The trucking business in North America is undergoing a tectonic shift that threatens the traditional brokerage business. Freight brokers are trying to respond to the advance of digital disruptors by beefing up their own digital capabilities, but a different entrant is aiming to see them exit altogether.
On December 9, J.B. Hunt Transport Services and supply chain solutions provider JDA Software announced that the latter would integrate directly with the logistics firm’s digital freight marketplace on J.B Hunt’s online portal, where shippers can obtain real-time price quotes.
Over the past year, a number of software providers have teamed up with freight brokers to gain traction in the market. For their part, brokers have been eager to beef up their digital capabilities. In November, C.H. Robinson, the largest US freight brokerage, unveiled web-based self-service technology with multimodal shipping options for small business customers. This allows new customers without any shipping knowledge to book freight. They don’t even have to sign up.
Clearly brokers are concerned about the growth of on-line competitors like Uber Freight and Convoy. Flush with funds from investors, they are advancing to capture a large slice of the truck brokerage market. Uber announced in November that it would be expanding into Canada, having entered the European market earlier in the year, with the Netherlands the first country across the Atlantic where it launched its app.
These disruptors, and their financial backers, are lured by the prospect of a juicy market that is ripe for the picking. According to Frost & Sullivan, the digital freight brokerage market will climb from US$11.2 billion in 2018 to over US$52 billion by 2025.
A chunk of the truck freight in North America has been funnelled through third-party electronic channels for years. Load boards have matched truckers looking for loads with shippers trying to find carriers for their cargo. They have also been used by brokers.
According to a senior executive at Transplace, a 3PL, this channel has been useful.
“Shippers may occasionally find cost savings through load boards, or be able to seek out bids at the specific cost level they need. The process is also efficient and easy to access,” he said.
Transplace itself has limited use for load boards, preferring to go with a crop of regular trucking providers, he added.
“We support our partner carriers and utilize routing guides to manage the freight flows of our customers. However, if a shipment can’t be covered, or we have an ad-hoc load, we may utilize a load board to secure the capacity. From a research and execution standpoint, load boards are one of the resources we utilize to procure capacity and gain market intelligence,” he said.
While brokers have been using load boards, the likes of Uber and Convoy are trying to take over the brokerage element themselves, posing a direct challenge to the incumbent brokers.
Another challenge comes from a start-up that is looking to do away with brokerage outfits altogether. Matthew Kane, founder and CEO of Riteload, argues that shippers and truckers could benefit if the broker were dropped from the equation. Technology is good enough to allow them to do just that, he added.
His company operates a type of load board that allows shippers and truckers to sign up at no cost to post or look for loads. If they do contract a load through the Riteload site, they are charged a flat fee.
This way both truckers and shippers save money, Kane said.
“If you have a $2,500 load, 20% goes to the broker, so the carrier makes $2,000. With us, the shipper pays the trucker $2,400, so he saves $100 and the truckers makes more money,” he said. “For the shipper, $100 is not much, but if you have a lot of loads in a month, that adds up.”
According to Kane, over 20,000 truckers are using Riteload at this point. In addition to allowing the parties to post and look for loads, the company provides elements like tracking, invoicing or money transfers to truckers free of charge.
Kane intends to take this further. Leveraging the number of truckers in Riteload’s system, he wants to obtain discounts for them on fuel, repairs and tires. He is also in advanced discussions with an insurance provider to offer truckers discounted insurance through Riteload, he said.
Brokers argue that they provide their clients with a range of service beyond pure freight brokerage, but Kane is sceptical. In his eyes, the brokerage model is a dinosaur on the verge of extinction.
“It will be a slow death out of the gate, but the inevitable is coming, and Riteload is spearheading it,” he said.
Is he worried about the likes of Uber with their deep pockets? “They’re still brokers,” he said, adding that they cannot match Riteload’s low charges because this would upset their investors.
By Ian Putzger
Correspondent | Toronto