TALE OF TWO DOT-COMS

TALE OF TWO DOT-COMS

The divergent trajectories of two well-known names in the local dot-com universe -- GoCargo and Logistics.com -- helps explain a lot about where this sector is headed. Surprisingly the picture is not all doom and gloom, as trends in the broader dot-com economy might suggest. But the rules of the game and the players are changing, and the services are evolving in ways that will eventually provide substantial cost-savings to shippers.

GoCargo was among the first dot-coms to base its business model on the public auction for freight services. During 2000 when competitors such as eRateRequest and Celarix marketplace were being shut down or sold as glaring weaknesses in the freight auction concept became apparent, GoCargo didn't waver. It seemed to internalize its own advertising motto, 'Bidding is Believing.'But as Helen Atkinson reports on Page 26 in a story well worth reading, reality has caught up with GoCargo. The company claims it was able to eliminate its human intermediaries -- a 40taff reduction -- because experienced GoCargo users can complete an auction on their own. But some users say without the intermediaries the service won't be worth using. GoCargo says it's now developing an online service to support negotiation and management of long-term ocean carrier contracts, to be rolled out in May.

GoCargo is late to that party, which is already populated by a number of well-established firms, including one -- GT Nexus -- that has the backing of a large segment of the ocean carrier industry. GoCargo can't be counted out because of its widespread name recognition and the determination of its kinetic founder and president, Eyal Goldwerger. But changing course this far into the game will be a tricky task for the New York firm.

Logistics.com is a different story. About 950f its business is full truckload domestic, so that puts it in a different market than the internationally focused GoCargo though some of its business is Asian import cargo transloaded at warehouses near seaports. Both firms set out with the premise of saving money for shippers.

GoCargo's solution was the open market, but as it discovered, shippers are uncomfortable using a carrier they don't know or trust. Logistics.com takes a different approach. Its customers are shippers who want to put all or a portion of their domestic freight out to bid by truckers. In most cases Logistics.com has told the shipper that the rates they're paying are too high. Logistics.com knows that because they've plugged the clients' rates into their database of all their customers' rates and routes and done a quick comparison. '90% are spending too much,' said John Lanigan, chief executive.

The key to Logistics.com's system isn't that the bidding is open to any trucker who wants to bid; the client invites the carriers it wants to participate. It's the opportunity carriers have to bid on multiple-lane business, and thereby price their services based on the opportunity to generate backhaul cargo. Prior to this point, Lanigan said, truckers have largely bid based on single-lane business. 'What we're encouraging carriers to do is look at their network economics. What we see with a lot of carriers is they put in a two-prong bid -- single lane and a myriad of (multiple-lane) packages that enhance their network optimization.'

The idea is that if carriers can visualize a shipper's cargo as part of a larger portfolio of business, they're likely to bid more aggressively. And they apparently have done precisely that in the roughly 50 bid packages Logistics.com has handled.

The Burlington, Mass., firm announced last month that over the last year it's saved customers a total of $100 million while procuring $2 billion worth of services. Logis-tics.com has done one global ocean freight contract, for Compaq Computer Corp., but Lanigan said the domestic truckload sector will likely be the company's core focus.

Ocean freight auctions such as GoCargo.com may obtain for some shippers a lower rate, but unlike Logistics.com, they aren't making strides toward solving or at least mitigating the fundamental excess cost producer in freight transport -- inefficient use of equipment. Ocean carriage, in fact, appears no closer today to solving its problem of empty container repositioning than it was 20 years ago, only now the problem has grown worse as volumes have grown and trade imbalances have widened.

Hats off to whoever can crack that particular nut.

Peter Tirschwell is editor of JoC Week. He can be reached at (973) 848-7158, or via e-mail at ptirschwell

oc.com.