Note to readers. A more updated version of this article will be kept here…
What Happened to the Technology Initiated Freight Revolution?
Lets take a walk down memory lane back to 1998-1999. i2 Technologies was the number one supply chain vendor and their management had seen fit to come out with a new concept based upon information sharing and the web called TradeMatrix. To explain all of what TradeMatrix was would take more than one article, however the basic concept was that i2 was going to create a number of marketplaces where supply chain information was to be exchanged, allowing a more integrated system of supply chain management to result. i2 introduced FreightMatrix, which was directed towards the transportation, warehousing and third party logistics areas of the supply chain. Of all the TradeMatrixes, FreightMatrix is one of the few to survive, and its website can be found at http://www.freightmatrix.com.
What you will notice about the site is although it talks a lot about advanced supply chain topics and software as a service, the site is nothing more than brochureware, and had no way to open an account or experience the service offering. Once you begin to look under the surface, it is simply a front end for i2′s legacy transportation management product called TM, along with probably a few other products that add minimal functionality. The problem with i2′s vision of TradeMatrix in general and FreightMatrix is they, as with all the major supply chain vendors, never really got the web. Their approach was to simply use the web to entice customers to sign on for the same old corporate software model. Anyone who doubts this, simply head over the Amazon.com and see how easy it is for anyone to open a fulfillment account and begin experiencing the Amazon servicing immediately. The entire implementation of these marketplaces was so ineptly done, with so many self styled ‘visionary” directors fighting with one another, that it seriously degraded i2′s position as a though leader — a position it had rightly earned for its previous work on factory and supply chain planning.
Tendering in SAP SCM
SAP’s TPVS – transportation planning and vehicle scheduling has functionality that supports freight tendering, however, it simply interacts individually with different carriers allowing them to respond, and is not a marketplace offering.
To read more about TPVS see this post
The transportation tendering functionality is not broadly used, at least one reason being that setting up these one to one integrations is expensive and time-consuming. It is also discriminates against smaller transportation providers who may not be able to invest in the systems that the larger carriers can afford to due to their scale economies. This effectively reduces the choice of providers available to the transportation customer. This is part of a broader problem with enterprise software in that it does not allow for incremental pricing, so smaller users are priced out of the market. This is one of the reasons we beat the drum on this blog for vendors to release truly web enabled solutions that have incremental pricing.
The Need for Tendering Marketplaces
The need for marketplaces is real. However, instead of being implemented as a closed system as proposed by i2, the marketplaces need to be open and allow a variety of buyers and sellers to participate. FreightTender is one such company / site. Below the screenshot shows how easy it is to sign up. We created a dummy account ourselves.
It is easy to see the freight advertisements.
What became apparent immediately is how few listings there were. FreightTender’s website is easy to use and well done, so why the lack of volume? We also did a search for freight tending software, and did not find very many companies offering this software. So the question we have is “why not?” This is an obvious excellent use of information technology, yet the industry is not caught on to the idea.
For medium to higher volume shippers, MercuryGate is the leader in providing independent integrated TMS and freight tendering.
A Higher Volume Solution
A website that is not integrated into the tendering system may be effective for small freight volumes, but it not going to the efficient for large volumes. For this we contacted the leader in integrated freight management systems with freight tendering. This company is called MercuryGate. They sit at the crossroads of shippers, brokers and 3PLs, and their transportation management solution is already connected to their freight tendering system which has large number of transportation companies already integrated to the system. This allows a new customer to be brought up and integrated with the carrier systems in a just a few weeks from the initial request to add the shipper to the system. Moving to a system like this allows for far less manual intervention in the process of putting freight out to bid. This allows a tender to be sent to a very large number of carriers, and this is a move to process orders electronically. Furthermore, this adds transparency to the transportation system. Carriers have fought this because they think it will reduce their profits. However, transportation has been lacking transparency for decades, and still has very low margins, thus it can not be transparency that is causing the low margins. Furthermore, transparency, combined with metrics regarding transportation quality allows for shippers to compare carriers on a wide variety of characteristics, price is only one.
The Carrier Dedicated Solution
Another way that carriers fit into this solution, a number of them offer integrated TMS and freight tendering systems that are branded and essentially sold as part of the transportation services relationship with a shipper. One example of these is Yellow Meridian IQ. However, Yellow is not a software company, so they essentially offer this service by taking the software from a software company called Meridian IQ and branding it Yellow, and then only connecting it to the Yellow system.
The problems with this approach should be fairly obvious. If a shipper has multiple carriers, then they must login to multiple systems. Secondly, having a dedicated system to just one carrier, promotes using more of that carrier’s services simply as matter of convenience. This is moving against transparency and is obviously an attempt to locking a shipper to a particular carrier. Over the past several decades, the Sherman Anti Trust legislations, which the vast majority of Americans do not understand, have come to no longer be enforced. Thus arrangements like this, as well as anti-competitive agreements in cellular service have also been allowed to flourish. Suffice to say, our view is that the TMS solution should be carrier independent, and we would not be particularly interested in having a dedicated carrier TMS-freight tendering system in our transportation department.
In addition to MeridianIQ, Yellow, as other carriers, have a nice rate searching, tracking, and many other shipment functions on their website. Below we have performed a search.
One the next page we receive the rate response.
However, while this is good for evaluating individual moves, clearly, an integrated TMS-freight tendering solution is desirable for serious transportation volumes.
10 years after FreightMatrix was introduced by i2, we still don’t have freight marketplaces, and we don’t even have large freight tendering websites. However, we do appear to have an integrated TMS to freight tendering system with MercuryGate that is proven and implemented at a number of companies. We also have anti-competitive carrier dedicated solutions that work against carrier transparency and attempt to lock shippers into sending more freight their way, without competing for this freight. We can’t help but feel progress should be increasing more rapidly in this field. It is especially disappointing when juxtaposed against mountain of marketing literature and executive predictions and promises that were promoted in that decade period.