This story appears in the July 7 print edition of Transport Topics.
The fledgling load-matching service Cargomatic is bidding to capitalize on unused capacity in local trucking markets by using a wireless or smart-phone application, beginning with Southern California.
Cargomatic seeks to match shippers’ small loads with available truck space for dock-to-dock moves, primarily for shipments that typically are a pallet or two and weigh several hundred pounds.
“We want to make companies’ fleets as efficient as possible,” said Brett Parker, Cargomatic’s chief operating officer, who outlined the company’s plan during an interview with Transport Topics on June 28, four days after the company said it had officially begun operations. “We have built an on-demand tool for [fleets] to use when it’s needed most.”
However, analyst Satish Jindel, a principal at SJ Consulting and a former package company executive, said there were competitors capable of offering similar services and raised other questions about Cargomatic’s plan.
The company said it works with 100 carriers and 400 trucks moving in a market stretching 75 to 100 miles from central Los Angeles to the north, east and south.
Parker explained how Cargomatic works:
Shippers who have loads can place them on Cargomatic’s website, which sends the request to participating carriers who have indicated they are ready to handle a load near the shipping location.
“The carrier who accepts the load first gets it,” Parker said.
Carriers see load weight, cargo type, origin and destination, revenue and delivery requirements, with same or next-day delivery within specific time spans.
Rates are set by Cargomatic, which includes a 20% component for its fee and operating costs, Parker said.
Percentage pay is similar to carrier arrangements with independent contractors on longhaul routes, where pay is a percentage of revenue.
Freight moves with a bill of lading and proof of delivery are transmitted through Cargomatic’s app and its computer system. The meshing of its carriers with that wireless technology differentiates Cargomatic from other load-matching businesses.
Parker said Cargomatic resembles a load board. His company is focused solely on the local market, while load boards target longhaul freight. Load board operator DAT said 95% of its freight is longhaul.
The local trucking market is an estimated $70 billion business nationwide, Parker said. “There is no way now to match an owner-operator with a pallet headed in the same direction,” he said.
Parker compared Cargomatic’s app-based transactions business with ride-sharing services such as Uber now operating in several cities around the country. Both use Web-based apps.
“I wish them good luck,” said Jindel, who has been a consultant to freight and package carriers for almost two decades.
“There are so many dot-com businesses that come and go,” Jindel told TT on July 1. “It is someone else’s money, with no infrastructure and no assets. You can hire a college kid to develop an app.”
“Until they reach a scale that they are handling a few million dollars of revenue, it doesn’t have validity in the marketplace,” he added.
Jindel said the comparison with Uber isn’t accurate because of differences between the on-call passenger and for-hire freight businesses.
Jindel also maintained that Cargomatic has both established and potential competition.
For example, Jindel said, courier companies move the same kind of freight Cargomatic is targeting. Parker said Cargomatic isn’t competing in the courier market because it is already saturated.
In addition, Jindel said Cargomatic’s reliance on carriers’ operating authority rather than its own authority means that Cargomatic functions like a broker. There is no barrier, he said, to keep well-funded brokers, with sophisticated technology and deep customer relationships, from pursuing the same market.
Carrier qualifications include verifying authority, commercial driver license, insurance and federal safety performance information. Cargomatic has its own contingent cargo and umbrella insurance in addition to carriers’ coverage, Parker said.
“We take carrier selection very seriously,” said Parker, who came to Cargomatic last year from Triangle Group, a transport and warehousing company.
“The main thing that differentiates us is that we eyeball every carrier and driver,” he said.
That’s done while bringing them into Cargomatic, which often includes training on the technology needed to transmit pickup and delivery information immediately, he said.
Shippers are added through a combination of Cargomatic’s sales force and contacts with third-party logistics operators, including brokers.
The company plans to expand to the East Coast this summer, although Parker declined to say where. The company, based in Venice Beach, California, has 20 employees.
The company has raised $2.6 million from seven individual and corporate investors that will be adequate to fund operations and expansion this year, Parker said.