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|lew software delivery models offer new choices
O shippers in an optimized transportation world
By David Biederman
lia
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ered under the software-as-a-service umbrella
is evolving as next-generation hybrids and cloud
computing delivery models enter the marketplace.
Third-party logistics operators that pro-
vide trucking services are benefiting from new
hybrids and delivery models tbat enable shippers
to strike an ever-finer balance between tactical
and strategic control. For many, that means tbey
can keeping broader carrier management tools
in-bouse while leveraging tbrougb 3PLs tbe vast
new scale, advanced connectivity and scalability
of today's transportation management systems.
Tbe evolution of TMS is occurring as carri-
ers are retrenching in tbe wake of tbe recession
and sbedding logistics management services.
In 2010, Scbneider Logistics sold its freight for-
warding and custombouse brokerage business,
wbicb included seven sites in tbe U.S. and two in
Cbina. YRC Worldwide, tbe largest U.S. trucking
operator, recently sold most of its logistics unit to
a private equity investor.
www.ioc.com
F COMMERCE IS
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3PLS STAND TO BENEFIT
MARKETPLACE
AND THE RISING COSTS
AND SCALE OF DATA
ND TECHNOLOGY
EQUIREMENTS.
\
During the boom years leading up to
2007. many trucking companies started
brokerage businesses. Most have settled
into basic brokerage operations rather than
broader logistics operations that can include
carrier management and transportation
optimization.
Dallas-based Transplace works both
sides of the aisle, and Tom Sanderson, com-
pany president and CEO, knows managing
3PL and 4PL relationships is much more
technologically demanding than brokering
freight loads.
"More and more carriers will go down
the brokerage path when they understand
what being a 3PL involves," Sanderson said.
3PLs stand to benefit from a narrower
marketplace and the rising costs and scale
of data and technology requirements. TMS
data requirements are so massive and the
costs of purchasing and installing soft-
ware so high never mind consulting fees
and ongoing maintenance the installed
software model is waning, said Doug Wag-
goner, CEO of Chicago-based Echo Global
Logistics.
SaaS solves those problems with low
upfront costs, quick turnaround times, cus-
tom configuration and services on demand.
The market for TMS is so big Wag-
goner doesn't worry about the competition.
According to AMR Research, only about
.^8 percent of shippers now use TMS even
though users cut an average of 10 to 25 per-
cent from their annual freight costs in the
first six to 12 months of a TMS deployment.
"We find out what our clients want and
build it for them," Waggoner said.
The reality is, many choices have
emerged in the marketplace, said Jordan
Kass, executive director of TMC, a division
of C.H. Robinson Worldwide that manages
more than $1 billion of freight for about 30
global clients. Shippers now have access to
hybrid models for managingtransportation
that combine the best TMS functionality
with new SaaS delivery models and tech-
nologies for leveraging scale and providing
business intelligence.
C.H. Robinson's managed TMS was
designed to align the benefits of SaaS with
cloud computing scale.
Cloud computing-based SaaS deliv-
ery models aim to extend the global reach
of SaaS and broaden its scope. Managed
TMS falls squarely in the middle of the
spectrum of transportation management
services, with installed software at one
end and outsourcing to a 4PL at the other.
Shippers with limited technology resources
who aren't ready to cede control of carrier
relationships to 3PLs can keep their carrier
management program in-house while utiliz-
ing SasS technology for other transportation
management functions.
Supporting the technology are dedicated
teams of engineers who provide fast start-up
times and ongoing expert support. "We see
managed TMS as addressinga gap that previ-
ously existed in the marketplace," Kass said.
New business intelligence tools include
"in memory" technology for instant enter-
prise-level data analysis. Because data does
not have to be pre-aggregated, users can ana-
lyze huge volumes of data on a transactional
level and support evolvinggoals and metrics.
Persistent filtering flipping data for
analysis from multiple angles in relation
to numerous other factors occurs almost
instantaneously on an enterprise-wide level.
It's an example of the capabilities provided
by the new TMS business analytics, said
Ryan Pettit. director of technology strategy
for C.H. Robinson.
The C.H. Robinson cloud houses a vast
data infrastructure that includes data from
more than 30.000 global trading partners. It
handles about 9 million trade messages per
month. New technologies exist there that
have only recently entered the TMS lexicon,
including highly available storage area net-
works, internal logshipping, standby servers
and server virtualization.
Virtual snapshots of the entire infrastrLic-
ture are sent to the company's disaster recovery
center in Chicago. In the event ofacata.strophic
failure at the data center, the entire infrastruc-
ture can be restarted in a few hours.
Carrier portals have evolved signifi-
16 THE lOURNAL OF COMMERCE www.joc.com
APRIL 4.2011
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By David Biederman
GREENING UP
Trucking companies, 3PLs boost investment in technology
to reduce emissions and improve fuel efficiency
HOURS-OF-SERVICE RESTRICTIONS AND CSA 2010 aren't the only issues motor carriers are
dealing wi th. Trucking companies and 3PLs wi l l ramp up investment in technologies to comply
with green mandates and sustainability initiatives.
"It's our view the green transportation initiative and discussion is not going away, and wi l l
only gain momentum as we move into the future," George Macko, transportation services man-
ager for USG, told Thej ournal of Commerce's 3rd Annual Shippers Roundtable in January.
Last year, the Obama administration directed the Environmental Protection Agency and the
Department of Transportation to set a plan to reduce greenhouse gas emissions from medium- and
heavy-duty trucks for model years 2014 to 2018. According to the EPA, the new regulations would
save the trucking industry about 500 million barrels of oil over the life of vehicles made during
those years, and reduce greenhouse gas emissions by nearly 250 million metric tons.
Green trucks and clean engines are just the beginning. The nation's largest trucking com-
panies are investing in other technologies to reduce carbon emissions, including sophisticated
electronic devices for monitoring tractor engine computers to measure fuel efficiency, software
for fuel-efficient route planning, devices that automatically switch off idling engines, using only
ultra-low-sulfur diesel at in-house fueling stations, auxiliary power units to reduce idling time,
and increased use of paperless solutions such as electronic bill payment.
The best way to reduce carbon emissions is to improve miles per gallon, said Steve Gra-
ham, vice president of line-haul purchasing for Schneider National, the nation's second-largest
truckload carrier.
Schneider has approximately 12,500 trucks in its fleet, including its independent contrac-
tors. The company's sustainability efforts include ongoing investment in low-emission engines
to reduce particulate matter and nitrogen oxide. Emissions by the company's measure have
declined more than 80 percent since 1988.
In-cab heaters to reduce cold climate idling have been standard on Schneider trucks since
2003, resulting in an annual emissions savings of 3,332 tons of nitrogen oxide. In 2004,
Schneider became a charter member and the first truckload and intermodal carrier to join the
EPA's SmartWay Transport Partnership.
All Schneider trucks are equipped with diesel-powered furnaces that consume one-tenth of
what diesel engines consume while idle. Drivers are offered bonuses for using the devices. Air
conditioning units still require internal combustion engines for power.
Schneider is looking to battery-powered solutions rather than gas- or diesel-powered genera-
tors to run AC compressors when trucks aren't running, Graham said.
Truck speed is a major factor in carbon emissions. Schneider has financially incentivized its
drivers to do what it asks in terms of adhering to mandated speed limits.
Schneider has a team of engineers that twice a year test new equipment using a method
developed by the Society of Automobile Engineers for reducing carbon emissions. The proce-
dure, known as J1321, involves a control vehicle and a test vehicle that use identical engines,
tractors, trailers and cargo. The test vehicle is equipped wi th the technology being measured
for fuel efficiency.
SmartWay adopted a modified version of J1321 testing that sets limits for wind speed, temper-
ature, track layout, altitude, precipitation and other variables. It is now the basis for aerodynamic
devices to qualify as U.S. EPA Verified Technologies.
The entire Schneider fleet wi l l be outfitted this year with wheel covers and trailer skirts, both
of which have been through the rigorous SAE testing. |oc
Contact David Biedernnon at inexdb@comcast.net.
cantly from as recently as 2007, when their
primary function was to find brokerage
freight and manage tenders. Today's por-
tals increasingly are used for document
exchanges and management of freight pay-
ment and transactional records.
"We support the entire life cycle of
shipments with tools delivered through the
cloud, which has facilitated tighter integra-
tion and allows us to harness the power of
scale," Pettit said. "We do this for all modes."
Truck transportation accounted
for three-quarters of C.H. Rohinson's
$290.5 million net revenue in the fourth
quarter of 2010, up 16.2 percent in the
quarter and 3.4 percent for the year.
Still, skepticism over tight alignment
with single-provider technology has shippcM's
looking for other entry points to the henefits.
C'arriers and shippers are integrating more
closely through portals as they overcome
their initial reluctance to sharingdata online.
"If you think back to late 1990s, there was
incredible reluctance and concern over shar-
i ligdata over the Internct," Kass said.
Shippers are more likely to share data if
it produces results, such as exceptions being
nagged, routed and managed and processes
improved continually.
"If you do not have strong processes,
TMS becomes a receptacle of meaningless
information," Kass said.
Taking the concept further are compa-
nies such as Descartes, a Canadian provider
ofglobal supply chain management services
that has developed a cloud coniputingmodel
for delivering TMS.
The new model takes Web-based
connectivity between trading partners
to process-level collaboration through
multi-enterprise husiness process plat-
lorms, said Frank Hamerlinck, executive
\ ice president, research and development
at Descartes. The cornerstone is the Des-
cartes Federated Global Logistics Network,
which includes more than 3.S,000 compa-
nies, including transportation carriers,
.iPLs, non-vessel-operating common carri-
ers, freight forwarders and motor carriers,
as well as manufacturers, distributors and
ictailers.
The Descartes model represents an evo-
lution in delivery of software-as-a-service.
The first enterprise .systems were enterprise-
centric and internally focused, with little
external connectivity. The next phase saw
cautious integration between shippers, carri-
18 THE lOURNAL OF COMMERCE www.joc.com
APRIL 4.2011
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ers and suppliers for limited data excbanges.
Tbat was followed by hosted software that
provided operational cost reductions by using
standard applications in a sbared model.
New delivery models for supply cbain
execution feature expanded configura-
tive and customization capabilities and
improved scalability and collaborative func-
tionality. Tbis is made possible tbrougb a
process Hamerlinck calls SODA, for Service
Oriented Development of Applications. It
allows companies to leverage cloud comput-
ing for global connectivity and to reuse and
sbare data for a bo.st of service, operational
and cost improvements.
Tbe SODA process is in keeping witb
Descartes' collaborative vision of supply
cbain strategy and execution technology
tbat is service-driven ratber tban driven by
a traditional developmental approacb. "It is
more like composing ratber tban developing
an application," Hamerlinck said.
To support sucb complex multiparty
processes wbicb involves more than
35,000 global trading partners and regu-
latory agencies Descartes leverages
Microsoft cloud-based capabilities tbat
enable companies in tbe vast federated
network to process billions of transactions
annually and easily con nect and collaborate
witb eacb otber.
"By using SODA, logistics-intensive
organizations bave an unprecedented
opportunity to bring incredible agility to
integrated business processes as application
ebanges can be quickly and easily integrated
as needs arise," Hamerlinck said.
Tbe model bas strong potential in truck-
ing, wbere SaaS and online carrier portals
are widely used. SaaS models allow smaller
carriers tbe same level of integration as
larger carriers, opening up business oppor-
tunities. Rate management, freigbt audit,
delivery management, routingand scbedul-
ing and otber services are available as SaaS
modules, Hamerlinck said.
Transplace offers a Web-based propri-
etary, on-demand TMS tbat allows sbippers
and carriers to collaborate on transportation
logistics strategy, planning and execution
tbrougb a wide range of transportation
management services.
Tbe tecbnology can be customized, is
bigbly scalable and is upgraded montbly,
giving carriers and sbippers tbe benefits of
added functionality witb no added costs.
THE ISSUE OF data ownership is an obstacle to broader acceptance of cloud-based collabora-
tive TMS models.
Paradoxically, it is the sheer volume of data that gives cloud computing-based TMS ts advan-
tages, including lower costs through scale and the availability of data elements for reuse across a
variety of applications. For example, route planning, importing or security filings share common
data that can be applied without having to add keystrokes, increasing operational efficiency.
Frank Hamerlinck of Descartes said the technology provider is exploring the development of
proprietary areas for users, a form of which are used on social networking sites, so that security
and ownership reside with customer.
"We would like to introduce a similar concept on our platform where customers can deter-
mine what they are willing to share with their trading partners," he said.
Transplace bas a data center in Dallas
tbat bouses its hardware processing power
for driving its TMS application. It isn't a
cloud-ba.sed computing model, wbicb taps
into unused computer cycles on otber peo-
ple's bardware. Sanderson doesn't see tbe
benefits oftbat model for Transplace.
"Hardware is relatively inexpensive,
and we like baving complete control over
our processing cycles," be said.
Carrier portals are a boon to smaller carri-
ers in tbe fragmented truekload industry, wbere
access to a TMS brings tbem tbe connectivity
and networking scale of tbeir bigger peers. In
tbe bigbly concentrated LTL sector. Transplace
bad direct EDI links witb most carriers.
Sanderson believes SaaS delivery models
will evolve, facilitating deeper collaboration
between sbippers and carriers. "It makes no
sense to buy and install TMS software," be
said. "SaaS is cbeaper, just as good and mucb
faster to implement."
Ecbo Logistics' FlexTMS is delivered as
SaaS via a self-service cloud-ba.sed model tbat
gives sbippers advanced functionality witb-
out tbe large capital investment necessary to
acquire and implement tbeir own software.
For Ecbo Global Logistics, tbe cloud
label means tbe 3PL bas its own data center,
routers, .servers and backup. "All tbe tilings
tbat a data center bas we make available
tbrougb tbe Internet," Waggoner said.
Small to midsize sbippers are more likely
to seek single-source solutions for transporta-
tion management, but bigger sbippers usually
opt for some services wb He keepi iig otbers in-
bouse. Many want to retain tbeir carriers, but
want access to Ecbo's tecbnology.
"Bigsbippers can manage tbeir own car-
riers," Waggoner said, "but we can improve
tbe program witb our data, market knowl-
edge, scale and buying power." loc
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Contact David Biederman at inexdb@comcast.net.
22 THE lOURNAL OF COMMERCE www.joc.com APRIL 4.2011
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