The profit impact of a strategic approach to Web Enhanced Services (WES)—a study of the motor carrier industry

INTRODUCTION From 1995 to the present, the interstate motor carrier industry in the United States has seen growth in the number of companies offering web-enhanced services (WES). These services range from limited tracking and tracing to transactions that are completely Internet-based. New technologies such as automatic vehicle location systems (AVLS), automatic vehicle identification (AVI), and satellite and radio based communication (SRC), make value added real-time service to shippers possible. Several publications have highlighted this growth. Lancioni et al. (2000) noted that throughout the supply chain, the sector that most widely uses the Internet is the transportation sector. Hickey (2001) reported that most trucking companies are involved in one or more Internet projects aimed at improving customer service. The Inbound Logistics' 2000 Annual Top 100 Trucking issue identified specific web-enhanced technologies commonly found in the motor carrier industry--real time tracking and tracing (RTT), electronically available bills of lading, POD's, etc.--and ranked the breadth of each of "the Top 100 Company's" web-enhanced capabilities. While success stories abound (e.g., Shulman, 1999) and lead to the assumption that WES capabilities add financial value to a motor carrier, motor carriers are hesitant to embark on a full-scale adoption of WES. According to a study by Nagarajan et al. (2000), motor carrier spending on Internet development has been small, accounting for only 12 percent of their investment in new technology. Implementation is still in its infancy with respect to both breadth and depth (Ellinger et al., 2001). With the recent difficulties that many Internet companies have experienced, some are questioning the cost advantages of WES for motor carriers (Chakraborty and Kazarosian, 2000; Graham, 2001; Nagarajan et al., 1999; Nagarajan et al., 2000). These concerns reflect the lack of actual knowledge and the scarcity of research regarding relationships between WES and their impact on profitability. Some authors have theorized that companies offering WES would be able to advantage themselves competitively (Chan and Artmangkorn, 2002; Kleindl 2000; Watson et al., 2000), that effective implementation would separate the successful trucking companies from the struggling ones (Panza, 2000), and that web-enhanced capabilities would even the playing field between large establishments and smaller startups (Rodriguez, 2001). However, others have noted that there are no well-established ways to estimate or measure the value of a website (King, 1999), or to accurately account for development costs (Stout and Marden, 2001). Still others have suggested that investment in WES may not be as profitable as other investment opportunities (e.g., Chakraborty and Kazarosian, 2000; Graham, 2001; Nagarajan et al., 2000). This study clarifies some of these issues by investigating relationships between adoption of WES and a motor carrier's financial performance. In particular, this study measures the financial results that firms should expect from offering WES in the motor carrier industry. This study also identifies distinguishing characteristics of companies that offer WES and addresses the issue of whether recent technological advancements have allowed smaller companies to compete more effectively with larger companies in service levels. Due to significant website development and maintenance costs and the lack of ability to clearly measure the financial value of WES, motor carriers are incurring substantial risks in committing resources for implementing and maintaining WES. This research provides empirical evidence that establishes a clear relationship between the offering of various web-enhanced services and their impact on profitability. This increased understanding offers great value and allows firms to allocate resources to WES with greater understanding of the likely effect of these investments. …