Companies like Lyft, Airbnb, and Kickstarter use technology platforms to connect customers with service providers. And that same concept has made its way to the trucking markets, where companies like Convoy, Transfix, Uber Freight and Loadsmart are using algorithms to pair carriers with shippers who need their loads delivered.
This is no passing fad either. According to Frost & Sullivan, the digital freight brokerage market (aka, “truck-as-a-service” or TaaS) is expected to surpass $52 billion in annual revenues by 2025—up from $11.2 billion in 2018. Thanks to that revenue potential, the research firm expects digital freight brokerage to be the biggest market segment, with the telematics devices segment growing from 25.7 million units in 2018 to more than 73.1 million in 2025.
“With the world’s leading truck OEMs like the Traton Group, Daimler Trucks and Volvo Trucks showing clear intention to adopt connected, autonomous, digital and smart services,” Frost &
Sullivan analysts conclude, “TaaS is
set to take off.”
Digital freight matchmaking
A relatively new approach to trucking, digital freight matching uses technology to help truckers and couriers fill empty lanes—a service especially relevant for the 97% of carriers that operate 20 or fewer trucks. With digital freight matching, drivers can use a mobile app to match their truck with an available load.
“After a truck has delivered its load and is heading back to its origin point with an empty trailer, it can use digital freight matching to avoid deadhead miles,” says Cunnane. “On the LTL delivery side, here’s a driver with extra capacity—so why not fill that capacity and make the route more profitable?”
In surveying the current TaaS environment, Cunnane says Uber is probably the most interesting company to watch right now. “Lots of companies want to be the ‘Uber of freight,’ but Uber has the name recognition and the money to invest,” he says. “In fact, Uber just announced that it’s expanding its trucking business to Europe.”
Bart De Muynck, Gartner’s research vice president, transportation technology, likes to think of digital freight matching, or TaaS, as the “digitization of transportation networks.” Much like we’ve seen with Uber for personal transport and Airbnb for property rentals, he says companies like Convoy, Uber, Transfix, and Loadsmart are utilizing technology platforms to serve as matchmakers in the trucking world.
Pinpointing the advantages of working with these platforms, De Muynck says it all comes down to ease of use and the high levels of visibility that shippers get over their deliveries. The platforms are also helping to ease some of the pain of the capacity crunch and driver shortage, both of which are making it more difficult to tender loads. Finally, from the trucking perspective, digital freight matching provides a more seamless way to pick, choose, and commit to specific load assignments.
The latter is especially useful for smaller, mom-and-pop trucking operations that used online bulletin boards (“load boards”), phone calls, e-mail and faxes to set up their routes. Others worked with freight brokers who, in turn, managed the shipper-trucker relationship. Neither approach is particularly efficient in today’s fast-paced shipping environment, where customers see next-day and two-day deliveries as the norm.
“At many of these smaller trucking firms, one person is the driver, dispatcher, salesperson, and accountant,” says De Muynck. “These new technology platforms make it much easier for those truckers to find loads, manage their businesses and get everything delivered on time.”
An evolving industry
Like any promising new technology (think Napster for streaming music and how far we’ve come since then), the digital freight matching market has had its fits and starts along the way. “There have been a couple of very visible players, but they haven’t necessarily been the most successful,” says De Muynck, who points to Uber and Convoy as two companies that have significant financial backing, but didn’t really gain the market traction they expected early on.
“Out of their starting blocks, they really weren’t very successful and ran into difficulty gaining credibility with the large enterprise accounts,” says De Muynck. “Some of that had to do with the fact that they entered the freight market saying: ‘We’re going to disrupt the industry; we’re going to disintermediate the brokers.’ I think that was a wrong approach.”
Fast-forward to 2019, and those digital freight-matching platforms are singing a different tune. “Uber has become a true, traditional broker and Convoy has changed its messaging,” says De Muynck. “At the same, the two other vendors that were flying under the radar—Transfix and Loadsmart—have both been successful at working with large enterprise customers like Electrolux, AB InBev [which also works with Convoy], and Walmart. They’ve done pilot projects and are also now working together on an ongoing basis.”
According to De Muynck, the digitization of freight didn’t turn out to be as disruptive to transportation as players like Uber and Lyft have been to the traditional taxi industry. “Although there are still taxis, they’ve lost a big part of their business to these new companies,” says De Muynck.
Thanks to the growing need for freight, the pervasive capacity crunch, and the trucking industry’s labor problem, digital freight-matching platforms are actually providing complementary capacity to shippers that require it.
“These new platforms aren’t taking away any volume from traditional brokers, many of which posted a record revenue year in 2018,” says De Muynck. Comparing the freight market to a pie, he says that just as more players are carving off larger slices for themselves, the pie itself is growing exponentially. “There are more pieces of the pie to go around,” he points out, “so there’s an opportunity for these different models to live side-by-side.”
When asked what gaps these platforms are filling in the trucking industry, Cunnane says the biggest use case involves small, independent owner-operators that shippers may not otherwise have immediate access to. They’re also used a lot in the spot freight market, where shippers who are looking for the lowest bid will “broadcast” lists of loads out to multiple providers. “The big carriers still have contracts to adhere to,” Cunnane says, “but the small companies have that flexibility to try to match available capacity.”
The potential to grow
For shippers, digital freight platforms have already proven themselves on both the time- and cost-savings fronts. For example, De Muynck says that he’s seen companies whittle down the time it takes to confirm a carrier for a load from 5.5 hours to just 18 minutes. “That time savings mostly comes from not having to make phone calls. In turn, the systems are doing all of the ‘talking’ to one another,” says De Muynck, who adds that some platform users have reported transportation costs reductions of up to 10%.
Looking ahead, Cunnane predicts consolidation among platforms in the near future, and says the concept of digital freight matching itself is here to stay. “There’s been so much venture capital funding driving this market [e.g., Convoy received $185 million in Series C financing in September while LoadSmart raised $21.6 million in November],” Cunnane says, “but there are only a handful of companies that are showing the ability to capture market share.”
Pointing out that more of the major transportation management systems (TMS) providers are integrating digital freight matching services into their offerings, Cunnane sees more positive momentum ahead for the industry. “This shows that the market is in a good spot,” he says, “and that it has the potential to grow.”
That positive momentum should continue as more companies realize the value of digital freight matching, according to De Muynck, who calls the overall market “fairly immature” at this point. As TaaS continues to evolve, trucking capacity continues to be hard to come by, and as freight rates rise, he says shippers will explore newer freight models and add them to their transportation strategies.
De Muynck cautions those companies not to view the platforms as a one-size-fits-all opportunity, and says they should do their homework before picking one or more digital freight matching providers to work with. “Look for a platform that’s going to complement what you’re already doing,” he says, “while also helping you reduce transportation costs and the amount of time it takes to tender a load.”