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November 1, 2015 4:30 AM, EST

Firms Try to Mimic Uber for Freight Shipments; Analysts See Both Opportunities and Pitfalls

Transfix
This story appears in the Nov. 2 print edition of Transport Topics.

Fledgling companies are advancing the adaptation of Uber’s transportation model to arrange freight shipments, a step that experts believe offers a combination of opportunities in several trucking sectors as well as pitfalls.

Leaders from several of these new companies outlined their progress for Transport Topics, including tens of thousands of loads moved through Cargomatic, a California-based company, and revenue approaching $1 million monthly at Transfix, which is based in New York.

Additionally, Trucker Path, which offers an app to locate places such as truck stops, is about to launch a freight app. Also, 10-4 Systems added an app to its 3-year-old marketplace, which has multiple communications options to match freight and drivers, 10-4 President Travis Rhyan said, adding that $200 million of freight is moved through the app annually.

Likewise, Convoy and LaneHoney have jumped into the freight market, and On the Move Systems is trying to attract investors. Those new companies are in addition to recent start-ups such as Shyp that deploy new technologies to move packages in local markets.

As new approaches proliferate, consultants such as Satish Jindel of SJ Consulting, Geoff Milsom of enVista and Robert Lieb, a Northeastern University professor, see multiple pitfalls in adapting the Uber model to trucking.

Lieb said there are openings for companies that follow Uber’s approach for the freight market, as long as they don’t ignore regulations.

“They could bite off a piece of the truckload market,” he said. “That is pretty wide open for regional truckload on a small scale.”

Less-than-truckload is a “long shot,” Lieb said, because it needs a network with facilities and investments.

He said Uber’s adaptation is being held back by those who enter the freight business without industry knowledge.

Similarly, Jindel said, “They will not have success unless they bring in senior people who have an understanding of how freight moves.”

There are distinctive differences between Uber’s model, which matches a driver and his car with a paying passenger, and the complex, specialized business-to-business world of trucking, Jindel said.

“Trucking requires that people have a [commercial driver license],” he said. “Not every Joe Schmo has a CDL. Every person who is on the street and has a car can take someone somewhere with no limits.”

Despite those challenges, executives expressed confidence in their businesses.

Cargomatic President Brett Parker told TT that his app is “a viable model” to connect with small owner-operators and fleet owners.

“The timing is right,” he said. “It’s about bringing the best of technology and applying it to logistics to make the [trucking] industry better.”

Cargomatic generates half its business from container drayage, while the rest is split among truckload and LTL.

Drew McElroy, CEO of Transfix, targets truckload freight, using more than 6,000 owner-operator and small-fleet drivers. Transfix profit margins are about half of what brokers obtain, which should attract shippers, he said.

“The thesis of the company is that the application of technology allows us to eliminate waste from the supply chain,” McElroy said, including faster driver payments while eliminating human involvement.

Traditional brokers follow more steps, receiving a tender, and putting it into a transportation management system, before people call prospective carriers.

Charles Myers, vice president of strategy at California’s Trucker Path, said its freight app is being tested with 30,000 carriers and more than 400 brokers. It will be available by the end of November.

“This number will be increased twice by attracting new brokers in a few months’ time,” Myers said.

“LaneHoney is a vast change from the current broker model,” CEO Roseanne Stanzione told TT, offering users a comparison of contract, open market and brokered rates. “Our real target is standardizing rapid procurement for large enterprises who manage their own shipments.”

Seattle-based Convoy, whose investors include Jeff Bezos, founder of Amazon, announced in late October that it’s operational in Washington state.

Jindel said any company trying to adapt Uber needs to make sure their providers have operating authority and meet safety requirements. Because freight shipments are aggregated by shippers and carriers, service quality matters more than an Uber ride, where seeker and provider are engaged in a single, independent transaction, he said.

He also said “the [Uber] technology can be leveraged for freight with minor adjustments,” particularly to match shippers or brokers with owner-operators or small fleets.

Milsom said trucking isn’t adopting the Uber model quickly, in part because 80% or more freight moves are done by contract that doesn’t fit today’s app model.

Experienced shippers with substantial freight volume “won’t go to a mobile app” to find capacity, he said, because their freight volumes are greater.

Milsom said brokerages could replicate Uber’s model to create more efficient carrier sourcing.

Small carriers without a dispatcher could benefit as well by making a simpler transaction through an app, he added.

Milsom stressed the advantages to third-party logistics providers of using more apps than machines to reduce steps needed to arrange loads.