The startup, Shipper.com, is building fulfillment centers in nine metropolitan areas, much like Webvan is doing for groceries. These fulfillment centers will be used to warehouse goods for E-retailers and express-deliver them to consumers for the price of the typical five-day ground shipment, says marketing VP Andrew Krainin. In many cases, Shipper.com will be able to ship the same day an item is ordered.

"There is a lot of online purchasing going on in the early afternoon," Krainin says. "By then, FedEx and UPS are busy on the upstream side, getting packages to distribution centers. But that's when people want their product delivered downstream."

Shipper.com has launched with 10 trucks and two warehouses in the Los Angeles and San Francisco metro areas. It plans to expand into New York and Washington, D.C., later this year and early next.

Yet as challenging as business-to-consumer delivery may be, it's simple compared with the increasingly complex task of integrating shipping and logistics systems with modern E-commerce systems. Carriers are becoming full-blown partners in the success or failure of E-businesses whose supply chains are mostly electronic but who also depend on third parties to deliver their products to customers.

"A couple of years ago, Web-based tracking of shipments was a big deal [for logistics companies], but now anybody can do that," says Ari Smith, a principal at Next Generation Logistics Inc., a shipping and logistics consulting and services firm. "Now we're being called on to do more. We not only do shipping and tracking, but we source products and reroute the loads when the carriers drop them. We basically tell them to give the orders to us and we take over from there."

FDX is taking that idea to a new level, working with companies to develop logistics and supply-chain systems and processes that go beyond overnight package delivery.

"Our strategy is to have a complete plug-and-play transportation solution that will hook in with you however you want to do it," says FDX CEO Smith. "If you've got SAP or Baan, we can plug into them. Then we're all of the things that you need to know outside the four walls of your company to manage your inventory in motion. And if you want us to, we'll actually manage the warehouse for you."

Such broad offerings will mean swift deployment of Internet technology in the shipping market, not only by carriers, but also by their business customers. While companies such as Federal Express offer supply-chain and logistics software and consulting services to customers, UPS earlier this month announced an even more basic Web aid: free "fenced" Internet access that lets customers use UPS.com.

The growing variety of offerings from shipping and logistics companies also is forcing their customers to make some hard decisions about the role that each carrier should play in their supply chains. "Some companies may want to outsource their whole logistics process to a company like ours," says Next Generation Logistics' Smith.

The problem with logistics outsourcing for commodity manufacturers and E-retailers is that they can no longer reap the tiny profit margins made in each part of the shipping process. An efficient E-retailer makes a tiny profit at each step of the process--processing an order, warehousing the stock, and shipping. If they outsource warehousing and shipping, they turn those profits over to the outsourcer. "That's why a company like Amazon.com chose to build its own warehouses instead of outsourcing them," Clancy says.

Some older companies have been slow to automate their logistics and supply-chain processes, and they are paying the price, says Laurie Tucker, senior VP of E-commerce and customer service for FedEx, whose online service handled 800 million of the company's 1.2 billion customer interactions a year.

"Some companies will be near death before they see the vision," she says. "But when they stare death in the face, we're ready with the tools."

--with additional reporting by Ellis Booker, David Joachim, and Tom Smith

return to page 1, 2
go on to the next story, "Federal Express: A Matter Of Existence."