When it comes to the Web portals they use, more and more companies today prefer private to public accommodations. Compaq Computer Corp. is no exception. The Houston-based computer manufacturer has begun using the Digital Transportation Marketplace technology from Logistics.com to construct its own exchange, where it solicits carrier bids and awards transportation contracts.

In the first six months, Compaq has saved several million dollars just by automating its ocean carrier bidding process. And that's just the beginning; the company has plans to include truckers and air and express carriers in its exchange.

Ranked 20th on the 2000 Fortune 500 list of the largest companies, Compaq makes and sells personal computers, Internet devices, servers, and storage systems in the United States and more than 200 foreign countries. Its sales revenue last year totaled $42.4 billion worldwide.

The company manufactures its products both in the United States and in Asia, Australia, Europe, and Latin America. For the domestic market, it typically imports low-end product from overseas, while making its high-end computers in the United States. Imported product arrives via both ocean and air.

In the United States, Compaq uses a network of five key warehouses, most of which are operated by third-party logistics providers. (It also runs a separate distribution organization to supply parts and services to existing customers.) The distribution centers ship product to retailers as well as direct to some customers, using truckload, less-than-truckload, and parcel carriers.

Last year, Compaq began looking at various options for improving its freight bidding and carrier selection processes. "The old way of preparing RFQs (requests for quotes) was paper and pencil and spreadsheet work," says Tom Day, director of global logistics services, "and it involved several rounds of bidding."

After examining proposals from more than 20 candidates, the company selected Logistics.com Inc. of Burlington, Mass., to upgrade its transportation procurement process. "Compaq investigated all available global procurement solutions and found Logistics.com offered the best and most comprehensive product solution suite," explains Day. "[It] also had people who were very well versed in the transportation market. And they were able to go global with us."

Logistics.com, like so many others, had launched itself last year as a public Internet auction site. But when it became obvious that carriers and shippers were shying away from load-matching exchanges, the company revamped its business model. Today, it provides the platform for private portals used by companies like Compaq to line up contracts with core carriers.

Compaq decided to adapt its bidding process to Logistics.com's procurement tool in phases, starting with ocean transportation this past October. Even that was a formidable task: Day reports that his company had to award bids on 515 lanes of ocean traffic, though it would award contracts for multiple shipping lanes to one carrier where it made sense.

First, the company developed a request for proposal with Logistics.com and sent it out electronically to l7 carriers. The e-mail message explained how to enter the requested information and return it electronically. "We set up the process so [the ocean carriers] could communicate back and forth with Logistics.com to ensure they were filling out the bids correctly," Day recalls.

By gathering information electronically, Compaq was able to obtain and process more information from the carriers than it had under the previous, manual system. Furthermore, the new process simplified the rate comparison task by consolidating accessorial and other charges into one linehaul rate. "We consolidated front-end, pickup, and back-end [charges]," Day reports. "It gives us better visibility of our freight [costs]. And it's a time savings for us when we do freight payment audits. We think we have one of the best structures in the industry right now for dealing with ocean freight."

After it received the carriers' responses to its initial request for proposal, Compaq evaluated 39 scenarios within a two-day period using Logistics.com's analytical software. "We were [looking for] the best-quality carrier," says Day, "not the lowest price."

This past March, Compaq awarded contracts for ocean freight transportation to five steamship lines. Because of the favorable rates it received, the computer maker expects to save 3 to 4 percent off last year's ocean freight bill, which totaled about $50 million.

Compaq hopes to realize similar savings when it applies the same bidding process later this summer to domestic motor carriers and to air shipping next year. "The next phase of the project is to use the system for domestic ground bids," says Day. "And if everything goes smoothly with the domestic ground bids, we will go to air."

Compaq believes that the private contracting mechanism could become even stronger if more shippers joined in "There could be a greater opportunity to leverage the industry and put more freight together," says Day. "There's a huge time savings in the evaluation of carriers. And you would end up with a better mix of carriers as far as capacity, technology issues, and quality of service."