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In theory, the idea of an on-demand freight marketplace sounds great. In fact, there has been a big push and a great deal of investment made into automating freight brokerage or non-asset logistics.
In reality, companies that have tried it have not been successful. It’s just not getting adopted from the shipper community nor from the drivers’ side.
What we are seeing is that the automated solutions are basically mobile apps, and drivers don’t necessarily want to be using an app to book loads.
The shippers don’t see a benefit in these on-demand marketplaces either because there is still a middleman involved. To them, this is the same old brokerage model just aided by technology.
Typically, shippers don’t like to work with brokers. The reason is because of the liability. Shippers prefer to work directly with the asset provider, but that is not often possible because of the nature of the trucking industry with so many small carriers.
With these on-demand marketplaces, you usually are paying a transaction fee just to use the service. That is the same thing you would be paying if you were using a broker.
Much of it comes down to liability issues.
The shipper doesn’t know who is on the other side of the platform, who the trucking provider is. Shippers want to know who is picking up the product. Was that trucking company properly vetted? Do they have a safe driving history? Do they have the correct insurance requirement? Have they passed U.S. Department of Transportation drug testing recently?
Shippers want to be privy to all that information, however the problem is that the majority of trucks on the road are owned by owner-operators. Ultimately, the role of the broker or an on-demand marketplace is to connect the shipper to an individual trucking company.
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Even with the on-demand market model, the shipper is not going to know who the carrier is because like the broker, the marketplace does not want the shipper to go around them and solicit the carrier directly.
I think the ideal model is a hybrid one. Companies that are shipping product will customize the marketplace to their unique needs and ensure that all the providers can meet their shipping liabilities. In a way, this means the shipper will become the broker.
Eventually that is where it will head. We have already seen it at some big companies that have developed their own brokerage divisions.
It is very difficult to standardize commercial transportation, and that is what these on-demand marketplaces are trying to do. They are trying to create one massive utopia transportation marketplace, but the reality is that commercial transportation is way too complex for a one-size-fits-all solution.
It is not like you are shipping yourself from the airport and getting into someone’s car. There are certain insurance requirements and there are certain delivery windows. There is a trickle-down effect with the entire supply chain.
What we have seen from some of these on-demand marketplaces is that they are offering other services with the transportation piece and are using those other services — like warehousing — to subsidize transportation. That is not a sustainable model.
Transervice Integrated Solutions, or TIS, delivers both 3PL and 4PL logistics solutions utilizing proprietary technology to execute and solve complex logistics challenges.
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