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Enron Mail |
Please read the following message from Dan Reck regarding WebModal. Thank
you. ----- Forwarded by Cathy Phillips/HOU/ECT on 02/14/2001 07:25 AM ----- Daniel Reck 02/13/2001 01:48 PM To: Cathy Phillips/HOU/ECT@ECT cc: Subject: WebModal At Monday's EGM meeting, Mike McConnell asked me to describe the WebModal acquisition EGM made last week. Following is a brief description of the freight capacity market and what WebModal gets us: Market The US market for logistics is $600bn annually. We are pursuing the largest homogenous segment which is long-haul truckload and intermodal. That market is $50-$100bn annually, depending on who you ask and whether you include dedicated fleets. The interesting thing about these markets is that they are extremely fragmented and massively intermediated. There are over 100,000 trucking companies (carriers) in the US and thousands of independent brokers (brokers in this market act as credit principals). 10-20% of all loads are conducted in the spot market (brokered) and the rest are done under 1-3 year contracts that are generally non-firm, but define the relationship between each shipper and their chosen carriers or intermediaries. On the rail side, the US railroads act as wholesalers, selling their capacity to Intermodal Marketing Companies (IMCs). The IMCs then retail or broker out that capacity to shippers. The difficult part of ground intermodal is that the rail haul makes up only the long-haul component. The trip from the origin warehouse to the origin rail yard and then the delivery from the destination rail yard to the destination warehouse has to be done by truck. This first and last mile transportation is called "drayage". WebModal WebModal developed a system to price and schedule intermodal moves so they look identical to truck. They have a database with prices and schedules from all the RRs and 48 drayage companies that gives them complete US coverage. A buyer can type in their scheduling and equipment requirements and receive instantaneous quotes for zipcode to zipcode service. Because of the inherently different cost and performance structures of rail and truck, the pricing differences between the two modes of transportation is significant. For any move greater than 500 miles, intermodal is generally 20-30% less expensive than a single driver truck move. The substitutability of intermodal and truckload should allow us to trade the spread in price. The WebModal acquisition gets us a team with tremendous industry expertise and a good head start as we enter this market. The next move will be to build a truck intermediation capability. I encourage you to meet Chris Kravas the CEO of WebModal. He will be spending all of his time in Houston when he is not on the road. Please give me a call if you have any questions. Thanks, Dan Reck
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