National Transportation Exchange: A Case Study
The National Transportation Exchange (NTE) is a business-to-business, eCommerce solution.The portal provides a neutral marketplace for buyers andsellers of ground transportation. The Exchange is the onlycomprehensive, "real-time" trading exchange in thetransportation industry. Buyers and sellers interactivelytrade ground transportation capacity, at a market-drivenprice, in a neutral exchange. Much like a stock market, themarket-driven price is based on the dynamic elements of time,distance and shipment type. The Exchange provides a set ofprocesses, technology interfaces, and membership requirementsthat permit complete execution processing. This includesshipment tracking, guaranteed payment and quality oftransportation service. The result is that members trade withconfidence and reliability.
The National Transportation Exchange is a business-to-business (B2B), e-commercemember-based trading exchange for shippers and carriers. NTEoperates a dynamic, rule-based optimization exchange used byshippers, third party logistics providers, freight forwardersand other intermediaries. Using the Internet, NTE's Exchangeis designed to seamlessly link all trading partners in asupply chain to optimize and automate the execution of tradesbetween shippers and carriers. At this time, there are over500 industry users-members represented by shippers,consignees, contract and dedicated logistics companies,forwarders, brokers and truckload carriers.
NTE executes collaborativeinformation sharing between transportation supply chainmembers, and creates a transportation trading market place byconsidering the dynamic elements of shipment time, size,distance, routing, service levels, transport availability andmarket pricing.top of page
NTE is committed to thelong-term growth of the exchange. In the months ahead NTEanticipates the use of the exchange for new types of freightand different transportation modes beyond the current use oftruck transport. The exchange also looks to expand into othermarkets beyond the US, with the next focus being on Canadaand the global marketplace. NTE will continue to operate andfocus across all industry segments.
NTE considers its major assetsto be their use of advanced technology, a "firstmover" advantage and a very strong management team:
- NTE considers themselves at least two years ahead of their competitors with regard to technology. They are now utilizing the fourth generation of their application which puts them at a considerable advantage over newer participants in the marketplace.
- NTE was also the first player in the transportation portal marketplace, which gives them a great competitive advantage.
- NTE has recently re-focused the company with an entirely new executive team. This new team provides a wide variety of work experiences including concentrations on transaction processing, financial management and customer management.
NTE also uses partnerships andalliances as part of their overall business strategy. Theycurrently have partnerships with Manugistics and mySAP.com toprovide integration and access to their clients withautomatic access to the NTE Internet trading community thatextends optimization beyond the enterprise. Shippers andtheir trading partners can gain visibility and improvedservice for all shipments by leveraging the dynamics of thetransportation industry.
With the integration of NTE,Manugistics and mySAP.com clients can optimize freightmovement with existing trade partners with the added featureof using the trading exchange for real-time pooling ofless-than-truck-load orders. The Exchange can find thebest-priced alternative that meets service parameters by theshipper - optimizing customer service and cost. This virtualtransportation optimization can facilitate dynamic supplychain communities- the coming together of trading partnersfor in-the-moment decision making and optimization across theextended e-chain.
NTE is also negotiatingpartnerships and alliances with other companies which havenot been publicly released to date.top of page
NTE provides a marketplace,through a web portal, where buyers and sellers can exchangeempty carrier space, specifically in 'less-than-truckload' (LTL) to full truckload sizeshipments. Although the current focus is on dry palletizedfreight, other types of freight are in pilot and will beadded as full services soon. The seller benefits byutilization of capacity, driver retention, and additionalprofits. The buyer benefits by purchasing transportationservices at a higher quality service, compliance management,visibility, and direct level of service at a lower cost.
The true results of NTE'sservices can be found in their operating statistics. Theaverage shipment placed on The Exchange which matches with anavailable Carrier's capacity is committed for shipment(trades) within 3 hours of being posted on The Exchange.Shippers see immediate cost and productivity improvements andCarriers realize improved utilization and increase theirearnings.top of page
NTE has recently completedtheir fourth round of private equity financing of $53 million. Interestingly, NTE turned down other substantialoffers. There is a lot of backing available for this type ofbusiness. Also a major courier company has a minorityinterest in the company.top of page
NTE has a customer base, whichincludes both shippers and carriers. Both customer bases haveseen substantial benefits from their use of the NTE exchange.Benefits cited by shippers include:
- compliance control
- detailed reporting on delivery loss, damages, etc.
- guaranteed capacity
- substantial savings on soft administrative cost (time spent loading trucks to capacity, etc.)
- "one cheque to cover all transport costs"
Benefits for carriers areprimarily profit; drivers always carry full loads on trucks.Other significant benefits to carriers are:
- driver retention — because full loads for drivers are more profitable, the drivers get paid more and therefore stay with a trucking company longer.
- product is guaranteed to be ready to ship when the carrier arrives
- some profit sharing has been arranged with dispatchers
- carrier visibility
The value provided to NTEcustomers is the capability to efficiently visualize thewhole supply chain while inventory is in motion, allowingreal-time decision making and decision execution, andensuring compliance of terms between trading partners.top of page
NTE experienced manychallenges during the start up of their company. A majorchallenge which is faced by anyone initiating an exchangesuch as theirs is the "noise" that is currently inthe marketplace. There is currently a lot of activity ine-business and the biggest challenge is to get your productnoticed and differentiated from other offerings. Branding isa major issue in the set up of any e-business. There are somevery major players in the business, such as E-Trade whichspent US$250 million on advertising in the past year. It isvery difficult for a new company with no brand to create abrand quickly given the marketplace today without substantialfinancial backing in order to position itself.
As in any business start up,NTE experienced some roadblocks and headaches which othercompanies can learn from:
- NTE was too sophisticated for the market when it began. The vision was created in 1994 and the exchange was operational by December 1998. At this time most people were not familiar with the internet for much more than Email let alone e-commerce. Make sure you fully understand your markets and their willingness to change before you start.
- NTE suggests that new e-business companies build relationships within their industry to help differentiate themselves from their competitors. NTE also suggests that e-business companies fully utilize their websites as an information channel.
One final word of advice fromNTE: be prepared for how fast this marketplace moves. Settingup an e-business is a big commitment and anyone who isventuring into this field must be aware that you can'tjust "play" in this business, you must be preparedto "jump right in and do this".
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