FRAMINGHAM (01/28/2000) - A new online service is emerging: transportation exchanges that let companies use the Web to automate logistics operations such as arranging product shipments to buyers both in the U.S. and overseas.
Several exchanges have opened since the middle of last year. They're now starting to be put to the test by online retailers and other companies that want to reduce the complexity of doing business with customers outside the U.S.
For example, Hybrid Liquidation LLC in Berlin, Md., which auctions surplus goods for companies via its Web site (www.liquidation.com), last month began using a transportation exchange operated by iLink Global Inc. in Glen Ellyn, Ill., to arrange shipments between its buyers and sellers.
Logistics "is kind of the Achilles' heel of the business-to-business arena," said Billy Burke, president of Hybrid Liquidation. The auction site initially left shipping arrangements to individual buyers and sellers, but that resulted in "frustrated customers and uncompleted deals," he said.
Now, the site's customers can use iLink Global's online exchange to calculate overseas shipping costs and hire and pay the freight carriers that handle the shipments. A transaction fee is added to the shipping bills by iLink Global, but Burke said Hybrid Liquidation doesn't pay anything to connect to the exchange.
Other companies that have set up similar transportation exchanges include Celarix Inc. in Boston, E-Transport Inc. in Pittsburgh and nPassage Inc. in Seattle. Burlington Northern Santa Fe Corp., a railroad in Fort Worth, Texas, last week said it is developing another exchange with Manugistics Group Inc. in Rockville, Md.
The emergence of the exchanges parallels the development of new software that's supposed to calculate the full cost of shipping products to foreign buyers once tariffs and customs duties are added to the bill. The big package carriers are teaming up with different vendors to provide the software to their corporate customers.
John Fontanella, an analyst at AMR Research Inc. in Boston, said he expects most of the transportation exchanges to add more advanced costing and price-quoting engines during the second half of this year.
For now, many exchanges are "wide in scope, but thin in functionality," Fontanella said. The deals they can handle often are limited to one-time shipments instead of longer-term contracts, he added.
And the amount of business the exchanges are managing remains limited. For example, iLink Global has only one other live user: Gavelnet.com, a San Francisco-based company that auctions artwork and other collectibles.
After some start-up kinks, the exchange is working smoothly, said Gavelnet.com CEO George Noceti. But the number of transactions the company processes monthly is only in the hundreds now, he added.
Hybrid Liquidation is still working to set up a direct link from its Web site to the iLink Global exchange. Customers currently contact the exchange via e-mail and then wait 15 to 20 minutes to get a response, Burke said. The wait should be reduced to less than two minutes when the Web link goes live next month, he said.