behemoth to grab a huge chunk of market share. The company's plan focuses on a new product called BizTalk, which combines features of a computer language with those of an Internet server program to allow different companies, using different software, to integrate seamlessly.
Industry analysts cite inter-organizational connectivity as the next frontier for making optimum use of the Internet within the purchasing and logistics functions, so having a language that will allow different platforms to communicate effortlessly would go a long way toward fostering that next step.
Despite Microsoft's ongoing legal problems with the Justice Department, this new business focus will most likely remain an important development. One eventuality some legal analysts are predicting is that Microsoft will break up into smaller units or "Baby Bills," to keep from violating antitrust laws. Even if that happens, the most likely way for the company to be divided will include a company focusing on Internet/e-commerce; in fact, the recommendation of the Software and Information Industry Association is that the company be divided into three units covering operating systems, software, and Internet applications.
Bill Gates, Microsoft's CEO, says he hopes to help a million businesses set up shop on the Internet over the next few years. The company has been buying up companies that can help it develop a one-stop marketplace on the Web and has announced an alliance with MasterCard and Clarus Corp. to market an integrated system for online business-to-business purchasing.
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