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Freight rides a mouse
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June 18, 1999: 10:31 a.m. ET
Internet is a carrier customer service tool, but niches offer some Net returns
By Staff Writer Allen Wastler
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NEW YORK (CNNfn) - Hulking freighters pounding through the waves, throbbing locomotives straining along a steel track, roaring 18-wheelers racing down the highway, screaming jet engines pushing 747s into the sky .... computer mouses clicking on Web sites?
Not exactly images that go together. Nevertheless, they are becoming connected.
As it is in other industries, the Internet is wheedling its way into the transportation business. From parcel delivery to plane tickets to shipping schedules, more and more transport companies are using the Web to their competitive advantage. Investors interested in picking winners in the transport section, analysts point out, should pay attention.
Customer service tool
"Most every company has a Web presence these days," said Doug Rockel, a transport analyst with ING Barings. "Primarily they are using it to trace and track freight."
Time-critical transportation and global supply chains have become common with manufacturers and retailers looking to minimize carrying and supply costs. In turn, those manufacturers and retailers demand that transportation companies be able to provide information about where a shipment is and its delivery schedule.
Boxes on ship or shore? Web connections let customers keep track of freight location.
The Internet provides a quick and easy way for transport companies to do that. Under the typical model, the transporter sets up a Web site that customers, using password and shipment numbers, can access to keep tabs on their freight.
"A fairly rapid evolution has taken place in transportation over the last few years with the adoption of the Internet," said Jim Winchester, an analyst with Lazard Freres in New York. "Really the focus is in inventory management and the management of cargo."
One company that has made particular strides is American President Lines, a unit of Singapore-based Neptune Orient Lines, Winchester pointed out. The shipping line has a Web operation that allows corporate traffic managers to customize delivery reports and manage their logistics by exception - making the abnormal shipment the one most closely followed.
"Logistics managers may have hundreds of shipments moving between various origin and destination points on a particular day, and they don't have the time sort through endless pages or screens of data looking for a single 'exceptional' shipment that could represent a special opportunity or problem," said Hans Hickler, vice president of customer service for APL, when the company announced the management-by-exception Web tool in May.
"They want to know ... 'Are any of our computer monitors from Rotterdam or Silicon Valley stuck in customs at Dubai?,'" Hickler said.
Such specialized tools put APL "at the top of the list" among shipping companies making good use of the Internet, said Winchester. "But Sea-Land Service (a unit of CSX Corp. (CSX)) and Maersk Line aren't far behind," he added.
That's because in transportation, as in other industries, competitors are quick to pick up on a successful application.
"Once it's out there on a Web site it gets picked up very quickly," observed Steve Lewins, transport analyst for Gruntal & Co. "Like ticketing over the Internet ... every airline is doing it, because it's a good way to sell tickets without having to pay commissions to a travel agent."
Southwest Airlines (LUV) is particularly noteworthy in the Internet area, said Lewins, who has a "buy" rating on its stock. "Southwest has everything from ticketing to applying for a job," Lewins said. Other airlines are close behind, he noted.
Parcel pitfalls
But there are pitfalls to going on the Web: It may increase your ability to sell, but it may also increase your costs. This is the case in parcel delivery companies, notably Federal Express. Delivering lots of residential packages can be expensive, Rockel pointed out, especially if your operation is geared more for high volume, business-to-business traffic.
"A lot of people think Federal Express is an Internet play -- it isn't," said Rockel. "They forget FedEx is a high-end transportation provider. The transport companies benefiting from the Web boom now are the Post Office and UPS, which are hard to invest in." United Parcel Service is privately held, and, of course, the Postal Service is a government-backed entity.
Federal Express will become more of an option as more luxury goods retailers jump into Web retailing, Rockel said. "If you order a paperback book, slower delivery time via the mail or UPS is fine. But if you've ordered a fur coat, then FedEx is more of an option," observed Rockel.
When will FedEx Internet traffic take flight?
In the meantime FedEx's parent, FDX Corp. (FDX), is attacking the Internet segment through another unit, RPS Inc. RPS has traditionally focused on the business-to-business small package market. But, in a nod to the rise of e-commerce, RPS this summer will begin a test delivery program in the Pittsburgh area aimed at businesses shipping to homes.
If the program is successful, FDX may end up with a unit dedicated to the Internet boom, leaving its main FedEx unit free to concentrate on its core, high-volume business-to-business traffic.
Riches in niches?
Other transport companies are capitalizing on the Web in similar ways. CNF Transportation (CNF), for example, has put its Emery Worldwide air freight under contract to the Post Office to move e-commerce-bolstered second-day delivery traffic on the East Coast. "This contract puts Emery in a prime position for more Post Office work," said Rockel, who has a "buy" on the stock.
U.S. Freightways (USFC) is using the Web in a different way. It has a reverse logistics unit called Processors Unlimited. The outfit specializes in picking up damaged, unsaleable, or unwarranted goods from manufacturers and retailers and subsequently finding buyers for the merchandise.
With the advent of the Web, the company now holds online auctions for the goods, making the process quicker and less costly.
Such specialized uses of the Internet will probably become more commonplace, analysts agree. But they caution that overall, the Internet is still primarily a way for companies to improve their customer service. The underlying mission is getting goods from Point A to Point B.
"As we look down the road four or five years from now we'll realize that the Internet is an important customer service enhancement for the transportation industry," said Winchester. "But 90 percent of the time the important thing is 'Did the ship get out of the dock on time?' and 'Did it get into the dock on time.' It's the same for truck or rail."
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