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April 10, 2017 3:15 AM, EDT
Tech Startups Beat Uber to Freight Market, Connect Drivers With Loads Via Mobile Apps
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This story appears in the April 10 print edition of Transport Topics.

Uber entered the freight world last year, launching speculation and arguments on whether the tech company could strike a second time and do to shipping what it did to passenger transportation — and if so, which segment of freight would have to endure the type of disruption experienced by the taxi industry.

Uber Freight is keeping quiet for now, but other technology firms are mimicking the idea of uniting purchasers and suppliers through smartphone apps. Some of those vendors are gaining traction in the market while others have opted to follow a different path, but either way, more drivers have more apps on their phones and tablets.

The tech vendors say they offer a leveling of the playing field so owner-operators and small fleets can compete with large carriers, while bringing the market place closer to the economist’s ideal of perfect information for all participants. Traditional freight brokers, meanwhile, say they are not technological neophytes, and that they have been using systems to augment their personal relationships for years.

“The purpose of the platform is to eliminate waste,” said Andrew “Drew” McElroy, CEO and co-founder of Transfix, which has distributed its app to 25,000 drivers and handled 20,000 truckload shipments last year.

“We’re trying to aggregate this capacity and provide them with tools,” especially for reducing deadhead, or empty miles. “When you apply technology to scale, you create a virtuous cycle,” McElroy said, adding that he hopes that virtue will prove to be lucrative for Transfix.

“We’re looking to make pennies [per transaction], not dollars — but lots and lots of pennies. Putting more money into [drivers’] pockets is a winning strategy,” he said.

“Freight-tracking technology, along with technology that serves to link smaller carriers with brokers, [third-party logistics providers] and shippers directly, is readily available and has been for roughly a decade,” said Jason Beardall, president of England Logistics Inc. and chairman of the Transportation Intermediaries Association since April 8.

“The providers of such tech have jumped into the industry investing millions, and the end-product offerings are viable and strong. And yet, while there are a handful that have made some traction, none has made their intended splash, or at least a splash that could be compared to something as significant as Uber or Lyft,” said Beardall, whose company is a division of C.R. England Inc., which ranks No. 23 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada.

Uber Freight launched its website in late October but so far has not initiated its service in a major fashion. The company did not respond to e-mail and telephone requests seeking comment.

Moving freight with an app is not just a curious idea, it is a market built to boom, said Wallace Lau of market research firm Frost & Sullivan.

“The arrival of ‘Uber for trucking,’ or mobile-based freight brokering, signifies a tectonic change in freight efficiency and asset utilization,” Lau said in an F&S report, of which he was principal analyst.

“Such a value proposition is the basis for mobile-enabled brokerage to grow” at 66% per year, on average, through 2025. In 2014, Lau said, North American truck brokerage via app generated $100 million in revenue out of a total brokerage market of $120 billion. By 2025, the F&S report said, the mobile-based revenue should grow to $26.4 billion, or 16% of a total market of $165 billion.

The basics of the market, Lau explained, are drivers and carriers making themselves available through an app. Shippers or their brokers are courted and urged to post loads through the service.

Drivers can then shop for loads based on where they are at the moment and where they’d like to go. Pricing for the job is usually set up with an algorithm that considers multiple factors. Brokers and carriers can rate each other, often on a five-star scale, and drivers have to verify insurance and operating authority.

Lau said for-hire trucking is the immediate target for the service, but not the only one.

“We definitely see a situation for private fleets to enhance their productivity and reduce empty miles. The technology helps the entire productivity and efficiency of a fleet, allowing it to more fully utilize its assets,” he said.

Sometimes the apps are used for a pure spot-market situation, or what to do now, and sometimes for planning the week ahead, but they’re not just for small companies, said Dan Lewis, CEO and co-founder of Seattle-based Convoy.

International consumer products manufacturer Unilever NV has a four-year deal with Convoy.

“They reached out to us in 2015, and we’re doing a competitive pilot program,” Lewis said.

“We’re great for the spot market with visibility and real-time tracking, but we’re not just for the spot market. It’s all about visibility. We can lower the cost to do a transaction, even for contract freight,” Lewis said, adding that he has pitched Convoy to RILA, the Retail Industry Leaders Association.

Trucker Path Inc. of Mountain View, California, has two apps on the market, one for navigation, parking, weigh stations and facility reviews, and the newer Truckloads app to match drivers and loads.

The company launched Truckloads to the general market a year ago after initial tests and is now handling about 100,000 loads per day, said CEO and founder Ivan Tsybaev.

He said the freight comes from 1,000 shippers or brokers and 80,000 carriers or drivers are using the app to hunt for freight.

“Mostly, this is for backhauls and the spot market,” said Tsybaev, a former freight forwarder from Russia who has lived in the United States for eight years.

Tsybaev said he is trying to build freight density, so the app is free to drivers. The company uses two financial services to pay for the app: factoring and advances for fuel purchases.

“Subscriptions and fees per transaction are coming,” though, Tsybaev said.

Despite the success of Uber in passenger transportation and all of the growth predicted for freight apps, two companies that have worked in freight booking via app have quit the business and moved on to other ventures they think will work better.

Barry Conlon, CEO and co-founder of Overhaul, doesn’t doubt the utility of the technology being produced, but he has concerns about how to turn it into a successful freight business.

“Freight transportation is not like ride-sharing with a cool app. With cars, if the one you’re driving in breaks down, you get on your phone and get another car.” That won’t work with freight, he said.

When doing the Uber-like app business, Conlon noted a “chicken and the egg paradox.” It’s hard to get hauling capacity without freight to offer and hard to get loads without capacity. He also said many shippers value hav- ing some sort of personal business relationship with a transportation firm.

“It’s a conundrum that’s difficult to change. Here’s the challenge: What differentiates you from C.H. Robinson or XPO? What’s to stop them from do- ing what you’re doing?” in terms of technology development, Conlon asked.

Because of those concerns, Conlon said Austin, Texas-based Overhaul is now doing more work for high-value shippers, including pharmaceuticals and electronics, “who crave visibility” on their shipments. He said these sorts of shippers have often been leery of using the spot market.

Overhaul is not acting as a broker now; the company is often providing services to brokers and other logistics providers.

Meanwhile, Cargo Chief got out of business Feb. 23 when it completed the sale of its brokerage work to Genpro Inc., said Abtin Hamidi, executive vice president and co-founder of Cargo Chief, also based in Mountain View.

Cargo Chief handled 25,000 to 30,000 loads in 2016 and holds 14 patents on data aggregation and integration, Hamidi said. The company helped move freight from 800 companies and had access to 500,000 trucks, but no more.

“We had to do both technology and brokerage, so we could apply our technology to brokerage,” Hamidi said. “We became a very good brokerage, but now we’re taking the technology and developing it even further to make it available to other intermediaries,” mainly brokers.

Cargo Chief still has a Federal Motor Carrier Safety Administration broker’s license even after the Genpro sale. Transfix and Convoy also have licenses, although Trucker Path Truckloads does not.

In addition to selling the Uber-like technology it developed for brokerage work, Hamidi said, Cargo Chief wants to branch out into a new area. It will use predictive analytics and artificial intelligence for scheduling and pricing.

“Ideally, I want to know every move and what happens. I want to know how you make a decision so I can help you make it. The decision process means a lot,” Hamidi said.

Third-party logistics provider Transplace ranks No. 49 on the new Transport Topics Top 50 list of logistics companies. Transportation management is its main business, but that often includes a lot of brokerage work, said Chief Operating Officer Frank McGuigan.

Not only does the Frisco, Texas, firm buy software but it writes a lot of its own as well, said McGuigan, who was eager to rebuff the notion that 3PLs are oblivious to technology.

“We use technology to automate our processes, such as tendering loads. We can do it all without making a phone call,” he said. “For our largest customers, it takes a lot of planning and engineering to create a network” for shipping.

The company uses an auction freight allocation module to put bids out to carriers when needed, but Transplace prefers to avoid the spot market for most moves.

“It can be expensive,” McGuigan said, adding that Transplace works with about 25,000 carriers.

McGuigan said he is pleased about the evolution of technology in transportation, but he cautioned there is a lot more to play out.

“If they have a better way, we’re all for it. Good technology in the hands of small carriers is a good thing,” he said, adding that there’s definitely room for improvement because “there are lots of empty miles in the U.S. industry. If you reduce that, it’s good.

“We’d like to see [the tech companies] make a difference in the industry and hope they add value,” McGuigan said. “We’ll have to see where it all works out.”