July 2002 | Case Studies | I.T. Toolkit

Nistevo Finds Strength in Numbers

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Nistevo's network-based TMS gains punch as it attracts more shippers and carriers.

From high school reunion sites to B2B portals, the web is a heaven-sent tool for constructing communities. Two trading partners that swap electronic data will get business done faster and more effectively than if they rely on phone and fax. When dozens or hundreds of users exchange information through a central facility, the opportunities to build new, profitable relationships multiply. But an excellent infrastructure isn't enough. Without a crowd, there's no buzz.

Since its debut in the late 1990s, Nistevo Corp., Eden Prairie, Minn., has been steadily populating its web-based logistics network with shippers and service providers. Currently, the network helps large companies, such as General Mills/Pillsbury, Land O'Lakes, Georgia-Pacific, Cargill, and Baxter Healthcare, plan and execute 4,000 shipments per day. About 700 logistics professionals working for those companies use the network to do business with more than 300 carriers.

Increasingly, they also use the electronic community to share those carriers by building continuous moves and tours. As this collaboration guarantees carriers fewer deadhead miles, it helps the shippers secure better rates.

Nistevo's ability to foster collaboration probably has won more attention than any other aspect of the system. But Kevin Lynch, the company's CEO, emphasizes that Nistevo also offers all the functions of a full-fledged transportation management system (TMS). "You can't collaborate until you're effectively running an excellent internal transportation department," he says.

Among those functions are contract management, carrier selection, load tendering, communications via Electronic Data Interchange (EDI) or Extensible Markup Language (XML), load tracking, exception-driven alerts, and reporting.

Technology Without Trauma

The big difference between Nistevo and some of the well-entrenched TMS offerings, Lynch says, lies in the system's architecture and business model. As an application service provider (ASP), Nistevo offers its technology by subscription. New customers can start using it in as few as 65 days, without the trauma and expense of a major software implementation. The network model also allows Nistevo to deliver new features quickly, and it does so every six to eight weeks.

"One thing we're known for is this rapid-deployment, low-intrusive solution that allows companies to get up and running quickly with low risk, sign up for an annual subscription fee, then bring their enterprise up to start to reap the ROI [return on investment]," Lynch says

One of the newest members of Nistevo's community, International Paper, signed on for a two-year subscription after running a pilot at three locations last year. True to the community network model, the paper, packaging and forest products manufacturer joined Nistevo at the suggestion of a trading partner.

"Bill Crawford, International Paper's vice president of logistics, brought that idea into the company after having a conversation with one of our customers" about collaborating on transportation, says Mel Howell, who works in the company's global supply chain office in Memphis. "The customer was already using Nistevo, and saw it, eventually, as an opportunity to use their carriers more effectively by keeping their trucks rolling."

International Paper has implemented Nistevo at 12 locations in its paper business, including mills, plants, and distribution centers. Eventually, it hopes to expand the system to 80 locations, although it has not yet laid plans for the full rollout, Howell says.

By year's end, International Paper expects to be creating continuous moves, first among its own facilities, but later with other Nistevo members. Right now, however, the manufacturer is using the system to take better advantage of contract rates and evaluate carriers' on-time performance.

Each company location dispatches its own freight, and "some locations were doing a much better job than others" of tendering each load to the carrier with the best negotiated rate, Howell says. Now, Nistevo maintains a database of International Paper's contract rates with its carriers. As users create shipments, Nistevo "is always looking for the lowest-cost carrier with the best equipment to deliver the value," he says. Users tender loads to the preferred carriers, and carriers accept loads via EDI.

Performance reporting is "very important for us and for our customers, to know how well we're doing in delivering the products they want," Howell says. Delivery notices that carriers send through Nistevo provide the data for these reports. Most carriers use EDI to send these notices, although some use an interface on Nistevo's web site to enter the data.

Wanted: Faster EDI

During its pilot last year, International Paper found it had to upgrade its own EDI infrastructure before it could use the Nistevo network effectively, Howell says. The company wanted to offer loads to carriers and get their responses within 30 minutes. In the EDI world, though, transactions generally move in batch, and 24-hour turnaround times are considered acceptable. "When you tender loads, that's not fast enough to be able to secure needed capacity to meet customer demand," he says.

"We did a lot of work internally, and with our value-added network (VAN) provider, to improve that," Howell says. The company's carriers, in particular, "helped us understand where the bottlenecks were in our process that were not allowing the information to get to them in a timely way," he adds. Now that International Paper has worked out the problems with its EDI infrastructure, "up time and reliability are not an issue any longer," he says.

Within the next year or so, International Paper hopes to start accessing Nistevo through ForestExpress, a transaction processing network for the forest products industry, Howell says. Nistevo and ForestExpress announced in May that they will develop real-time connectivity between their networks.

International Paper uses Nistevo to manage only its outbound transportation. That has been true of many Nistevo members, but this year some of them are starting to look at the inbound side as well, Lynch says. "They focused in the past on customer-facing logistics solutions. Now they're looking backward in the supply chain and finding opportunities to take the same sorts of technologies and point them back at their various suppliers, and gain efficiencies there."

Nistevo is also expanding the network's functions so that shippers can use it to plan and execute more kinds of freight moves. For example, after focusing purely on truckload (TL) transportation in the past, the company recently announced that it will add functions for less-than-truckload (LTL) freight.

Many of the customers Nistevo targets—firms with $500 million to $5 billion a years in sales—spend a larger portion of their transportation budgets on LTL freight, Lynch says. "LTL is typically more expensive, and in some cases can require a longer duration for delivery," as freight moves from truck to truck, through multiple depots, on different legs of its journey.

The company will also expand the system to manage ocean, air, and rail transportation, and it's adding international capabilities. That will mean adding the ability to capture events that apply to those modes—noting, for example, that a container has arrived in a port or has been loaded onto a train.

Also, customers using these other modes want more detail about their inventory than do TL shippers, Lynch says. "With truckload, it's all about getting tender information to 100 carriers every day," he explains. "In ocean, air, and rail, there are only a few carriers. What's more important is to find out where the inventory is at any time" because, in the case of ocean and rail, goods remain in transit for long periods.

Going Global

For international freight, "the biggest demand is, "Where's my product in the pipeline, and do I need to reorder products that got delayed?'" Lynch says. To fill this need, Nistevo will add the ability to track individual stockkeeping units (SKUs).

Nistevo also continues knitting its members into a closer community, holding meetings where they can get to know one another and discuss mutual concerns. It also helps them work through the sticky details that could raise barriers to cooperation. For example, Nistevo has built a methodology to determine how to split the savings when two companies share a carrier.

Even direct competitors, such as Kellogg's and General Mills, have discussed how they might work together to reduce costs, Lynch says. While members still resist collaborating with rivals, some cooperation of this sort will probably become inevitable in the future, he says.

"The manufacturers are being forced by the retailers to work together to ship one truck to their dock with everybody's product on it for that day," Lynch says. "They recognize that collaboration is coming."

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