Even the efficiency of logistics will be improved as net trading gains momentum. David Smith explains how it will work J ust one year ago you would never have thought of using the internet to manage your company's logistics and distribution. This year, most companies will at least consider it an option. Several online logistics services have been launched in the past 12 months aimed at improving the exchange of information between retailers, manufacturers and transport companies. No one in online logistics doubts that road transport can be made much more efficient. Some 30% of vehicles at any given time are running empty, increasing congestion and pollution. This affects the entire supply chain through rising costs and increased prices. By using up that spare capacity, online logistics marketplaces can bring economies of scale, cut down administration costs, and improve efficiencies. They provide greater communication and share real time information about loads, traffic and freight corridors. Information on what contracts are available at a given time makes it far easier to fill empty lorries. If a vehicle is sent from a Manchester based firm to drop off its load in Scotland, then a return load could mean the difference between profit and loss for that journey. Using normal channels, however, finding the right load can be like looking for a needle in a haystack and adds cost through additional administration and time. An online marketplace makes it easier to see what opportunities there are to fill that return journey or adding to empty backloads. Efficiencies are therefore achieved, with the administration costs of looking for new business negligible. For shippers, and carriers, the online marketplace will provide access to a much greater pool of business opportunities. For shippers this means a wider choice of carriers to more locations, and for carriers a much easier and cheaper source of finding new business. All these savings gained by using online exchanges will be shared when bidding for new business, so companies not using the net may soon find it difficult to compete. How will the process work? Simply put, shippers will place contracts on the internet for which distributors can then bid. Distributors can keep adjusting their bid until the shipper decides to close the deal. There is also the possibility of using private bid environments, where existing supplier networks are maintained and the exchange is simply used to improve communications. GlobalNetXchange and the other online marketplaces set up by the large supermarket groups and retailers are a similar service. Freight procurement online is a complementary or evolutionary step on from this. The different exchanges developing online solutions for different aspects of the supply chain will probably provide service through alliances to begin with. Eventually, however, joint ventures and acquisitions will become increasingly common as the industry consolidates down to one or two giants. Ultimately, the more shippers and carriers that register with the online marketplaces, the greater the business opportunities will become with access to European and global markets far easier. Emerging online market makers and leading business consultancies are already recognising the potential of tying up, through strategic alliances, the £2.5 trillion global marketplace for logistics. Companies like Arthur Andersen and PricewaterhouseCoopers have led the way in the US, while in Europe eLogistics has announced an alliance with KPMG Consulting. These alliances are a way of tying in emerging online logistics market makers with leading business consultants and their blue-chip clients ­ while at the same time sharing resources and expertise to develop better logistics services. Mike Clarke, a lecturer at Cranfield University and a respected authority on the internet and logistics, claims that this change will not happen completely for another five or 10 years because distribution companies are currently locked into contracts. But there will be a fundamental shift towards trading through particular industry platforms. He believes companies that get on board quickly and adapt to the changes will be at an undoubted advantage. Cap Gemini consultant Erik Van Dort puts it more bluntly. Speaking to a mixed audience of shippers and transport firms, Van Dort said: "More and more product is going to be traded on the web. Twenty per cent of shipping and warehousing will be arranged online by 2004. Are you going to wait to be asked whether you can do business this way?" n David Smith is eLogistics chief executive (fmcg) and former head of primary and secondary distribution at Tesco. {{MANAGEMENT FEATURE }}