January 28, 2002
(Computerworld)
Caterpillar Logistics Services Inc., a wholly owned subsidiary of heavy equipment maker Caterpillar Inc., is using the services of a rival to help it reduce annual transportation costs.
In what analysts said is an unusual move, Peoria, Ill.-based Caterpillar last week signed rival Schneider Logistics Inc. as its application service provider (ASP) for transportation logistics technology.
Under the deal, Caterpillar Logistics will use the Schneider Utility for Managing Integrated Transportation (SUMIT) suite of applications to provide transportation management as well as shipment information on all of its North American truck shipments.
Schneider's technology will allow Caterpillar to choose from among multiple modes of transportation to optimize costs for inbound and outbound shipments while providing the ability to track and trace material in transit, said Rachelle Kunz, a Caterpillar spokeswoman. The agreement will also allow it to have a centralized operation for managing its transportation requirements.
Competitive Market
The decision to use Green Bay, Wis.-based Schneider as an ASP was made based on an assessment of its capabilities and the fact that it supports the same decision support tools Caterpillar Logistics uses, Kunz said.
"The [third-party logistics] landscape is a very competitive one, with thin margins and a lot of players," said Michael Bittner, an analyst at AMR Research Inc.'s Irvine, Calif., office. "This is a pretty unique deal. Schneider obviously had a value proposition that met Cat's needs."
The deal also highlights the increase in attempts by third-party logistics firms to expand into the hosted services arena in a bid to differentiate their offerings, said Adrian Gonzalez, an analyst at Dedham, Mass.-based ARC Advisory Group Inc.
The SUMIT suite, which Schneider is now offering as a hosted service, was originally developed for internal use. The Web-hosted application supports functions such as carrier and mode selection, a rating engine, online tendering, shipment tracking and freight payment.
"We are offering it more like a service that supports a business process and to solve a specific business problem," said Schneider CIO Steve Matheys.
"To a certain extent, it takes us away from what we've been doing, but it allows us to leverage our technology base much better," Matheys said.
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Carrier and mode selection