Enterprise 3.0 In The Supply Chain: GT Nexus Cofounder Greg Johnsen (Part 2)

Sramana: How did you make the transition from a generic on-demand business platform into a logistics market company?

Greg Johnsen: We started to optimize our existing generic business platform and transform it into a domain platform for supply chain. That encompassed things like purchase orders, shipments, inventory, invoices and payments. We were off and running. We brought in another principle into the company that was a senior executive at one of the shipping lines, APL. Shortly after that we received our first round of funding from Warburg Pincus. At the time all we really had was a platform for buying and selling container slots on ships.

Sramana: I know a lot about a company called SynchroNet. Are they a competitor?

Greg Johnsen: They would have been much closer of a competitor 10 years ago. We started in the area of buying and selling container spaces and contracts. The way it works in the containerized freight market is that most big shippers who move freight set long-term service agreements with a carrier. The price is based on the cost of a container move.

You don’t buy a slot on a vessel as much as you secure the long-term price of the cost of a container moving. That is not SynchroNet’s business. We started in the area of helping our customers secure good, electronic, trusted, collaborative service contracts with their carriers.

Sramana: Was this ocean only, or did you do air as well?

Greg Johnsen: It started out as ocean only. We looked at the ocean market, which dominates international trade. Most stuff moves in ocean containers; 95% of what moves by weight is moving by ocean containers.

The evolution of our company has gone through three major phases. The first was automating deep ocean execution processes. Think of shippers like Home Depot and Walmart and carriers; twenty carriers control 80% of the shipping lanes. Then there are intermediaries who help shippers to arrange reservations. Our platform automates dozens of processes around getting the right rate, getting the right service agreement, and booking a space on a ship. We also handle all the documentation such as shipping instructions, bills of lading, and freight invoices and payments.

We spent a lot of time building the platform around that, and we got a lucky break in the process. We won a contract from a consortium of ocean carriers to be their reservation system. It was like the Travelocity of ocean shipping. That was in 2001, at which point 13 major carriers got behind GT Nexus. Some of them got invested in the company and secured long-term technology partner agreements with our company to help them to build a single platform that is a multi-carrier booking system.

At the same time, the other half of the carriers did the same thing with another technology player, Intra, which is alive and well today. The only thing that was different about our approach is that we did not just do the executional processes with those carriers; we targeted the shippers themselves and gave them tools and frameworks for how to manage the overall transportation process with those carriers across more functions. It was not so carrier centric like Intra whose offering was to help them automate transactions they had with their customers.

Phase 2 of our company was moving across modes. We took the same ideas and concepts that we did with ocean and we did them with air freight and truck loads. That gave us a broader strategic transportation solution. We started to do a lot more with other customers and to grow our footprint.

The last phase, which kicked in during 2004, was supply chain. We were already getting electronic feeds from carriers to let us know where containers were. What we did not have was visibility into what was inside the containers, which carriers cannot tell you. They don’t have the line-item details on what is in the container because that is in the hands of a customer or its forwarders.

We built a much more strategic inventory control system that leveraged the electronic network connections that we made for the container. To know where a pair of jeans is, you have to know where the container is that is holding the jeans as well as the order and line item and the shipping instructions and materials that happen before they are put in the container. Today we have a supply chain visibility system that is beyond transportation. It is truly purchase to pay, from the time the purchase order is cut to the time goods arrive at their destination.

This segment is part 2 in the series : Enterprise 3.0 In The Supply Chain: GT Nexus Cofounder Greg Johnsen
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