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E-Commerce & Logistics
3PLs Positioned for E-Commerce Opportunities
The logistics industry is being redefined. Delivery of supply chain services is moving from the traditional arena of asset-based 3PLs which by virtue of their industry leadership often serve as LLPs into a playing field with virtually no boundaries. The expanded network of the Internet economy has created virtual marketplaces where anyone can plug and play in the logistics space.
E-marketplaces across every industry are competing with each other for critical mass as each ones value increases with the number of players that participate in that exchange. Buyer-led industry alliances in such industries as automobile, aerospace and retailing, are banding together to force suppliers to move transactions to their exchanges to generate costs savings. Supplier-led industry alliances in the paper, chemical and meat products industries are improving inefficiencies in their downstream interactions with buyers and resellers. Intermediaries a distributor, an association, or start-up found in industries fragmented on both the buy and sell sides are aggregating buyers and suppliers and slashing costs on both sides.
Regardless of type, it is certain that e-marketplaces that are able to expand their range of services will see the number of their participants increase. Therefore, their value is directly linked to their services, which are offered through various applications or enterprises.
Some industry analysts, however, say these offerings have been slow in developing. Stacie McCullough of Forrester Research says, The lack of software applications keeps todays marketplaces in commerce kindergarten, and that a new application architecture and a revamped vendor community that supports the full trading cycle is needed. Targeting transportation exchanges, she says these entities must incorporate a broader set of services if they are to thrive.
This has created opportunities not only for application developers and solution providers, but also for 3PLs who have the technology to integrate the applications and solutions that manage the demand chain. As the B2B marketplace evolves, 3PLs will take on a critical role in e-commerce by acting as an e-business broker or integrator not only for those suppliers who are sophisticated enough to demand e-commerce solutions, but also for those who have not made the technological investment.
The advantage provided by 3PLs who serve as e-brokers is that they not only possess the technology to network customers to the different marketplaces, but also the vertical industry depth to extract value from the demand chain. As 3PLs integrate applications, such as order management, payment processing, warehousing and TMS into the supply chain, they create an enterprise capable of providing the cornerstone of e-commerce logistics fulfillment.
Already we see alliances (e-commerce integrators) forming among data management providers (IBM) and industry consultants (Ernst & Young) and process service providers (Viacore) to provide customers a single point of integration into e-marketplaces. What in fact they offer are deep technology expertise, industry knowledge and partnership facilitation one-stop shopping for companies seeking to enter into the e-commerce arena without having to make a huge investment to keep their technology up to current standards.
In comparison to e-commerce integrators, 3PLs possess the same resources to provide suppliers and customers an e-business enterprise that manages the supply chain while providing connectivity to the e-marketplace. Many are already equipped with the enterprise application integration (middleware) to interface with legacy systems and e-marketplace applications, and nearly all possess the vertical industry knowledge by virtue of their existing relationships. As 3PLs aggregate those applications that manage the demand chain, i.e., order management, payment processing, warehousing, TMS and delivery, they boast an e-commerce platform that can provide e-solutions as effectively as any e-commerce integrator.
Add to the fact that logistics is considered the critical element in e-commerce, and 3PLs become even more important to the e-commerce equation.
Perhaps that is why some industry analysts have predicted that 3PLs will usher reluctant suppliers into the uncertain world of e-commerce. These analysts argue that suppliers will depend on their 3PL relationships to introduce them to the B2B process, as they will not want to leap into it overnight.
As the B2B e-business marketplace unfolds, technology savvy, industry-wise 3PLs will play a major role in its success.
Despite the claims of solution providers, e-commerce still has many hurdles to overcome, not the least being issues of interoperability. The success of any alliance or exchange will depend on the accessibility and interoperability of its applications with the myriad of legacy systems being employed by companies. While many solution providers claim their enterprise can provide interconnectivity, until there are standards, there will be a spaghetti of protocols. This is of primary significance, in light of the fact, as mentioned earlier, solution providers need critical mass to ensure the success of a marketplace. Thus without a standard application protocol, each solution provider must publish applications based on its own standards, thus creating an industry of fragmented protocols, or, as happened, a cottage industry is formed to design software to reduce the dependency on standards. Either way, the battle for e-marketplace supremacy will come down to who can gain the most customers, creating a de facto standard.
Presented with this vast new interconnectedness, solution providers have started creating networks in which companies can do business in real time in a vastly expanded marketplace. The benefits are great to those linked together: Greater leverage for buyers, greater leverage for suppliers, and expanded marketplaces for retailers.
The fight for dominance in the e-marketplace has attracted industry giants such as Oracle, IBM and Microsoft (which is rapidly shifting its core business strategy away from shrink-wrap software to Internet/network-based solutions ), as well as upstarts such as Ariba, Commerce-One, i2 and SAP. Strategic alliances have formed dividing competitors. For example, Ariba has formed an alliance with IBM and i2 as that group seeks to accelerate the adoption and benefits of its B2B e-commerce applications. This alliance stresses that it is committed to being strictly a tool provider for building marketplaces and those companies participating in them, unlike Commerce One, who forms strategic alliances with its customers and helps manage for a fee (percentage of each transaction) their online marketplaces. Its strategic partners include GM, British Telecom and Shell International.
Add to this the task of integrating adjunct services, such as CRM and supplier performance monitoring, and e-marketplaces become even competitive.
On the heels of its merger with TNT Post Group, N.V., CTI LOGISTX has an opportunity to parlay its momentum as the seventh largest logistics company in North America into strategic partnerships with B2B network builders as they seek to cobble together their offering of B2B services. Network builders are seeking corporate alliances in an effort to cover every niche of the B2B landscape. As reported by Forrester Research, one of the most critical areas for the success of e-commerce is logistics. Network builders will be seeking alliances with formidable logistics companies who have the technology and supply chain expertise to integrate their services and applications into their end-to-end B2B solutions.
Already, such are alliances are forming among network builders and logistic software companies in an effort to carve up the B2B marketplace. CTI LOGISTX, with its leading edge technology, supply chain management expertise and applications, is in a position to strike alliances with some of the branded network builders, such as Oracle, and leverage that exposure to gain increased stature within the North American Logistics landscape.
The advantage of striking an strategic partnership with one of the network builders, as opposed to one or several exchanges, is that the former plugs us into any exchange that it creates. It gives us greater penetration into the industry as a brand, not as an adjunct partner as in the case of striking a partnership with an exchange. And analysts predict there will be a shakeout among the exchanges, leaving but a few to thrive. A partnership with a network builder gives us immunity from having to make choices as to who will survive.
In addition, such an acknowledgement of leadership in the e-commerce space will promote CTI LOGISTX business development by attracting those companies which may not be technologically sophisticated enough to participate in the B2B marketplace or which are not capable of making the technological investment. These companies will need CTI LOGISTX to lead them into the B2B marketplace gradually, serving as their intermediary for obtaining the efficiencies offered by the B2B marketplace.
Whether we pursue an alliance with a network builder or choose to pursue an alliance with any of the emerging exchanges, we should leverage the power that is CTI LOGISTX to increase our brand in the marketplace.
Alliances and partnerships give us a position in the logistics marketplace to be more than an execution-based deliverer of logistics services. We need to create alliances with network providers, for example, companies such as Oracle and Lucent, to give us integration with these companies using our own platforms.