A Transplace employee working in the company’s platform. ( Photo: Transplace )
A leading provider of transportation management and logistics technology is bringing on a new chief technology officer (CTO) to build more transaction-processing bandwidth and capacity on the company’s highly automated platform.
Transplace announced that Jim French joined the company as its new CTO. French served previously as CTO at MoneyGram (NASDAQ: MGI), a publicly traded payments company, and spent 18 years at American Airlines (NASDAQ: AAL) and Sabre Corporation (NASDAQ: SABR) in several executive technology roles. Mike Dieter, Transplace’s former CTO, will transition to the chief information officer role.
In 2018, Transplace experienced record percentage growth in both top and bottom line revenue, and projects double-digit growth in 2019.
FreightWaves spoke to French and CEO Frank McGuigan about Transplace’s technology, the outlook for mergers and acquisitions in the third-party logistics (3PL) space, and the opportunity for growth in transportation management.
“The opportunity and the vision at Transplace is compelling,” French began, “and we have a terrific and engaged customer base.” French said that while verticals may change, there were some fundamentals about technology development that did not, especially the imperatives of continuous improvement, crisp execution and a long-term strategy to push forward product development and customer experience.
French mentioned his experience with high-volume transactions processes at MoneyGram, and McGuigan agreed that Transplace was particularly interested in expanding its platform’s “bandwidth and capacity.”
McGuigan noted that although Transplace had made large investments in developing technology that its shipper customers asked for, having a coherent “build vs. buy philosophy” was key.
When customers shipping high-value chemicals requested a real-time visibility solution specifically tailored to the environmental conditions pertinent to the transportation of those chemicals, Transplace built it for them.
“Our customers wanted us to build a global control tower to give every stakeholder in the logistics supply chain visibility internal and external on all loads and transactions,” McGuigan said. “We built that and delivered that, but one of the core components is how do you get the real-time visibility? We do business with the companies that are already in that space. That’s something we could build, but we asked ourselves, what’s the quickest way to shipper value?”
“It’s our job in technology to integrate the external and internal capabilities so that it feels like one platform for our users—our job to manage the complexity,” French explained.
McGuigan said that shippers’ awareness of new technology and expectations for its 3PLs have been raised by increased media exposure.
“Our customers see everything that’s out there and they expect Transplace to find out how it’s meaningful to their business, and by meaningful I mean things that increase topline and bottomline,” McGuigan said. The Third Party Logistics Study 2019 reported that the IT gap—measuring the difference between the percentage of shippers who say technology is very important and the percentage of shippers who say that they are satisfied with their 3PLs’ tech capability—fell to 38 percent this year, down from 56 percent last year.
FreightWaves asked McGuigan and French about recent trends in digital freight brokerage, automated load matching, and realtime market rate pricing. McGuigan said that Transplace approaches technology from the shipper’s view out, and constantly asks what value a service offering would bring to the shipper.
“We have $8 billion of freight flowing through our system, including 20 million shipments,” McGuigan said. “Shipment automation has always been at the core. More than 85 percent of what we do goes from shipment to cash without a human touch.”
While there are still opportunities to automate Transplace’s brokerage and make it more efficient, McGuigan was skeptical that it would make a difference to his customers on the four things that mattered: service, cost, velocity and visibility. A good brokerage has an all-in cost per load of $20 to $40, McGuigan explained, and he said that he did not believe that brokerages operating at the low end of that range returned the value to their customers.
Transplace has accelerated the process of optimizing its network and removing empty miles over the past two years, and this year will roll out an artificial intelligence tool that looks at all orders in a network, IDs them, selects which are the best to match and automatically executes.
Finally, we discussed the outlook for mergers and acquisitions this year in the 3PL space. McGuigan reflected on the acquisition of Yusen Logistics’ intermodal marketing company and over-the-road brokerage group and reiterated that acquiring assets was not in Transplace’s M&A strategy, developed with private equity investor TPG Capital.
“I do think that last year was a terrific convergence of market-based conditions, low interest rates, and a large amount of cash in the coffers of PE companies coming together,” McGuigan recalled. “If you were a brokerage it was a good time to put your company up for sale. But when we look at those companies, we ask ‘how does it help our core businesses?’ Nothing fit cleanly with us until Yusen—we looked at a lot and passed on a lot.”
The volatility and trucking rate inflation of 2018 will encourage more large shippers to consider managed transportation, McGuigan believes.
“We’re engaging with companies right now, traditional in-sourcers in the Fortune 50, who are already using our help for engineering and benchmarking and procuring,” McGuigan said. “Ultimately, it is our very strong opinion that Transplace does this better than most companies can themselves and that will raise the opportunity for the industry in general.”