transportation as a commodity . - - - - - original message - - - - -
from : djcustomclips @ djinteractive . com
[ mailto : djcustomclips @ djinteractive . com ]
sent : tuesday , september 18 , 2001 10 : 43 pm
to : 168842 @ mailman . enron . com
subject : rahil jafry : transportation as a commodity .
transportation as a commodity .
by bill hensel jr .
09 / 10 / 2001
joc week
copyright ( c ) 2001 . the journal of commerce inc . all rights reserved .
enron corp . , the houston - based energy giant , is familiar with commodity
markets . in addition to energy , the business for which it is best known ,
enron is the world ' s largest metals trader . the company also understands
transportation . it ships products as diverse as coal , steel , forest
products and project cargo . now enron is proposing to change the face of
over - the - road trucking and domestic intermodal services , by treating
them as a commodity that can be bought and sold like any other product .
the company ' s enron freight markets unit promises to help shippers and
carriers manage risks associated with fluctuating diesel fuel prices and
other shipping costs . enron will quote a set rate for dock - to - dock
moves , and guarantee the service promised in the contract .
enron freight markets was created in march to develop a market for
freight capacity and to buy and sell spot and forward capacity in
transportation . as in other futures markets such as soybeans or pork
bellies , a buyer of a contract would have the option of taking delivery
of the service or closing out his position .
enron has successfully used similar formulas to create markets in
energy . can it do the same with trucking and intermodal freight
capacity ? barry par - ker , a consultant for bdpl consulting ltd . , which
specializes in freight economics , said it could work but that
transportation isn ' t like other markets . " the marketplace needs these
things , but transportation marketplaces are not really receptive to
them , " parker said . " i applaud what they are doing , but it is an uphill
battle . "
enron took a first step up that hill this year with its acquisition of
webmodal , a firm that provides domestic intermodal technology and
logistics services for carriers , shippers and service providers . the
former webmodal office in chicago houses enron freight ' s 24 - hour
customer service and operations center . this summer , enron took another
step , by acquiring trucking capacity for up to two years with major
trucking companies . enron said it recently signed its first firm sales
contract with a major shipper , but declined to identify it .
dan reck , vice president of enron freight markets , said the company can
offer shippers and carriers performance obligation terms that are
considerably different from any others . " what enron freight markets is
trying to do is commercialize the risk management products for the
freight market , " reck said .
a key to the service is standardization of general contractual terms and
conditions . the standardized areas would include specific delivery
times , and specific consequences for non - performance . fixed - price
contracts act to stabilize fuel surcharges , spikes in shipping volumes
and fluctuating carrier rates . enron said it can do that not only
because it has deep pockets to make the market liquid , but also by using
its technology to evaluate optimal routing and modes and by having
customers sign long - term contracts .
" what ends up happening is that the obligations of both parties be - comes
much more clean and predictable , " reck said . " so from a carrier ' s
perspective , they can really count on a revenue stream from this piece
of their business . there are very clean operational parameters . we are
also trying to have shippers sign on with us under those same terms and
conditions . "
enron has a reputation as an innovator in its approach to the natural
gas and electric - power markets , and is trying to change the way other
markets , such as steel , are structured . efm sees transportation as
another commodity with a price that can be the basis of hedging or
speculation .
" we are kind of commodity - agnostic , " reck explained . " we don ' t care what
the commodity is , we just sell capacity . "
enron ' s approach differs significantly from others that have entered the
trucking field as technology - based intermediaries . nte , the former
national transportation exchange , puts buyers and sellers directly
together , while logistics . com uses the contracting process to identify
the most cost - effective matches between shippers and carriers . unlike
the online services , enron contracts directly with the party involved
and does not wait for two to be matched up on its website .
under enron ' s ideal contract , damages for non - performance are spelled
out explicitly as part of its belief that for the market to work buyers
must be able to bank on the reliability of the contract . for example ,
suppose a carrier has accepted a contract price of $ 1 . 20 per mile for a
shipment of freight between atlanta and chicago . if enron does not
provide the carrier with a load and the next best alternative the
carrier can find is 70 cents per mile , enron pays the difference . the
same process would work in reverse . if the carrier promised to provide a
truck and didn ' t , enron would provide a replacement at a higher price
and the trucker would have to make up the difference .
reck said the standardized contract would not be dictated by enron but
would evolve through negotiations or public forums . efforts are under
way to introduce the company to shippers , carriers and other
intermediaries . enron officials say they ' ve talked with 400 to 500
shippers since march .
one goal is to persuade an independent group - such as a trucking
association or committee of marketplace participants - to sponsor a
forum for negotiations , which the company believes would add legitimacy .
in its first contract , enron is acting as a carrier , since the shipper
already was working with a third - party logistics provider . enron
considers itself distinct from 3 pls . it focuses on dock - to - dock moves
and leaves supply - chain optimization to others . its aim is to allow
parties to minimize risk , for example by giving shippers the ability to
hedge against the possibility of diesel pass - through fees .
enron is an extensive user of the internet , however , and last year
launched enrononline for traders to trade natural gas , oil , electricity
and various other commodities online .
no one expects enron ' s new freight capacity product to capture immediate
acceptance . even enron acknowledges that acceptance will be slow . reck
said it will take time to overcome cultural resistance to change in the
freight industry , and that enron is prepared for that . " we have done
that in every market we have gotten into , " reck said . " what we find is
the economic benefits of doing business this way overpowers resistance
over time . you have to show what the benefits are . "
jocoo 000 .
( c ) copyright 2001 , the journal of commerce inc . all rights reserved .
http : / / www . joc . com .
folder name : rahil jafry
relevance score on scale of 100 : 79
to review or revise your folder , visit http : / / www . djinteractive . com or contact dow jones customer service by e - mail at custom . news @ bis . dowjones . com or by phone at 800 - 369 - 7466 . ( outside the u . s . and canada , call 609 - 452 - 1511 or contact your local sales representative . )
copyright ( c ) 2001 dow jones & company , inc . all rights reserved
transportation as a commodity .
- - - - - original message - - - - -
from : djcustomclips @ djinteractive . com
[ mailto : djcustomclips @ djinteractive . com ]
sent : tuesday , september 18 , 2001 10 : 43 pm
to : 168842 @ mailman . enron . com
subject : rahil jafry : transportation as a commodity .
transportation as a commodity .
by bill hensel jr .
09 / 10 / 2001
joc week
copyright ( c ) 2001 . the journal of commerce inc . all rights reserved .
enron corp . , the houston - based energy giant , is familiar with commodity
markets . in addition to energy , the business for which it is best known ,
enron is the world ' s largest metals trader . the company also understands
transportation . it ships products as diverse as coal , steel , forest
products and project cargo . now enron is proposing to change the face of
over - the - road trucking and domestic intermodal services , by treating
them as a commodity that can be bought and sold like any other product .
the company ' s enron freight markets unit promises to help shippers and
carriers manage risks associated with fluctuating diesel fuel prices and
other shipping costs . enron will quote a set rate for dock - to - dock
moves , and guarantee the service promised in the contract .
enron freight markets was created in march to develop a market for
freight capacity and to buy and sell spot and forward capacity in
transportation . as in other futures markets such as soybeans or pork
bellies , a buyer of a contract would have the option of taking delivery
of the service or closing out his position .
enron has successfully used similar formulas to create markets in
energy . can it do the same with trucking and intermodal freight
capacity ? barry par - ker , a consultant for bdpl consulting ltd . , which
specializes in freight economics , said it could work but that
transportation isn ' t like other markets . " the marketplace needs these
things , but transportation marketplaces are not really receptive to
them , " parker said . " i applaud what they are doing , but it is an uphill
battle . "
enron took a first step up that hill this year with its acquisition of
webmodal , a firm that provides domestic intermodal technology and
logistics services for carriers , shippers and service providers . the
former webmodal office in chicago houses enron freight ' s 24 - hour
customer service and operations center . this summer , enron took another
step , by acquiring trucking capacity for up to two years with major
trucking companies . enron said it recently signed its first firm sales
contract with a major shipper , but declined to identify it .
dan reck , vice president of enron freight markets , said the company can
offer shippers and carriers performance obligation terms that are
considerably different from any others . " what enron freight markets is
trying to do is commercialize the risk management products for the
freight market , " reck said .
a key to the service is standardization of general contractual terms and
conditions . the standardized areas would include specific delivery
times , and specific consequences for non - performance . fixed - price
contracts act to stabilize fuel surcharges , spikes in shipping volumes
and fluctuating carrier rates . enron said it can do that not only
because it has deep pockets to make the market liquid , but also by using
its technology to evaluate optimal routing and modes and by having
customers sign long - term contracts .
" what ends up happening is that the obligations of both parties be - comes
much more clean and predictable , " reck said . " so from a carrier ' s
perspective , they can really count on a revenue stream from this piece
of their business . there are very clean operational parameters . we are
also trying to have shippers sign on with us under those same terms and
conditions . "
enron has a reputation as an innovator in its approach to the natural
gas and electric - power markets , and is trying to change the way other
markets , such as steel , are structured . efm sees transportation as
another commodity with a price that can be the basis of hedging or
speculation .
" we are kind of commodity - agnostic , " reck explained . " we don ' t care what
the commodity is , we just sell capacity . "
enron ' s approach differs significantly from others that have entered the
trucking field as technology - based intermediaries . nte , the former
national transportation exchange , puts buyers and sellers directly
together , while logistics . com uses the contracting process to identify
the most cost - effective matches between shippers and carriers . unlike
the online services , enron contracts directly with the party involved
and does not wait for two to be matched up on its website .
under enron ' s ideal contract , damages for non - performance are spelled
out explicitly as part of its belief that for the market to work buyers
must be able to bank on the reliability of the contract . for example ,
suppose a carrier has accepted a contract price of $ 1 . 20 per mile for a
shipment of freight between atlanta and chicago . if enron does not
provide the carrier with a load and the next best alternative the
carrier can find is 70 cents per mile , enron pays the difference . the
same process would work in reverse . if the carrier promised to provide a
truck and didn ' t , enron would provide a replacement at a higher price
and the trucker would have to make up the difference .
reck said the standardized contract would not be dictated by enron but
would evolve through negotiations or public forums . efforts are under
way to introduce the company to shippers , carriers and other
intermediaries . enron officials say they ' ve talked with 400 to 500
shippers since march .
one goal is to persuade an independent group - such as a trucking
association or committee of marketplace participants - to sponsor a
forum for negotiations , which the company believes would add legitimacy .
in its first contract , enron is acting as a carrier , since the shipper
already was working with a third - party logistics provider . enron
considers itself distinct from 3 pls . it focuses on dock - to - dock moves
and leaves supply - chain optimization to others . its aim is to allow
parties to minimize risk , for example by giving shippers the ability to
hedge against the possibility of diesel pass - through fees .
enron is an extensive user of the internet , however , and last year
launched enrononline for traders to trade natural gas , oil , electricity
and various other commodities online .
no one expects enron ' s new freight capacity product to capture immediate
acceptance . even enron acknowledges that acceptance will be slow . reck
said it will take time to overcome cultural resistance to change in the
freight industry , and that enron is prepared for that . " we have done
that in every market we have gotten into , " reck said . " what we find is
the economic benefits of doing business this way overpowers resistance
over time . you have to show what the benefits are . "
jocoo 000 .
( c ) copyright 2001 , the journal of commerce inc . all rights reserved .
http : / / www . joc . com .
folder name : rahil jafry
relevance score on scale of 100 : 79
to review or revise your folder , visit http : / / www . djinteractive . com or contact dow jones customer service by e - mail at custom . news @ bis . dowjones . com or by phone at 800 - 369 - 7466 . ( outside the u . s . and canada , call 609 - 452 - 1511 or contact your local sales representative . )
copyright ( c ) 2001 dow jones & company , inc . all rights reserved