Electronic commerce has become a key enabler for Tranz Rail to change the way it does business with its customers.
"Our aim is to provide total logistic solutions, including supply chain," says Garry White, general manager of business information services.
The supply chain model is fundamental to Tranz Rail's relationships with its large customers. It is offering warehousing services — using old rail sheds and some purpose-built facilities — and temporary storage, sometimes to meet just-in-time requirements for customers.
For example, a newspaper might not have the storage capability for multiple rolls of newsprint. Tranz Rail will warehouse that and deliver as required.
The Ports of Auckland is a good example of how the world has moved on. Traditionally, Tranz Rail would have had to consolidate its wagons for delivery of containers to the port, which has its own rail network. Now, the port will take the wagons in any order into a holding pen, where a straddle crane works to a pick list for extracting containers as they are required to be loaded on a ship. It's like a big warehousing operation.
"We just have to tell what is where," White says. "The supply of information is the key. It's like setting up a virtual company."
Tranz Rail's initial investigations into e-commerce began in 1991, studying how to capture data for the main computer systems. EDI was introduced for structured transactions.
In 1995, the focus widened to embrace e-commerce more fully.
The early EDI focus was getting information in a timely manner so appropriate planning could be made: for example, would one or two locomotives be required; what were the tonnages to be delivered?
Today, Tranz Link can trade electronically using a number of technologies.
It has a track and trace system, which tracks freight without accompanying documentation; it is EDI-enabled; it uses internationally accepted and non-proprietary standards for EDI and bar codes; it has developed and provides PC applications for customers to use for key transactions.
The e-commerce team comprises just two people: Phil Grocott, as business development manager; and Bryan Mulligan, a senior business analyst.
"Some of our customers are one-man shows," Grocott says. "We've actually put in fax machines for them so they can fax waybill information to us."
He recalls, wryly, the first fax machine ever supplied - to a multi-national organisation that was "too bloody mingy" to put in a fax itself.
"We now have the capability to trade electronically with all our customer base without documentation," he says.
Tranz Rail has entered into a relationship with Electronic Commerce Network (ECN), which has developed switching technology that handles all types of message, including non-standard forms. Essentially, ECN provides the switch and the message management systems. It's a gateway, linked back to Tranz Rail's core systems through IBM's MQ Series messaging software.
Bar coding is at the heart of managing freight. Each item is labelled with a unique identifier. The label holds the identifier number as an EAN 128 bar code. These can be supplied to customers, or the customer can use his own label and bar code.
Owner-drivers are paid on the items scanned. No scan done, no pay. That's proved an effective way of managing payments.
The Ontrac Direct internet freight tracking system and the Customer Information Service (CIS) - providing management information - have both been written in Java. Other passive text pages are written in HTML.
The freight tracking application is open to anyone and so does not include or reveal any information regarded as commercially sensitive. If you're a customer, you know the identifier number on the freight item and you can drill down into the system to find out where that freight item is at any time.
The importance of this is that when the delivery time is known in advance, other things such as manufacturing schedules can be planned around it.
Security of information is also important so particular freight - say, a consignment of liquor - can't be targeted by thieves. White says central North Island gangs are organised to target trains.
The e-commerce team has also built, or has in the design stage, PC applications for exchanging structured messages with customers.
CIS provides management information from the freight database via the internet. Customers can download into a spreadsheet for their own analysis data on service performance. This will shortly be supplemented with reports on freight claims, distribution patterns and freight spending.
The PC application which helps customers send consignment instructions electronically is called Ontrac Despatcher. It's a Windows-based application that uses conventional EDIFACT structured messaging for transactions. The user can prepare and transmit consignment details, receive and reconcile invoices, prepare bar-coded freight address labels, and send by fax an advance shipping advice to receivers. According to Bryan Mulligan, it's a 25-minute exercise to set up the application.
The cost of developing these applications is not high. White limits Internet projects to 90 days with a cost not to exceed $50,000.
The e-commerce customer base is growing, though not as quickly as White would like it too.
"One of the big things is to get people to trade electronically," he says. "They're all keen but they say 'we're just about to upgrade our system'.
"Our biggest problem is trying to develop the trading community at the high end."
The current customer base includes major industrials such as Tasman Pulp&Paper, Carter Holt Harvey, BHP NZ Steel, The Warehouse, Heinz Wattie, Kiwi Dairy, Tegel Foods, P&O Nedlloyd and Blue Star Line.
"I think it's about to explode," White says. "We're way out in front in terms of the transport industry and way ahead of Australia."
There are real cost savings if information can be received electronically and processed automatically. Operating efficiencies are improved and so is service.
Mulligan puts it into context. "There would have been an immeasurable cost if we hadn't done it."