Interview with Logistic CEO (ICGE Co.)John Lanigan
by Demir Barlas, Line56.com
Monday, January 15, 2001
John Lanigan joined Logistics.com in March 2000. As CEO, he took the place of Logistics.com founder Dr. Yossi Sheffi, who left to continue his professorial duties at MIT. Prior to joining Logistics.com, Lanigan spent over 16 years at Schneider National, the largest truckload motor carrier group in North America, where he was COO. In this interview with Line56, he discusses how B2B e-commerce is slowly but surely revolutionizing transportation procurement.
Line56: How did Logistics.com come onto your radar?
Lanigan: Well, I happened to know [Logistics.com Founder] Dr. Yossi Sheffi fairly well. Snyder had done some things off and on with Yossi, and I’d bumped into him at intervals at various industry events and conferences. Yossi and I had known each other for a number of years.
Q: What does Logistics.com do?
A: We empower shippers and transport providers to buy, sell, manage and optimize their transportation needs via the Internet.
Q: How would you sum up the differences between transportation procurement and procurement in general?
A: The difference is that, in the transportation space, much of the supply of what’s called raw material, whether it be a truck and a driver or a plane or a ship, is somewhat of a perishable commodity. Truck drivers are governed by regulations of how long the driver can drive and those sorts of things, so it’s not as simple as placing an order for pencils and office supplies. There is a huge human factor in the service, so the planning that goes around the use of transportation assets and transportation people takes on a whole different dimension than it does for basic materials.
Q: How is Logistics.com building liquidity?
A: Although Logistics.com is only a year old, there’s 12 years of history behind it. Dr. Sheffi founded a predecessor company called Princeton Transportation Consulting Group back in 1988, and their original focus was on creating optimization and decision support software for trucking companies. The company was sold to SABRE, the American Airlines reservation company, in 1996. SABRE thought they wanted to branch out into broader logistics services other than just airlines. Unfortunately, a couple of the guys who sponsored the purchase of the company left SABRE, and Princeton, as a division of SABRE, did not grow dramatically. When ICG and Yossi teamed up last year to look at the logistics space, they determined that one of the best plays in the market was the logistics division at SABRE, which was the evolution of Yossi’s initial company. So they bought it.
Q: How do you compare with pure-play companies?
A: When I think about the concept of the pure-plays versus the other forms of third-party logistics companies, we’re like a ‘tweener, because we’ve got all this history of software development and a lot of history of installing software at client sites. This year we’ve evolved from the classic software model to the ASP model. A lot of the pure-plays in the logistics space are really focused on the buy-sell relationship. That’s an important part of what we do, but we also have a lot of optimization and decision support that we’ve converted to an ASP model. The breadth of our service offerings creates a lot of stickiness with our clients.
Q: What percentage of Logistics.com’s relationships are pre-existing ones?
A: I would say that eighty percent of the relationships that we get involved in are existing relationships. When we work with companies, such as Procter & Gamble and Walmart, the transport providers that are invited are incumbents in many cases.
Q: What is your strategy for growth?
A: We’ve established in the last four or five months a real go-to-market strategy from a sales perspective. We’ve aligned along two axes: a vertical market approach and a regional approach. In vertical markets, we’re focusing on retail, CPG, high-tech, and electronics. We also focus on industrial verticals, which is a catchall for other categories that we don’t have a lot of traction in yet. We have a regional sales organization that is focused on smaller players in the marketplace. Those vertical markets are targeted towards the Fortune 500.
Q: What are the unique challenges facing transportation providers in B2B e-commerce?
A: In many cases, transportation providers react to shipper initiatives. Every vendor follows what their clients want them to do, but sometimes vendors can get ahead of the stream as well and offer new ideas and services to their clients. I'll give you an example. 13 or 14 years ago Snyder National became the first national trucking company to deploy two-way satellite communications on all the trucks. That was kind of a revolutionary step that clients were not necessarily asking for, but Snyder took the leap that it was going to make a big impact on the marketplace by reducing inventories and improving communications between transport providers and clients. And it worked. So there are examples of transport providers being innovative. But clearly, in the whole Internet space, in the B2B environment, my sense is the transport providers have been sitting back and waiting for the cues of the shipper community.
Q: What is your market penetration among trucking companies?
A: We have tremendous market penetration in the trucking industry. Sixty of the one hundred largest trucking companies in the United States run their day-to-day operations with one or more of our optimization and decision support tools. We also have a couple of railroads that use one of our tools to help with their rail car management to determine which car gets assigned to which shipment. We also have 3000 transport providers connected to our shipper execution systems on a day-to-day basis. Our shipper execution systems basically help our shipper clients run their operations. It goes beyond procurement into the actual tendering of the shipment, and the tracking tracing, consolidation of shipments, and all those activities.
Q: How does legacy transportation procurement work and how do you improve it?
A: The way that many companies have procured transportation is by disk. They’d send disks to their invited transport providers with some business activity on it that requests individual rates for individual shipments (origin-destination pairs). For example, Boston-Los Angeles would be listed on a disk and the trucking company would be asked to provide a rate for that route. That’s very common today. They use basic Excel spreadsheets and Access databases – very rudimentary tools.
The process we use for strategic procurement has two phases. The first phase is working with the client to help them determine what they believe are the most important characteristics for transport providers within the framework of that particular bid. We offer them up to forty different attributes that they can assign values to and they can create the attributes themselves. We generally see things like price, historic service levels, technology capabilities, and a whole host of attributes that the client can choose and assign a weight to. For transport providers, we offer a free analysis tool and also we have offered free training to get them to think about how the shipper’s freight overlays on their network. The technology enables transport providers to analyze their lanes, their traffic, and eliminate waste miles. Then they can present rates and packages to their clients. We work on the other end too, with shippers, to make sure their business goals are met. For example, they might want no more than five transportation providers to handle sixty percent of their freight.
It’s not about price--it’s about cost. It’s about getting the trading partners to come together to recognize how they can impact each other in reducing the overall cost of the network. |
