The global commercial freight or trucking business witnesses’ empty miles for nearly 20 to 30 percent of their total trips. To cover up for the losses, carrier needs to inflate the costing of their trucking business resulting in excess payout for the shippers.
The global commercial freight or trucking business witnesses’ empty miles for nearly 20 to 30 percent of their total trips. To cover up for the losses, carrier needs to inflate the costing of their trucking business resulting in excess payout for the shippers. For freight broking firms, it is a nightmare to match the prices of a carrier with the shippers, this manual activity provides 1 positive leads for 100 outbound activities.
The traditional broking channel is a bankrupt business model which employs brokers to negotiate freight brokerage manually via email or phone call to match a load with a truck. As per Bob Chappuis, who is currently working as the General Manager at Uber Freight, and having a previous work experience of working as broker for the freight brokerage firm. Bob says, conventional freight broking model employed by freight brokerage firm was inefficient in terms of matching the load with truck, changing the schedule as per the requirement and very difficult to negotiate in terms of pricing especially because of the empty miles. The conventional trucking business is inefficient and difficult to manage. Uber Freight has realized the challenge in the market and opted for digital brokerage solution i.e. Transportation as a Service model or automated on demand brokerage solution.
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Two types of digital brokerage solutions are available in the market. Automated on demand brokerage solution and the second one is the digital load boards. Load boards provide the load listing in simplified manner but do not provide a fully automated operation i.e. the manual labor is still involved, whereas automated on demand brokerage provide the complete automated solution without manual interference.
Automated On Demand Brokerage Solutions with dense carrier network and complex machine learning algorithms matches the prices between load and trucks and fulfil the deal within minutes/seconds. This process is completely automated and can be employed based on demand of shipper and carrier. The deals can be updated with respect to time and load within minutes and the shipper will always get a carrier to ship its load within time.
Automated on-demand brokerage supplier from Seattle called Convoy is one of the most thriving players in the North America region for transportation as a service solution. The company has converted the manual freight brokerage solution to digital freight brokerage solution for trucking business. At first, the company started offering a hook and drop solution for trailers. The solution was being offered to the small carries and the operator-owner of the trailer. This further helped the Convoy customers to tap into the delivery and pick up trailer market. During that stage, the market was dominated by carriers with large assets. At present, Convoy’s solution is being offered to all the carriers and shippers nationwide. Convoy’s solution offered is quickly rolled out in the market to grab Uber’s attention. In 2017, Uber Freight was launched for load transportation as a service.
Convoy also offer a Convoy Go solution which allows grab and go i.e. carriers need to bring along their tractor unit and then pick up the loaded trailer and go for the delivery. Convoy built a tool called Universal Trailer Pool, this tool has helped convoy to successfully implement their grab and go solution.
From the past 5 to 6 years, on-demand automated digital brokerage solutions are available in the market. Companies such as Uber Freight, Loadsmart, Transfix, Convoy and others are catering to the market. However, the conventional process of freight brokerage is still carried out in the market. Companies such as truckstop.com and DAT has developed a load board solution to digitalize the first step of the process. The small fleet owner and operator employ the DAT’s weekly rate index to negotiate the best deals with the help of load boards. But they were not able to automate the process of freight brokerage. The on-demand automated solution helps to cut down the back and forth process of negotiation and enable them to accept or reject the deal on single click.
Despite the automated on demand brokerage solution which works with ease and lowers the commission on freight brokerage, it was not able to realize the penetration rate. Thus solution provider has understood that no one solution fits all and that’s the reason Convoy has implemented its Convoy Go solutions as an effort to transform the industry. Convoy Go provides the differentiation to the solution i.e. it enables the small carriers and owner-operators to provide the same service as shippers i.e. solution in terms of in time delivery and pickup and equipment availability information.
In the US, one-third of truck business and freight brokerage companies cost is attributed to the amount of time spent waiting for the order or waiting for the load and unload at the dock. This further impact the cost of transportation and earning of drivers and reduction in the capacity for shippers.
The companies in the digital freight domain needs to strengthen the geographic cluster of shippers to enable rapid go and hook services for the small carriers and operators. This will allow maximum asset utilization, cut the load time and make the value stream more efficient.
With respect to the decline from the above figure, it is clear that in the first half of 2019, the trucking business has witnessed recession kind of environment, whereas in the second half tender load volumes has increased in the last two quarter and tender rejection rate has decreased. The market has also seen reduction in DAT spot rates.
Approximately 90% carrier operator operates 6 or less than 6 trucks. The capacity of current carriers is very less and not able to address the current load volumes which further triggers the rejection rate. Based on our 2019 predictions, the class 8 trucks orders have increased and the prices of the old trucks are declining significantly. Thus Automo believes that the current capacity environment will be improved in 2020 and the market will witness decline in rejection rate and increase in the load volumes. The spread of Coronavirus will witness the significant impact on the market. The load volume will decrease significantly for the first half of 2020 and will recover 20% to 30% in the second half of 2020.
In the first half of 2019, the digital freight trucking business has witnessed $1.6 Billion of investment. The investment of $1 Billion came from SoftBank Vision Fund.
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