Given the vast number of motor carriers in the United States, it shouldn’t come as a surprise that there are countless options for shippers to secure needed capacity. And depending on the current economic conditions, some times are easier than others for shippers to nail down the space they need.
One thing that’s helping shippers of all sizes in securing over the road capacity these days is the ongoing development of digital freight matching (DFM) platforms, with many established and upstart players competing for leadership position in this new and exciting space.
While the DFM market has made significant strides in recent years, so too has its sophistication on the technology front. Logistics Management (LM) recently spoke with a few of the industry’s technology thought leaders about the evolution of DFM platforms to gauge where things currently stand and where they may be going down the road.
Joining LM for this roundtable are Bart De Muynck, Gartner’s research vice president of transportation technology; Adrian Gonzalez, long-time technology analyst and president of Adelante SCM and founder of the peer-to-peer research organization Indago; Chris Caplice, executive director of MIT’s Center for Transportation & Logistics (CTL); and Dave Correll, research scientist at MIT CTL.
Logistics Management (LM): From your unique perspective, how far has DFM technology come over the last few years?
Bart De Muynck: DFM platforms have been around for four or five years now and have come a long way in building out their technology and their solution offerings, as well as their shipper and carrier networks. Many of the main platforms such as Uber Freight, Convoy and NEXT Trucking started as regional networks with limited pilot customers and a limited offering.
Vendors have added more options such as freight payment solutions for carriers and, in some cases, have added assets like trailer pools to their platforms. More recently, we’ve seen incremental partnerships between these platforms and transportation management systems (TMS) vendors. Some examples include SAP and Uber Freight; BluJay with Convoy; and Oracle with LoadSmart. We’re also seeing partnerships between the digital freight platforms and the autonomous trucking platforms—LoadSmart and Starsky Robotics is one example.
Adrian Gonzalez: DFM has certainly come a long way in recent years, thanks to ongoing advancements in mobile apps, real-time freight visibility, machine learning, GPS and electronic logging devices (ELD) adoption. However, all stakeholders––DFM providers, carriers, drivers and shippers––are still in the early stages of learning and adoption.
We’re also seeing a blurring of the lines between digital freight matching technology and digital freight brokers—Uber Freight and Convoy—that are technology-driven freight brokers—or “freight marketplaces” as they like to call themselves—that have developed their own DFM capabilities.
Chris Caplice: The sector has matured from initial attempts that caught our attention back in 2010 to 2015. It’s interesting to consider DFM technological development as the ongoing evolution of––or refinement to––classic load boards. The loads need to be carried. What’s changing is how the loads are being broadcast (to everybody, or to an algorithmically determined group), and who makes the matching decision (human or computer).
LM: How is it working and what are some of the most pertinent related trends and themes you’re seeing evolve?
Gonzalez: Shippers are testing out DFM providers, but at least at the moment, digital freight is not causing shippers to flip the model and move the majority of their freight via the spot market. They still prefer to move the majority of their freight with contracted carriers.
In a recent survey we conducted with our Indago members, one of the respondents, a VP of supply chain at a consumer goods company, summarized it this way: “At the end of the day, these digital freight startups are still a brokerage-based business. They are just deploying technology differently. Great if you utilize spot for your freight, not so good if you want to make sure that your freight is covered for a budgeted rate.”
In terms of trends, we’re seeing the rise of partnerships between TMS providers and digital freight providers as Bart has mentioned. For TMS providers, this gives their customers another avenue to find capacity, especially when contracted carriers reject a tender. For the digital freight brokers, they’re looking for ways to bring more shippers—freight demand—onto their networks and tapping the installed customer bases of TMS providers is a relatively quick way to do it.
Dave Correll: We’re noticing that larger shippers are becoming less reluctant to using DFM in order to access available capacity in the long tail of American owner-operators. At the same time, owner-operators themselves are concerned that DFM technology could reduce their negotiating and pricing power in the cases where the platform sets the prices algorithmically.
De Muynck: Those are great points, but I have a bit of a different take. On the shipper side, ensuring transportation capacity is the top priority for most. So shippers are looking for alternate sources to get capacity at reasonable rates while getting better insights into their transportation needs. Digitized transportation networks can provide a source of additional capacity, and this has contributed to the growing adoption of these digitized transportation networks.
Leading supply chain companies have been using these solutions for the last couple of years. AB InBev, Electrolux, Land O’Lakes, Monde¯z International and Unilever are a few of the companies that have openly shared that they have started using these new freight models. Several shipping companies don’t use just a single vendor, but also might use two, three or even four vendors concurrently. So adoption is growing and as companies are using these solutions they are also seeing the benefits.
LM: What would you say is the long-term growth potential for DFM?
De Muynck: With brokerage continuing to grow and many shippers looking at newer options to have access to consistent capacity, the digital freight platforms will grow and get more established in the next three to five years. That doesn’t mean that they’ll replace common carriers contracts or brokers, but they will provide an additional option as overall transportation volumes are growing and shippers are looking for core transportation partners to help them grow their business.
Gonzalez: It doesn’t matter if you’re a startup or an established provider, the formula for success in the freight industry remains the same, and it depends on three things. First, you have to build a critical mass of shippers and carriers and drivers. Second, you have to remember that transportation is not a commodity and that relationships matter—and take this reality into consideration in your operating model. And third, you have to measure and control the quality of the end-customer delivery experience.
Caplice: I’ll add that all dispatching is trending toward this solution, so there seems to be significant long-term potential. Going forward, it could become standard operating procedure to include a DFM integration into all transportation procurement portfolios.
LM: In your opinion, who are the biggest—or most important—players in this space and what makes them stand out?
Correll: Uber Freight is especially interesting for two reasons. First, is their investment in understanding the experience of the driver at shipper/consignee facilities. And second is the technological experience that they bring from their work on Uber for passengers.
De Muynck: At this point the biggest players are LoadSmart, Transfix, Convoy, NEXT Trucking and Uber Freight. These players have been around for four or five years and have established the largest carrier networks, as well as the largest customer base. Uber Freight has already made the move to Europe, and several others have similar plans.
There are some other players coming into the market that might have a different model or different market focus, and are gaining momentum. One is Emerge, a company trying to become the “Kayak” of the transportation industry or TruckerTools that focuses on brokers rather than just shippers.
Gonzalez: You have three types of players in this space: technology companies that offer DFM capabilities to 3PLs and brokers (Descartes MacroPoint, Trucker Tools); digital freight startups with DFM capabilities (Uber Freight, Convoy, Transfix); and established 3PLs/brokers that are adding DFM capabilities (C.H. Robinson, J.B. Hunt).
Although the new players get a lot of media attention, I wouldn’t count out the big guys. In fact, they still have the advantage because of their scale and relationships—and they’re not standing still. C.H. Robinson, for example, announced recently that it’s investing $1 billion in technology over the next five years, doubling its previous $1 billion investment in technology over the last 10 years.
LM: Where do you see this market in five years?
Gonzalez: Over the next few years, we’ll see some consolidation in the market, whether it’s large technology companies—particularly those with digital networks—buying some of these DFM technology providers, or some of these digital freight brokers merging together or getting acquired by the large, entrenched 3PLs/brokers. Ultimately, DFM will become a standard capability for all brokers in the industry, and those who fail to move up the digital transformation curve will cease to exist.
Caplice: We clearly see this market being digitally integrated into more and more companies’ transportation management systems.
De Muynck: I would expect this market to grow at a compound annual growth rate of 60% in the next five years, which would mean that the size of the freight these vendors represent would be tenfold in 2024 from what it is today. In the next few years we will see more vendors entering the market, but we will see several of these platforms fail and others consolidate.