Internet freight exchanges court ocean shippers
By Staff -- Logistics Management, 6/1/2000
They're popping up like prairie dogs on the first warm day of spring. "They" are online freight exchanges or auction sites-Internet marketplaces where shippers with freight that needs to be moved can find carriers with space to fill. But this brand new field is quickly becoming overcrowded, leaving shippers confused and service providers scrambling to differentiate themselves from proliferating competitors.
The concept behind these online services-using the power of the Internet to make it simpler, faster, and more efficient for shippers and carriers to negotiate deals-makes sense. Shippers can post information about their needs, including origin and destination, cargo characteristics, and service requirements. The online service provider acts as a conduit, making that information available to carriers, which then bid on that business.
Now, online marketplaces have found their way into the ocean shipping industry. Before the Ocean Shipping Reform Act of 1999 (OSRA) took effect last year, shippers had to negotiate contracts with ocean freight conferences rather than with individual carriers. OSRA opened the door to one-on-one negotiations-and therefore to online freight exchanges that focus on ocean freight, including GoCargo.com, NeoModal.com, and Tradiant. Others-such as Celarix, logistics.com, FreightQuote.com, nPassage, and CargoNow.com, to name just a few-include ocean shipping among their offerings.
Several exchanges have been able to attract the critical mass of participants that is required to make them viable. GoCargo.com, for example, recently announced that it had signed up about 6,000 members, including shippers, ocean carriers, and intermediaries. Most, though, are still trying to increase those numbers to a level that gives shippers a wide range of choices.
In order to succeed, online freight exchanges will need to convince shippers of the following: that they offer measurable savings and efficiencies, that their services are managed by experts who understand the maritime industry as well as technology, that they are trustworthy, and that they offer something unique that meets shippers' specific needs.
Online service providers say there's no question that they save shippers money by providing instant access to information that used to require days to gather and evaluate. Most of them stand up pretty well on the expertise front, too. Top brass at some were shippers, like Celarix President Evan Shumacher (formerly a logistics executive with Nike and StrideRite). Others came from the maritime industry, like Tradiant President and CEO John Urban, formerly a vice president at APL; GoCargo.com Vice President of Sales and Marketing Robert Magown, formerly with Cast North America; and NeoModal.com Chairman and CEO Richard Murphy, who was a Sea-Land Service vice president.
As for neutrality, the online marketplaces insist that their interest is simply in helping shippers and carriers share information. Exchange managers also say they are scrupulous about presenting information in a neutral fashion and maintaining a "hands off" position.
Providers of at least one service, though, believe that human intervention is necessary for shippers to get the full benefit of an online exchange. GoCargo.com recently opened a trading "floor" on Wall Street in New York City, where multilingual account managers are available around the clock to help shippers manage their shipments and financial transactions.
Internet-based freight marketplaces and auction sites are bound to permanently change the way shippers purchase ocean freight services, believes John Urban of Tradiant. That's because they're not just an information source, he says, they're a management tool. "This is really designed to manage carrier relations ... [Exchanges allow] shippers to better understand the carriers' strengths and make a better assessment. We're facilitating the negotiation of long- and near-term complex relationships."
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