Sea-Land Sets New Course with IT
By Philip J. Gill
Integration at a Glance
Terminal Automation System Benefits
Sea-Land's Management System
A new corporate structure, facilitated by open systems, helps
an ocean shipping giant prepare for the global market of the next century.
The common wisdom today is that, to compete in the global marketplace, companies
must decentralize management, business operations, even their information
technology (IT) infrastructures. Only by unleashing centralized power can
a company achieve its potential, empowering local offices to respond quickly
to customer needs and market conditions.
Sea-Land Service, Inc., a leading provider of worldwide containerized cargo
shipping, is bucking this ground swell by setting sail on a major reorganization
that goes against the current of decentralization. Instead, Sea-Land centralized
its senior management, its core business operations and its information
systems (IS) department at a new worldwide corporate headquarters in Charlotte,
NC. "Our customers' needs changed," explains Jim Watkins, staff
vice president of IT. "We used to have an ocean-based focus; now we
have a global focus."
In 1956, Sea-Land, then known as McLean Industries, virtually invented the
containerized shipping industry as we know it today. The company strapped
a container full of cargo to the deck of a converted oil tanker, which then
sailed successfully from Newark, NJ, to Houston. In 1995, Sea-Land, now
one of five operating companies of CSX Corp., a $9 billion international
freight transportation conglomerate, began to reinvent itself to face global
competition in the coming years. The unit, which earned almost $3.5 billion
in revenues in 1994, has undergone management reorganization and corporate
consolidation, backed by major changes in its IT operations and infrastructure.
Sea-Land has outsourced and downsized key IT operations, and embarked on
a series of new strategic IS initiatives that will be handled by an internal
department now free to focus on business operations. The new systems will
be built on open technologies, which Sea-Land's IS department defines broadly,
beyond just Unix systems, Ethernet local-area networks (LANs) and relational
database management systems (RDBMSs). Microsoft's Windows, Windows NT and
Visual Basic programming language, and Powersoft's PowerBuilder application
development tool amount to de facto standards in the corporate computing
environment, and IS works to integrate them with other systems.
Although Watkins believes open systems enables Sea-Land to develop important
new applications faster, with higher quality and at lower cost than under
the proprietary model, that alone does not justify the concept. "That's
not enough for me," he says. "What's important is that open systems
supports our business as we see it. Certain pieces of that business need
to be centralized, others decentralized. The fact that open systems allows
us to develop new systems that fit this business model, and still provide
access to our legacy systems, helps a great deal."
A Unified Front
Like most other industries today, freight transportation sees a future whose
business dynamics and operating environment are quite different than in
the past. "There are external influences surrounding our business reorganization,"
Watkins says. "For one thing, there's the deregulation of the ocean
shipping industry. The Federal Maritime Commission regulates the ocean shipping
industry and publishes tariffs. [Currently] we're a common carrier, just
like the railroads, trucking and airline industries used to be."
Secondly, competition is no longer regional or national. The new global
nature of business forces companies, when they can't expand themselves,
to form alliances overseas or at home. In Sea-Land's case, it has struck
up a strategic partnership alliance with Maersk, a Copenhagen-based shipping
business and sometime competitor. Through their alliance, Watkins explains,
the two companies will determine the best way to deploy resources to their
Obtaining a single, unified view of operations--a global view, as it were--is
essential to charting the changing business environment. Senior managers
were convinced that, without such a unified view, says Watkins, the company
would not be able to respond to changes in the marketplace and to improve
customer service. Sea-Land had been a largely decentralized company. Its
three major business units operated independently from one another, even
to the extent that they maintained their own information systems for key
As part of the shift in business focus, Sea-Land underwent a massive reorganization.
"We consolidated various senior management from around the world to
the new headquarters in Charlotte," Watkins recalls.
The reorganization was felt up and down the company structure, and included
layoffs and reassignments in all areas of the company. About 100 members
of the IS staff lost their jobs, either because they chose to stay in the
New York metropolitan area or because their positions were consolidated.
Although Sea-Land opted to "recentralize" management and operations,
the company adopted a flexible IS strategy. One of the most drastic changes
was the decision to outsource the care of its legacy mainframe systems to
offshore programmers. Programming teams in India and the Philippines now
do all maintenance and upgrades to its existing mainframe applications.
The ultimate goal is to phase out these applications, largely in favor of
client/server systems. But that will take time, and even then Sea-Land envisions
a continuing, though diminished, role for its mainframe. "We still
have these programs and the need for centralized access to data," says
Watkins. "The mainframe will evolve into a central server, but it will
take five years to make that transition."
In the meantime, someone has to service those systems, which are accessed
remotely by users worldwide through IBM 3270 applications. With costs as
they were, he says, it didn't make sense to continue maintenance with the
in-house IS staff, whose talents could be put to better use elsewhere.
Sea-Land's own IS personnel will deal with downsized, client/server versions
of some legacy applications and, more importantly, build new systems that
can offer the company strategic and competitive advantages. "We have
redefined the group to be much closer to the business," says Watkins.
In this regard, the company is in line with current IS trends. Rather than
being confined to one data center, personnel have been turned into "consulting
analysts, business analysts, and project managers," according to Watkins.
"We moved everybody out to sit with the Sea-Land people."
The way in which IT resources are managed and deployed also has changed
dramatically. "We are becoming a project-based organization, not a
functional or staff-based organization," says Watkins. This makes for
fluid, responsive use of people and technology. "The company looks
at the staff and reallocates them once a year to meet the project mix,"
he explains. "This makes us a nimble organization, though it does require
a big planning effort once a year."
Getting a Grip
With the new organization in place, one of the first efforts IS made was
to streamline key business operations through increased automation. That
has taken the form of two new client/server applications developed by the
redeployed internal staff.
The first application, the Terminal Automation System (TAS), automates the
operational aspects of cargo shipping. "The system tracks everything
that happens, from the time a container arrives at the gate until the ship
leaves," says Watkins. "Most of the time, the containers get moved
around before they're finally put on the ships. We need to know where [a
container] is, and if it's been picked up or checked out."
TAS replaces what was largely a manual, paper-based process, although some
mainframe pieces were involved. Automating such a system has provided "impressive
productivity gains," according to Watkins.
TAS has been installed at two locations, Elizabeth, NJ, and Charleston,
SC. In Elizabeth, TAS has helped reduce operating expenses by $3 million,
not to mention several other operational efficiencies. At Charleston, among
other benefits, it has enabled Sea-Land to increase cargo volume 40 percent
without adding personnel. (For more details, see "Terminal
Automation System Benefits")
The second new client/server system, the Shipment Management Project, is
designed to improve customer service. The project has been under development
since December. As its name implies, it will manage customer shipments and
provide online information about cargo, the physical location of goods,
their current status, expected shipping and arrival dates, and other pertinent
"The shipment management system is a competitive response," says
Watkins. "We can now look at each shipment as a continuous process,
so that at any moment we know the location of the goods and other information
that's important to our customers."
Sea-Land staff developed both systems using the PowerBuilder tool. They
are currently deployed on Windows NT servers, although TAS was originally
developed to run on IBM's OS/2 operating system.
Sea-Land's reorganization goes against much of the common wisdom of the
containerized cargo shipping business. For instance, it is generally assumed
that the way to make money is to increase volume. "The shipping industry
for years has been known as revenues and volume. If you push up volume,
you push up revenues, and you'll make more money," says Henry Hill,
director of Sea-Land's yield management system (YMS). "In general,
more was better; full ships meant high operating profits."
The hole in this assumption was that no one could tell if they were making
money on every booking or just on some bookings. "We would carry some
loads that appeared to be making money for Sea-Land, but in fact they may
not have been," Hill recalls. "Volume and revenue appeared to
be up, but they were still not making the money that they should."
As part of the reorganization, senior management decided that the IS department
should take a more proactive stance, specifically by delivering systems
that would utilize available resources to maximize both revenues and profits.
A YMS takes in information on demand and supply. For Sea-Land, demand
translates into forecasts for cargo opportunities, while supply is
the pool of available equipment, including not just the number of containers
available, but their size and whether they can provide refrigeration. The
YMS combines this information with route networks and vessel schedules to
maximize both utilization and revenue.
"The cargo planning helps show us the best way to deploy our assets,"
says Hill. "It shows us the opportunities we should go after and ones
that we should pass on." After that optimized information has been
massaged and analyzed, it is sent to the sales force, which is expected
to use the reports and forecasts to help set sales targets and goals.
The YMS originally started as a pilot in one of Sea-Land's divisions. Before
the reorganization, each business unit had its own YMS. Then Sea-Land consolidated
the three independent YMS operations into a single unit, which was centralized
and expanded company-wide.
The YMS is Sea-Land's main Unix system. It runs on a Sun Microsystems Sparcstation-20
workstation configured as a server. About 10 Sparcstation-10 and -20 workstations,
plus a handful of X terminals, access the YMS across the Ethernet LAN that
runs through the new corporate headquarters building in Charlotte.
The YMS consists of two software components. Sea-Land's IS staff periodically
downloads information from a variety of sources, including its mainframe,
into an Oracle 7 RDBMS, which feeds that information into a customized linear
optimization software package from C-Plex, Inc., of Lake Tahoe, CA. C-Plex
tailored the software, called the Dynamic Yield Management System, to fit
According to Hill, thus far the company has realized two key benefits from
the new system. First, it has provided the desired worldwide view. "[Users]
used to run specific optimizations for their division," says Hill.
"Now we run global optimization. Our assumptions are set at the global
level." Secondly, it has paid off financially. "For 1995, our
goal was $30 million in benefits from having it," he says. "We
expect to meet that goal."
With the YMS system in place, Sea-Land realized that, to act on the plans
the YMS might produce, its sales force would need better IT support. As
a result of a quality inspection team (QIT) report, the company embarked
on a dramatic upgrading effort whose result is the Sea-Land Account Management
"The QIT found that the sales force lacked easy access to information
that is truly accurate and comprehensive," says Cindy Hill, who, as
manager of information resources for the IS department, oversees SLAMS and
related laptop-based applications. "With SLAMS, we give them tools
to do that." SLAMS includes modules for call planning, call results
and forecasting, and a territory snapshot on volumes, ports and commodities,
as well as ad hoc reporting capabilities.
In its current iteration, SLAMS is a custom-built application running on
laptop PCs from AST Research with Intel 486 66MHz processors, 8MB of RAM
and 250MB or 540MB hard drives. The PCs run Microsoft Windows, and a SLAMS
relational database stores a variety of account and territory information.
Also loaded on each laptop is a copy of Microsoft Office and Delrina WinFax
Pro, which the sales reps use to create reports, write letters, produce
mass mailings and execute more daily business activities.
"Our first goal was mainframe independence," says Hill. "All
the mainframe-based applications were written in CICS and VSAM, and were
cumbersome to operate." The mainframe hasn't been dispensed with altogether.
SLAMS relies on a territory snapshot it receives from the mainframe, and
it includes information on the past and current accounts in that territory,
account history, current bookings and the like. About 250 of the 350-person
worldwide sales force are up and running on SLAMS, says Hill.
In phase two, anticipated for later this year, Sea-Land plans to upgrade
SLAMS for two-way information exchange with the mainframe. Currently, SLAMS
cannot download mainframe-based information directly from Charlotte headquarters,
leaving sales reps and headquarters to exchange information by telephone
and paper-based postal mail.
That is about to change. A beta group of about 20 Sea-Land sales reps is
testing a new version that provides automated two-way information exchange.
The SLAMS database will be able to automatically download and refresh its
data from the mainframe, and upload to the mainframe changes made to the
laptop database. The new version also will upgrade the operating environment
to Windows 95 and add new host communications capabilities. Sales reps will
have access to a Windows 95-based Remote Access Server in Charlotte. It
runs Microsoft's SQL Server RDBMS on an NT platform.
Such access is only the first step toward easier two-way information exchanges.
Also on the agenda is a link to the YMS, possibly through direct links to
the Unix servers or through remote logons to the corporate Ethernet LAN.
Right now, Sea-Land distributes the YMS reports via paper mailings, but
Hill thinks direct links to the YMS and other resources are essential. "We
will definitely interface to the yield management system and other databases
on product knowledge, for instance," she says.
Sea-Land has just begun to study how to accomplish that goal. The two-way
RAS server connection for the sales reps' mobile laptops will replace the
current DOS-based dial-up software. Before connecting the laptops to its
other systems, however, Sea-Land wants to establish a more sophisticated
communications infrastructure. In that regard, it might not be necessary
for the laptop users to enter the corporate computing network through the
RAS server for all applications.
"We'd like to make those connections realtime, so the databases are
updated instantly," Hill says. Open systems will play a key role in
achieving that end. Sea-Land is currently evaluating various middleware
offerings, including several Sybase products, with the intention of coordinating
the updates of data residing on legacy and open systems.
These four new systems are but the first changes. Sea-Land's new management
structure and IT infrastructure will provide a global view of operations
to senior management in Charlotte, who will be able to communicate that
global view to all personnel around the world. In that way, management intends
to make sure the entire organization is charting a common course.
Philip J. Gill is a San Diego-based free-lance writer and
editor. He can be reached at firstname.lastname@example.org.