The trucking industry is at an exciting but confusing point when it comes to digital load-matching technology and shippers will be brought along for the ride.
A few years ago, the domestic truckload market was seen as a logical place for the sharing economy to take hold.
The theory went something like this: The industry was hyper-fragmented and wildly inefficient. As a result, owners of loads never had access to all the capacity that was actually available at a time they needed it, and carriers drove hundreds of thousands of empty miles.
It wasn’t too much of a stretch to see how the reasoning that led to the rise of ride-sharing technology might lead directly to freight-matching technology. The line was so straight to some, in fact, that Uber (the biggest brand in consumer ride-sharing) decided to enter the world of freight.
But a funny thing has happened to that straight line. It’s zigged and zagged a lot more than some of the folks advocating for load-matching technology (also called freight marketplaces) might have imagined.
And here’s the interesting topical wrinkle: There’s never been a more important time for shippers to get access to capacity. Truckstop.com, which tracks supply and demand in the U.S. trucking market, estimated that there were 60 loads for every truck available in early April, compared to a typical baseline of 10 per truck over the last three years.
In the world of taxis, the sharing economy has enabled a mobile app to help someone locate someone else willing to give them a ride, at any time of day or night. In the context of hotels, it means an app can help a traveler find anything from a private residence that’s free to a hotel willing to rent a room at a significant last-minute discount.
These technologies take advantage of two relatively new phenomena — instant, real-time price discovery and consumer willingness to abandon their reliance on traditional models.
There’s a tendency to peg the emergence of the concept of digital load-matching with the emergence of Uber, but longtime experts in the trucking industry will roll their eyes at that notion and point out that such a concept is essentially nothing more than the evolutionary version of a load board.
But the dollars invested by venture capitalists in load-matching providers suggest there’s something more at play, that the market and underlying technology is ready for a sea change.
However, there are so many factors interacting within this market that it’s head-spinning. Are freight marketplaces designed to wipe out freight brokerages, or assist them? Or, are they designed to become, for lack of a better term, digital freight brokers themselves?
Are these marketplaces intended to comprehensively overhaul the way shippers and carriers interact? Or, are they merely intended to change the way spot loads are transacted?
Will there be a small number of digital freight-matching solutions that dominate in the way Uber and Lyft have in ride-sharing, or does the fragmentation of the trucking industry indicate that the market for these solutions will be similarly fragmented?
Is digital freight-matching technology suited only for the small shippers and carriers that don’t have the necessary leverage with big carriers and big shippers? Or, is there a place for this technology with enterprise shippers, major carriers, and the biggest freight brokers?
And finally, are all these technologies alike, or are there different flavors that indicate one model might be more successful than others?
Driving Concept. On a fundamental level, solutions providers in this space are trying to automate the matching of available capacity and freight. If that seems simple in concept, history has shown that it’s been difficult to execute.
Take the origins of DAT Solutions, for example. DAT began life 40 years ago as a monitor-based system that allowed truckers to view loads electronically, rather than on handwritten note cards pinned to a bulletin board.
The more modern promise of cloud-based solutions that leverage effective algorithms and analyze historical patterns is that the industry can shine a light more clearly on where available drivers are, and what compels them to accept loads. For carriers, the promise is of a tool that lets them determine where loads are available, and whether the rate and route matches their needs.
On a secondary level, these solutions are essentially trying to reduce the empty miles traveled by carriers. That’s also a simple idea that’s complicated by the fragmentation of the industry, and by the wildly divergent needs of individual drivers. It’s also one that freight marketplaces intend to un-complicate.
The third level, and this is quite aspirational at present, is reaching a point where loads can be automatically sequenced in such a way that drivers know not just what the next load is, or even the load after that, but several loads in order.
Different Approaches. It is here where much of the confusion around freight marketplaces emanates, and some of that is due to uncertainty around whether a marketplace is designed to primarily benefit shippers, carriers, or brokers.
Indelibly, there are some solutions designed for brokers, and others designed for shippers and carriers. Almost any solution provider in this space will insist that the goal is to benefit both parties to a transaction, so there must be benefits to the providers of capacity, not just those looking for that capacity.
And that leads to the second area of variety when it comes to different approaches in load-matching: location data.
At their core, marketplaces require detailed, accurate, and virtually real-time data into the location of available loads and capacity. The capacity component has been the hardest problem for which to solve, primarily because the vast majority of U.S. trucking companies are small operations, with little to no technology.
A raft of visibility solutions has emerged in recent years to provide clarity on the location of loads, and those solutions depend on one or more of three primary sources of data: GPS location from driver cell phones, EDI (electronic-data-interchange) status messages, and electronic logging device (ELD) information.
Why is this important? These visibility solutions feed directly into freight marketplaces, and it’s important for those looking to use a digital freight-matching solution to understand which approach a given provider’s solution relies upon.
If you think of these sources of data on a hierarchy of most to least reliable, it would go: ELD, then GPS, then EDI. To be clear, the advantage of one over another might be quite incremental. For instance, one technology might provide the location of a vehicle within a one-mile radius, while another might be more granular, giving the location within a five-foot radius.
How important is that distinction? Well, if a receiving facility needs to know when a driver might arrive with a load, and the data shows it’s a mile away, and there’s heavy traffic on that mile-long stretch, it could be very important.
But in terms of knowing whether there’s available capacity for a load that will be ready in the next four hours, there’s little practical advantage to knowing the location of a truck within a one-mile or five-foot radius.
Still, the market is undoubtedly gravitating toward more granular, real-time data. And the general consensus is that load-matching solutions that use ELD information provide a higher level of granularity than the others. The December 2017 mandate that trucks use ELDs, coupled with the April 1 deadline for stricter enforcement of the mandate, have highlighted the efficacy of this source.
While every freight marketplace wants access to ELD data, some providers have based their platform around that ELD data.
“There are a lot of guys who think they’re going to get access to ELD data, but the problem is, they don’t own that data,” said Ken Evans, chief executiv e officer of Konexial, which provides an ELD app for drivers and last year unveiled its GoLoad freight marketplace. “The hypothesis is that if all this waste could be seen, the market can eliminate it. But then you need to create motivation to share the data for the carriers’ own benefits. Carriers do want access to dynamic load-matching. They want to find that opportunity at the right price, and under a fair set of terms and conditions.
“A lot of people say, we’ll go get the ELD data. Well, why would someone give it to you? We didn’t start our company to be an ELD company. We saw an opportunity to be a direct connection between shippers and carriers. There are people who continued to build walled gardens, and they keep the knowledge inside the garden. We’ve created a true open ecosystem, where parties can directly transact.”
Broker Tools. Another approach is arming brokers with tools to remain relevant.
“One of the biggest problems with the brokerage industry is that they have 30,000 carriers in their network, but only use 10 percent regularly,” said Prasad Gollapalli, CEO of Trucker Tools, which launched its Smart Capacity load-matching solution in late 2017. “The other 90 percent are one-load wonders.”
Until the Smart Capacity platform went live, Trucker Tools was known primarily as a mobile app provider for carriers, providing information and discounts to drivers to make their lives easier. That app, downloaded on 500,000 drivers’ phones, became the foundation for the marketplace, which Trucker Tools sells to brokers.
“The biggest problem for brokers is not knowing where the carrier is,” he said. “The second biggest problem is a lack of accurate information. When a load board gives an available load, 90 percent of those loads are already booked.”
Gollapalli said his approach was built around the idea that relationships between shippers and brokers and carriers can’t be wiped away.
“They are technology brokers,” he said of marketplaces connecting carriers with shippers. “We are doing the opposite. We’re not eliminating the broker, we’re empowering them to do better. They have all the carrier and shipper relationships. We’re eliminating the inefficiencies.
Anybody who is aggregating things, and balancing the needs of both sides, will have a bright future.”
Gollapalli is very intent on building tech that allows brokers to assist drivers in planning a sequence of loads. That, he said, is the key to getting digital load-matching out of the realm of individual transactions and into the realm of strategic relationship-building.
Trucker Tools is not alone in wanting to help brokers. In early April, Cargo Chief, which initially pursued a model as a digitally-driven broker, launched its own capacity-finding solution called C4. Cargo Chief has now become a technology provider for brokers, not a broker itself.
There are seemingly a countless array of others, like LoadSmart, Convoy, Transfix, Fr8Star, and FreightRover. And the traditional load boards, like DAT and Truckstop.com, still command a huge presence in the trucking industry and have adapted quickly to a more competitive environment.
Going Digital. Perhaps the biggest evolution to occur in the freight marketplace arena in the past year is the realization that many solutions providers are actually aspiring now to essentially be digital brokers, not massive disruptors.
This recalibration of the load-matching market has occurred on both the buying and selling side. In other words, brokers and shippers have realized that attempts to truly provide “fully automated load-matching” have not yet lived up to the hype, while load-matching providers have realized that it’s much easier to make a market more efficient when you emulate existing relationships rather than disintermediating those relationships.
In some ways, this comes down to the way shippers prefer to procure freight.
“The core problem Uber faces is that many shippers, and virtually all the larger ones, don’t want to do business with just any carrier,” Steve Banker, vice president of supply chain management at ARC Advisory Group, wrote in a recent blog about the future viability of Uber Freight. “They want to do business with a closed network of trusted carriers. A trusted carrier has sufficient insurance, drivers with safe driving records, often has expertise in special areas—like hazmat or refrigerated shipping—and can be counted on to deliver reliably.
“Large shippers typically develop a route guide that specifies that for a particular lane, two or three carriers are preferred vendors designated to get the initial tenders. Only when preferred vendors can’t take the loads, do shippers reach out to brokers and the spot market to find alternative carriers,” Banker said.
Uber is not alone in finding that the market isn’t necessarily ready for full-scale automated procurement. Other early entrants that sought to create freight marketplaces, like Convoy and Transfix, have quietly and gradually gravitated toward a more digitalized broker model than pure digitized load-matching.
“They’ve become the brokers they were trying to disintermediate,” said Bart de Muynck, a vice president of research at Gartner. “They didn’t understand that’s not how shippers buy freight, and that big carriers aren’t going to play like that. It only works for small carriers that don’t have a back office.”
De Muynck said he doesn’t see large enterprise shippers diving headlong into the digital freight-matching pool. Instead, he sees them dipping their toes, perhaps committing 1 percent or so of their freight spend.
“They want to have tried out these models, so they don’t have to look to it with a knife at their throat,” he said.
TMS Connection. One thing that has become apparent is that freight marketplaces don’t exist in a vacuum. The fragmentation of the industry makes it unlikely that one (or even just two or three) freight marketplace will dominate the market. If anything, the market is more likely to transition to a similarly fragmented, but more efficient version of itself.
It’s also clear that freight marketplaces won’t displace transportation management systems, either those operated by brokers or shippers. Instead, these load-matching platforms must coexist or collaborate with TMSs. And that’s what is happening.
One way for marketplaces to achieve the necessary scale they need (from a supply and demand perspective) is to tie into existing TMS providers, or to provide a clean way for a shipper to connect via its own TMS.
This represents somewhat of an evolving situation for the digital freight matching providers, who likely saw their platform as highly disruptive not only to brokerages, but also to the existing TMS market. Instead of being a place where a shipper transacts wholly or primarily, these marketplaces instead become one of many, sitting alongside traditional brokers and contract carriers.
De Muynck said this especially comes into play as carriers get choosier about the shippers with whom they work.
“We’ve seen shippers who have in the past been 95 percent contract down to 90 or even 85 percent,” he said. “If you’re not a perfect shipper, carriers have started to pick and choose. And companies at an 80 percent tender acceptance are now down to 50 and are really struggling. They’re asking, where do we go to get capacity, so the marketplaces become this middle market.”
And perhaps that’s where the concept of digital load-matching was destined to go all along—not to completely upend the way shippers and brokers procure capacity, but to make it more efficient around the edges.
The sharing economy was never going to be a clean fit for the U.S. trucking industry, but it has ushered in a wave of innovation that will benefit all parties in more incremental and dispersed ways.