Trax’s J. Scott Nelson on Amazon and ‘big data’ accuracy

This year will be the scene of a major showdown over the issue of “big data,” as companies such as Amazon make their moves into the logistics sector. To keep up, integrators, shippers and carriers are seeking a deeper understanding of the enormous amounts of information they collect – UPS currently stores about 16 petabytes of data on its shipments – so that they can make their operations more efficient. But how do they know how accurate these data are? If parts of the data are bad, what can be done about it?

Enter Trax Technologies, a U.S.-based logistics analysis firm, based in Scottsdale, Ariz., that is focused on not only identifying but fixing bad data in a typical supply chain. Working with some of the world’s largest life-science and technology companies, Trax uses complex algorithms to seek out missing or inconsistent data in a company’s supply chain and converts it into a coherent database. To prepare for expected demand for their services, Trax recently hired a new CEO, John Baptiste, formerly with the digital workspace for government workers, called Bloomberg Government, and with consulting firm McKinsey & Co.

Air Cargo World spoke with J. Scott Nelson, founder, chief architect and vice chairman of Trax Technologies, to glean some insight from him about how big data will transform all modes within the freight industry. As a freight automation pioneer, Nelson also provided a frank assessment about Amazon’s entry into the aircraft leasing business and how it compares with its diametrically opposed counterpart, Alibaba, in China.

Please tell us a little about what Trax does and how it works.

We’ve been in the space for about 20 years and have developed an algorithm that will analyze large amounts of data and can identify places where crucial data is missing, is inconsistent with the rest of the data, is incomplete or is simply inaccurate. Then we analyze these bad spots and use the algorithm to fix the gaps and correct the data. After that process, we can help decide what businesses our clients actually want to be in and how their assets can best be utilized.

How big a problem is bad data in today’s supply chains?

In my nearly 30 years in the 3PL business, I can say I’ve never seen accuracy of data reach anything higher than 80 percent; sometimes it’s as low as 40 percent. That means even for the best companies, about a fifth of the data is incompatible. There’s so much data coming from other sources that it’s easy to let in a lot of errors. That’s a really big problem for people. When only 40 to 80 percent of your data is accurate, and you don’t know whether it’s accurate, then your results can come up way off. It distorts your averages and statistics. People haven’t directly connected it in their minds, but they have to come to the realization that if they don’t have good information, they won’t make good decisions.

How does Amazon’s strategy compare against Alibaba’s model?

Since Amazon made its big announcement earlier this year, there’s been a big increase in demand for what we do. They’ve really become a supply chain company now, with a new business model of integration, and they provide a storefront on the web. It’s fascinating to see two entirely different visions of logistics play out like this.  Amazon wants to do it all itself, while Alibaba doesn’t want to control anything. Amazon’s model will work with some things, but Alibaba is much more community oriented, so you participate more in the process.

How wise was the decision to lease a fleet of planes?

I have a feeling this Amazon plan may not be sustainable. The primary reason is to have centralized service levels and greater control of your delivery, which is a problem they had before with FedEx and UPS over the holidays. So, if you’re flying a full load each way, it’s great to have your own planes. But if you have any unutilized capacity, it can be a real danger. Costs are driven by asset utilization. But I think they want to be an integrator and offer their capacity to others. To do this, people will have to have better and better information. Amazon seems cutting-edge but think how fast technology is changing these days. They have some huge assets they’re stuck with, such as owning their own brick-and-mortar warehouses and leasing planes – those are some huge costs hanging over you. That could be a death knell for them. If it wasn’t for controlling the customer experience, they wouldn’t have done it.

What can companies do to prevent entering more bad data into their supply chains?

Everyone wants good data, but they’re not willing to pay for it. We enable information to be shared in a collaborative environment. What we do enables companies to get the same Amazon services without giving up control. Through our predictive analysis, we can show you what your prices would be should you make a change in your supply chain, track what will happen and assure that you get service levels you want. This can lead to higher profit margins and can move people away from a crisis mentality. In this business, a two to three percent change is a big deal. That’s pretty much most people’s profit margins right there, so it’s a very significant cost to avoid.