There still seems to be a lot of paperwork involved in the transportation industry and much less usage of technology then one would expect, especially in commercial business processes, which are still largely performed in Excel sheets. Based in Brno, Czech Republic, kg3 is a company working to change that with its eSourcing software for freight that delivers reduced rates for shippers by bringing transparency to the whole process.
While managing global freight procurement at electronics manufacturer Celestica, Lee Eden – Founder of kg3 – spent a few years pushing Excel to its limits before deciding that this was a process in dire need of a proper software solution, and so the company was established in 2013. kg3 boasts two distinct freight procurement products, each of which approaches a different aspect of the freight buyer’s job.
Two Equally Efficient yet Distinct Products
The first product, titled Procurement, is for running large tenders: going out to market for rates that should be valid for 6-12 months on regular lanes. The Logistics Service Providers (LSPs) quote either online or by uploading a validated Excel template to the kg3 system. This way, instead of spending weeks trying to clean up, validate, and compare Excel files, the customer gets an immediate apples-to-apples overview of competing offers and can even use the system’s powerful analysis and scenario-modeling capabilities to build award strategies.
The system makes it easy to release targeted and constructive feedback, thereby driving improved rates in the next round. After the bid process, kg3 becomes the customer’s rate-management system and communication platform for fuel-surcharge updates, for new-lane quotations and for freight-invoice verification. By taking care of the math involved, the system allows the customer to focus on the more strategic elements of the negotiation and upon LSP relationships, hence pushing the freight-buyer’s job further up the value chain and making it a lot more rewarding.
The second product, Spot Quote, is for one-off ad-hoc shipments. The slick request process delivers the RFQ to LSPs who quote their all-in rate online for the specific shipment. The customer selects the best offer and can use kg3 for internal approvals to keep the premium freight cost under control and address its root causes.
Choosing an Industry of Expertise
Anyone planning to launch a start-up should know their strengths and choose an industry which they understand well. Lee Eden had been delivering excellent savings year-on-year at Celestica, using a transparent process with constructive feedback to bid participants to leverage his $50m freight spend. Add to that, a professional IT department, and the results would surely be even better.
“Transportation does not fit nicely into generic eSourcing software: rate-structures are typically just too complex and you need to be able to model the impact of unpredictable shipment sizes and volumes over a large number of shipping lanes. The procurement module of the Transportation Management System we were using at Celestica did not understand incoterms or non-USD currencies and did not have enough columns to cope with our LCL ocean-freight rates. There was clearly a gap in the market to which we could apply our expertise,” mentions Lee Eden.
Overcoming the Odds
kg3 runs without any external financing, thereby allowing it to primarily focus on the product rather than worrying about keeping the VC happy. The company doesn’t have a large marketing budget, nor does it possess a big team (small but effective), but it gets ample amount of support from its first big customer. A global freight forwarder, which uses the company’s software for Tender Management, pushed kg3 to develop functionality that it had not planned originally. Although the Tender Management product looks at the process from the other side of the table, it has really strengthened the Procurement solution, as kg3 now has something that works both for the customer and for the bid participants.
A Leader who Brings Forward years of Industry Experience
A specialist in Transportation Procurement, Lee Eden, boasts 20 years of extensive experience in Supply Chain and Logistics. Initially, Lee used to write much of the code himself but owing to his position at the company, today he is much less active on the development front and more focused on the business aspect and looking after the customers. When kg3 implements its solutions upon a customer’s real-world challenges, Lee’s experience and background is a key enabler.
A Future Driven by Continual Improvement
Lee mentions that “Transportation procurement will not be Excel-based ten years from now. It will take time because it is complex, but there are massive efficiency gains for all parties in moving the process online. The combination of kg3Tender Management (for LSPs) with Procurement software (for shippers) is unique in the industry and will drive adoption on both sides of the table.”
kg3 hopes to get bigger and leverage that growth to add more functionality, improve the solution further and become THE platform for freight procurement; something that is already on the verge of happening.