Dodging the middleman: On-demand freight matching progress report

| March 03, 2017

Late last year, Overdrive reader Kacie Sill wrote in after reading updates on No Broker Freight and MyRiteLoad. The shipper-exclusive load-matching services were experiencing populating their systems with shippers’ freight, and others’ experiences sounded similar to what she and her husband had seen, trying to suss out “legitimate freight options” among the Wild West of online boards and the new crop of tech-enabled brokerages, Sill wrote. “We are currently members of [DAT’s] TruckersEdge and Truckstop.com, and are struggling with the rate offers,” she added. Were there legit alternatives to those longtime load-board stalwarts?

The answer is yes, but it’s not a black-and-white revolution where mobile apps and smallness always produce better rates and increased efficiencies for owner-operators. When it comes to that new crop of brokerages, pitching their on-demand freight options on the strength of their mobile technology, the “uberization of trucking” reality is proving more complicated than the hype, as predicted by Truckstop.com’s Scott Moscrip and others in 2015.

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When we first reported on the growing niche, some of those firms had spent much of their venture-capital cash on marketing, generating plenty of headlines. More recently, tech and logistics giants Uber and Amazon have signaled intentions of building brokerages themselves, but neither has disclosed plans directly. Uber has begun fishing for interested carriers and shippers alike via its Freight.Uber.com website in advance of launching a commercial service.

Meanwhile, established load services such as DAT and Truckstop.com have plentiful freight, most of it from brokers, though some shippers use the technology to source spot capacity. Others include 123LoadBoard, Truck It Smart and Trucker Path’s relatively new mobile-focused Truckloads app. In December, an established spot freight option, GetLoaded.com, known for its strength in specialty platform freight and hotshot loads, was consolidated into the DAT network.

For the dozens of others already established or fighting for a foothold, the reality of the truckload and less-than-truckload markets has tempered the visions of some. Most carriers want more predictability in scheduling than a purely Uber-style spot-pickup system can offer. While a high-functioning shipper-direct marketplace for freight hasn’t fully materialized for owner-operators, developments hold potential for improvements in rates, freight availability and productivity in the brokered freight landscape.

A lot of the “uberization of trucking” sizzle comes from the implied promise of disintermediation: “the elimination of the middleman and the cost the middle person imposes on the marketplace,” said Noël Perry, FTR Associates senior consultant. “The hypothesis is that they’re so efficient, they’re going to put [established brokers] out of business.”

Speaking at Truckstop.com’s Connected 2016 conference in November, Perry explained that unlike taxis, the trucking market lacks a considerable “excess margin” that can be eliminated. Many people believe taxis were overpriced prior to the rise of Uber and competitor Lyft, particularly in underserved markets. Introduction of better prices created new demand for ride-sharing services. That’s not so for owner-operators’ freight rates or demand for transportation from shippers, Perry said.

“There is no evidence in the truck market that lower prices themselves do anything to demand,” Perry said. “The market is infinitely inelastic. There’s no opportunity for a new guy to expand the market that much because they’re a lot cheaper.”

One example of some of the outsize expectations of some tech players can be seen in Cargomatic, based in Los Angeles. In Overdrive’s 2015 story, founder Brett Parker envisioned local LTL hauling based on quick-and-easy partial-load opportunities covered on demand by truckers on their way to another destination.

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Cargomatic was one of the first freight-disruptor startups to gain traction in local markets out West. The last couple of years have been anything but smooth, as a planned fast expansion to other local markets hit a wall. According to Business Insider and Wall Street Journal reports last year, the company was operating more or less like a traditional brokerage, with a technological assist.

Another newer startup is the Overhaul app founded by Barry Conlon and others in early 2016. Their big idea was similar to the holy grail of “Uber for trucking” brokerages – to attract high-end shippers that move their freight via the contract freight market to a load-matching situation more resembling the spot market.

In Overhaul’s marketplace, owner-operators and small fleets would build credibility through adherence to milestones tracked by the technology. With each milestone hit, the system would deliver better rates and access to higher-end freight, with no brokering.

By this year, however, Conlon had bowed to reality. Who was most interested in his tech platform? “The broker market as it exists today has really embraced what we’re doing,” he says. “Everybody who’s trying to set themselves up to disintermediate the broker market to create this really cool technology – well, it doesn’t take much for an existing broker to really roll out this technology themselves.”

C.H. Robinson in May announced its Carrier Advantage program, intended to reward its highest-performing carriers with first access to freight. Carriers that work closely with C.H. Robinson, meeting volume requirements in relation to carrier size and showing consistency of on-time performance and excellence in other measures, will “get unbridled [and earlier] access to freight,” said Bob Biesterfeld, the company’s president for North American Surface Transportation.

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Biesterfeld said that while automation in customer interactions wasn’t moving quickly toward any kind of disintermediation effect in Robinson’s business, the “technology continues to get more relevant” to the freight transaction and movement process.

Independents might not bypass the broker as their principal freight source anytime soon. But increased speed and reduced friction in interactions with freight partners could deliver closer partnerships and more predictable revenue, and more brokers are moving in the same direction. As Drew Herpich of Coyote Logistics noted in the Truckstop.com Connected panel, speaking to brokers, “If you’re not jumping on technology, you’re going to fall behind.”

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