Opinion: Trucking Spot Market Evolves With Technology

This Opinion piece appears in the April 17 print edition of Transport Topics. Click here to subscribe today.

By Matt Kropp

CEO

FR8Star

Trucking can always use more technology. That’s one reason we see so many tech startups in the industry these days.

Another is the astounding success of the neo-taxi service, Uber. Technology developers have long seen similar opportunities in trucking. Uber merely opened the eyes of financiers who now are underwriting these new technologies.

Kropp

Isn’t trucking ripe for just such a transformation?

Not so fast. Beyond providing transportation from here to there, trucking has little in common with Uber. For starters, trucking is diverse — truckload, refrigerated, less-than-truckload, heavy haul etc. The transactions that launch each shipment also can be quite complex. Many startups attempted to simplify those transactions.

This isn’t the first time engineers and entrepreneurs have tried to improve the truckload spot market. During the so-called dot-com boom from 1995 to 2001, the classic load boards moved from scrolling TV screens to the internet, an innovation that stuck. Many other technological ideas, including attempts to create web transportation markets, didn’t do as well. A few of those ideas morphed into third-party logistics companies, or 3PLs. The rest vanished.

Since then, two developments have vastly increased the utility of the internet — particularly for smaller carriers. The first was cloud computing — the idea, pioneered by Salesforce.com, was that companies can run critical software from their web browser. No need for IT departments, servers or expensive installed software.

The second development was the smartphone, which seized the world’s attention in 2007 when Apple introduced the iPhone.

These breakthroughs have democratized technology. What was once available only to the largest carriers now is accessible to all. A smartphone with GPS and powerful software apps gives small carriers virtually the same technology as the big fleets. While big fleets pay up to $200 per truck per month, small fleets can use smartphone technologies almost for free.

In fact, small fleets are a big market. Fleets with 20 trucks or fewer make up the largest part of all for-hire fleets. Many are totally dependent on brokers, whose job is to get as much as possible from shippers and pay as little as possible to carriers.

The wave of new technologies can bypass this problem — perhaps not entirely, but enough to make a positive difference in carrier income. All of them link carriers with shippers or brokers, all offer smartphone apps and all, in some way, facilitate the transaction for booking a load. They collect from shippers and pay carriers.

While the companies differ from each other in many ways, they separate into three general categories:

• The first category is the mobile app that offers services directly to the driver — such as parking availability, fuel prices, truck stop details, etc. This type of app, often focused on owner-operators, also offers loads — mostly from brokers — to drivers based on their location. These, essentially, are load boards on a smartphone with added bells and whistles.

• The second category is traditional brokerage in a technology-enabled form. These brokerages, many of them startups, offer apps and, in some cases, provide websites. They may offer the same services as brokers — factoring and tracking, for example. They promise a better customer experience through technology. But, ultimately, they compete as brokers. Carriers and owner-operators should use the same caution with these firms as they do with other brokers.

• The third category is the marketplace platform. These companies are not brokers. They link carriers directly to shippers, eliminating brokers. At a minimum, these platforms enable shippers to ask for quotes and receive bids. They can offer services to both sides of the transaction: carrier safety information, consolidated billing and tracking for shippers, and fast-pay and fleet management tools for carriers.

The most significant element common to all three is their involvement in transactions. This is where they offer a distinct advantage over classic load boards. While the largest load boards charge for ancillary, value-added services, they do not facilitate the transaction. This leaves carriers to haggle with brokers over price, and shippers in the dark about who is carrying their load or when it might arrive.

Where load boards charge carriers a monthly fee regardless of the quality of loads they provide, these new services only get paid if they bring carriers good-paying loads. So, where does this leave us today?

Here’s where cloud computing comes in. Platforms that create markets and enable transactions ultimately provide even more for small to midsize carriers — such as transportation management systems, or TMS, software, for example. Providers might charge for advanced features such as customized reporting, but basic operations and bookkeeping software are in the cloud — and free.

Shippers benefit, too. Many small and midsize shippers turned to brokers after deregulation. Suddenly, it was difficult to know if they were getting a reasonable rate or not.

This new generation of cloud- and smartphone-based technology enables shippers to compare rates quickly and easily, without e-mails and phone calls. Shippers book loads directly with carriers, who provide the necessary visibility and customer service directly — not filtered through a third party.

Some shippers will even find it beneficial to move their outsourced logistic functions back in-house.

It will take some time, but the trucking and logistics landscape will be changing.

Kropp is co-founder of trucking technology startup FR8Star, based in Oakland, Calif., and builds data-driven, cloud-based tools aimed at reducing inefficiencies in the $700 billion U.S. trucking market.