Disruption. Transparency. Visibility. Efficiency. Trust. Collaboration. Algorithms. Artificial Intelligence. This is the vocabulary of the rapidly changing world of technology and logistics.
Some envision technology in the freight market doing what Uber and Lyft have done in the ride-sharing market or Airbnb in the vacation market. But automating logistics is much more complex.
There are indeed a fast-growing number of automated load-matching technologies. But other technology solutions take a wide range of approaches to better connect carriers, shippers, and freight brokers, to make logistics and supply chains run more efficiently, and to drive more profits for users. There’s everything from digital brokers and electronic load boards to sophisticated systems that manage the entire process from load tender to payment. Some focus on the immediate transaction of the spot market. Others aim to foster greater collaboration.
“The power of software and technology, combined with relationships, has the potential to make the whole freight and logistics value chain much more efficient and effective,” says Jeff Hopper, chief marketing officer for DAT Services, which got its start replacing truckstop load boards of handwritten note cards pinned to a bulletin board with electronic displays.
Freight-matching in the spot market
Only about 30% of the freight moved by truck is transacted on the spot market, according to FTR. Shippers and carriers alike want the stability of long-term contracts for certain lanes. But there’s still plenty of transactional freight, and a lot of inefficiencies to be addressed, as spreadsheets, notebooks, telephones and laminated maps are still the tools of choice for many small brokers and carriers.
“Commercial freight is still fraught with archaic, antiquated means of how you connect a load with a transporter,” says Mike Williams, CEO of uShip, which started 15 years ago as a sort of eBay for people wanting to find a bit of extra capacity for small shipments such as items of furniture. The company has expanded into other areas, including a less-than-truckload platform and a partnership with global logistics giant DB Schenker.
“I think the biggest change has been the ability to move to a digital relationship from an email and phone relationship – that’s where everybody’s trying to get to,” says Robert Brothers, manager of product development for McLeod Software.
While Silicon Valley startups aiming to drag the industry into the 21st century have gotten a lot of attention, there are many established brokers and third-party logistics companies using technology to better serve shipper customers and carriers in their network.
For instance, one of the world’s largest 3PLs, C.H. Robinson, offers its contract carriers electronic tools called Navisphere, with features such as SmartMatch, which intuitively finds loads for you, and billing status, which lets you quickly see payments issued on loads.
XPO Logistics says 22,000 carriers have signed up with its mobile app, Drive XPO, since its launch last year. More than 50% of the company’s loads are now offered to its carriers electronically, customized for their preferences.
Some companies have turned to digital brokerage opportunities after seeing first-hand industry needs.
Lidia Yan founded Next Trucking, a digital broker focused on drayage at Southern California ports. Traditional brokers, she says, “have their more preferred carriers they work with. The digital brokers can bring transparency. We allow shippers to connect directly without a lot of human intervention. It gives more to the carriers, because they will be paid a fair market price. And the shippers can trace and track.”
Digital broker Transfix was started five years ago by founders with experience in the trucking and brokerage business. “Like any other broker, our job is to help get shippers and carriers connected,” explains Drew McElroy, co-founder and CEO. But it tries to streamline that as much as possible via technology.
“The vast majority of people moving freight are still old-school brokers,” he says, matching loads one by one. “In any given market on any day, we know how many drivers are looking for loads and how many loads we have. Our system looks at best solutions for minimizing empty mileage and wait time for these 30 loads and 30 drivers.” Transfix uses algorithms to match freight and trucks that allow its carriers to get more loaded miles on a weekly basis. “Our goal is to have choices the minute you deliver – or even before you deliver – your headhaul.”
The magic of matching
Using technology to help match available loads with available trucks on the spot market is not a new concept. Truckstop.com, for instance, started using the internet in the ’90s (then known as Internet Truckstop) to create a virtual load board, and it has continued to invest in technology to help match trucks and loads.
“We’re not trying to eliminate the relationship between carriers and brokers,” says Truckstop.com CEO Paris Cole. By giving visibility to both sides into factors such as pricing, the company believes it can eliminate a lot of waste in those calls.
Transplace was founded in 2010 as an internet-based transportation logistics company. “Finding the next load for a truck before it’s been dispatched on the first leg or while it’s on the first leg is harder than it seems,” says Jeff Thomas, senior vice president of capacity services. “Through artificial intelligence, we’ve been able to identify opportunities that have a strong possibility of success, and that is translating to fewer empty miles and more multi-leg dispatches. Quite frankly, it’s good for us, for the carrier and for the shipper, and it’s keeping trucks in our network.”
There are a number of companies that aim to take even more inefficiencies out of the process, even entirely automating load-matching.
Convoy, for instance, in February announced that it had achieved 100% matching in key markets. “What automated matching means is no humans are involved in helping the carrier find the job,” explains Nikhil Jaipuria, director of product, carriers. “What we’ve seen is matching a carrier with a particular load is one of the more time-consuming and expensive tasks. In the traditional brokerage model it takes about 100 phone calls, and carriers say they spend 50 to 75% of their time looking for loads. Through the Convoy app, what we’ve done is largely eliminated the call-intensive brokerage model and are allowing carriers to get matched with loads automatically.” However, Convoy also relies on humans to augment the technology when brokering specialized loads or when it has specific demands from shippers.
Beyond the spot market
Matching up freight with available capacity outside of the usual bid-and-contract process is not limited to the spot market.
Lanehub, for instance, says its technology lets shippers and carriers work together to improve utilization on lanes on a longer-term basis. Shippers load their lane networks into the company’s software. “It will show them which other members line up well with their network, and they can mutually agree to share those cases where they do have fits between them,” explains Chandler Hall, COO and executive vice president. Say one shipper has freight going from point A to point B, while another has freight going from B to A. Lanehub’s software will show them those matches and help the two connect to set up a deal. Many shippers use it to find freight on empty legs in their private or dedicated fleets. They also can work with their carriers to help reduce empty miles or get more consistent freight.
EKA Solutions, which is rolling out a cloud-based, end-to-end Omni-TMS for shippers, carriers, and brokers, developed a marketplace module, EKA MPlace. It lets shipper and brokers trade with precision in the more dynamic carrier capacity price environment, says J.J. Singh, EKA founder, chairman and CEO.
A shipper may have a new customer or a new lane not covered by its existing long-term carrier contracts and route guide, explains EKA President Mark Walker. “They don’t just want to shop it out to just anybody” in the spot market, he says. “Shippers can put that shipment [in mPlace] so their trusted carriers and brokers can see the load and make a longer-term deal.”
Supply chain visibility
Visibility is key in this new world. This includes the ability to know where trucks are at all times – something that has been made easier with the electronic logging device mandate and rapid advances in vehicle telematics – as well as visibility into pricing, detention, and other areas.
Part of what’s driving this demand for visibility in the supply chain is what’s called the Amazon effect. E-commerce customers expect to know when their shipment is
going to arrive and where it is in the system. While that can happen with big parcel carriers such as UPS and FedEx, small carriers that can’t provide that kind of visibility may be left out of the market.
“If Amazon ships it on a small carrier, we’re not going to know where that order is,” explains EKA’s Walker. EKA says its cloud-based Omni-TMS platform is affordable for small- to medium-size carriers, as well as smaller shippers and brokers.
“With capacity as tight as it’s been, it’s been very difficult for shippers to get their freight moved and have visibility into those freight movements,” says Bryan Coyne, general manager of visibility for Trimble Transportation. Visibility companies such as 10-4 (now part of Trimble Visibility) or FourKites do a good job of helping shippers see where their loads are, he says, whether they are being hauled by a contract carrier or through a brokerage relationship.
“One of the huge things technology is bringing to the table when we look at the supply chain is having the ability to see, across multiple different carriers, the freight movements that are out there, so [shippers] can more accurately plan their activity,” Coyne says. “Whether it’s inbound supplies for factories or the outbound distribution, they can direct their resources in the right area.”
While Trimble Visibility’s customers are shippers, carriers that have contracts with those shippers are also entered into the system, giving those carriers the ability to provide the kind of visibility that “may be table stakes to the shipper,” he says.
One of the key areas of visibility made possible by newer technology in pricing and payments.
For instance, McLeod offers its customers digital freight-matching tools within its TMS. The difference today, Brothers says, is in pricing visibility that allows carriers to make a decision on a price immediately.
“In the past when you got a tender, you had a contracted price you agreed on through some bid process, or you picked up the phone and negotiated a price. The pricing is now part of the communication mechanism. Brokers and shippers are able to do that because the pricing data available in the market is so much better and so much more reliable,” Brothers explains.
In the past, it was hard to know the true price of a load, says Convoy’s Jaipuria. “One of the things that helps carriers earn more is automated bidding.” Through Convoy’s app, carriers can specify the lanes they want to run, when they’ll be empty, and what rate works for their business. For every load that comes into the Convoy network, the app automatically compares it with their preferences. If it works, the load is offered in the app and all the carrier has to do is accept. “No negotiating, no back and forth, no calling brokers to check for new loads. One tap and you’re done.”
Another example is Loadsmart. It integrates with the shipper’s transportation management system via API to access shipment data, and runs each shipment through a machine learning pricing algorithm to return a live, bookable rate directly to the shipper’s TMS. This allows the shipper to compare the prices from other carriers and brokers, which are logged in their static rate tree, with Loadsmart’s bookable rate. Instead of the shipper’s load planner manually comparing Loadsmart’s pre-spot dynamic prices with static rates from their routing guide, this is done automatically on a server. Because it is given real-time, the rate is always live and can be booked with one click.
Technology providers say pricing automation has the potential to deliver lower costs for shippers, but at the same time higher rates for carriers, because the broker doesn’t take as big of a bite.
“Brokers were not always thought of as good business partners,” says Kate Kaufman, director of account ops for Uber Freight. “You were just expecting to be taken advantage of.” She says shippers have been surprised by the low rates, but like Uber Rides, Uber Freight pricing is based on proven algorithms and on what’s happening right now in the marketplace.
“Carriers are equally surprised,” she says. “Because we’re not engaging in that hidden margin, where who knows if [the broker] took 10% or 50%, our prices are fair [and] we put them out there for everyone to see. And that has changed the game.”
Building trust and collaboration
While some freight may be able to be matched entirely without human interaction, few believe this technology will bring about the end of brokers and 3PLs.
“There is plenty of room to automate some of the transactions in the marketplace, and to make them fully digital where price is the only element,” says EKA’s Walker. But it doesn’t work for all types of freight. He cites produce, for instance. “Few people can transport produce because it has so many unusual characteristics and special handling issues around it. You can probably think of other non CPG [consumer packaged goods] type freight that’s not just drop a trailer and move it from point A to point B and I’m done.” Oversize loads, for instance, and high-security loads such as pharmaceuticals or defense.
“There is only a certain type of freight that is applicable to total digitization,” Singh adds. “The market is so big that even if it’s only 10 to 15%, you create a lot of bling. They are not going to be able to take over the world.”
In fact, technology can improve collaboration and relationships between shippers, carriers, and brokers, by building trust.
“Transparency and trust has always been an issue in the industry, and by using technology in our approach to trucking, we want to make sure carriers have control to make the best decisions,” says Convoy’s Jaipuria. “But across the board we’re driving more efficiency and transparency, which I think will engender more trust. The shipper gets a higher quality of service, and carriers get high-quality loads and have piece of mind they will get paid as promised.”
DAT’s Hopper contends trust is becoming even more important. “I think like in anything in the business world, smart people who are serious about solving business problems realize that trust is important. Brokers are realizing this, too, and they’re going to treat carriers well and find good loads for them. As a neutral platform, we feel we’re helping them facilitate that.”
Part of that involves crowd-sourced data that helps carriers and shippers decide who they want to – and don’t want to – work with.
Transfix, for example, gives shippers and carriers the ability to rate each other. “If you’re not behaving well, in our network we capture that and there starts to be real implications,” McElroy says. Drivers who don’t make appointments get matched with loads less frequently. Shippers who continually detain carriers? “Those sort of things get reflected in your price. We’re making the consequences of bad behavior start to be felt by folks.”
Since Uber Freight added shipper facility ratings to its load-matching app, in much the same way it added user ratings to its rideshare platform, “we see a lot more emphasis on the shipper side into the collaboration they can have with the carrier,” says Xinfeng Le, Uber Freight’s carrier product lead. “The shipper wants to become the shipper of choice for carriers so they can attract high-quality carriers to haul loads for them and lower their costs in terms of carrying trucking capacity.”
KeepTruckin, a company that started out as an electronic log provider and since has moved into fleet management solutions and load-matching, also has added shipper facility insights to its platform. “We’ll be able to deliver to carriers what the driver experience is at those facilities and leverage the power of the network to deliver those insights,” says CEO Shoiab Makani. “We think it’s going to be really valuable for our carriers to understand the shippers they serve and make better planning decisions.”
One company believes blockchain-driven smart contracts will enable a system of “trust but verify.”
DexFreight is in final beta-testing of a decentralized, blockchain-based logistics platform that uses smart contracts used by shippers, carriers and “other supply chain stakeholders,” such as brokers.
“Everyone talks about taking out the middleman, about the broker disappearing, but we have a different vision,” says dexFreight co-founder Hector Hernandez. “Blockchain is not about tracking or pricing. It’s about collaboration, a new business model. I think there’s going to be an evolution of the role of the 3PL.”
Disruption or evolution?
Next Trucking’s Lidia Yan believes that in the long run, digital brokers will be able to replace traditional brokers. But not everyone does.
“I know some [traditional brokerage/3PL companies] are trying to go the technology way and want to do their own freight-matching software or TMS,” she says. “But technology startups, we’re faster, we’re more efficient, we’re smaller and more nimble, so we can adapt to the market a lot faster, where large traditional brokers have to disrupt themselves.”
KeepTruckin’s Makani doesn’t like the word disruption. “I think that’s the wrong framing. I think business is evolving. Fleets, carriers, are recognizing that they can benefit from technology. There was a lot of resistance at one point, but that has really changed. You’re seeing drivers, even small fleets recognize they need to use modern technology if they want to compete.”
At the same time, however, “We think brokers and 3PLs serve an important function. To us it’s not about replacing the broker or 3PL – it’s about enabling them, allowing them to access capacity in a much more efficient way.”
Truckstop.com’s Cole also takes issue with the notion of disruption. “These new entrants, and the funds being poured into technology in the transportation and logistics industry, it’s bringing awareness of what technology can do. Unfortunately, I think sometimes some of the new entrants talk about how they’re going to ‘disrupt’ the industry more than they talk about how they’re going to enable the industry.”
Transplace’s Thomas believes technology that completely replaces the relationships between shipper, carrier, and broker or 3PL with automation is “probably missing the finer points. Ultimately there are still choices. People do business with the people they want to do business with. I believe the companies that will flourish will keep relationships with carriers as part of their arsenal.”