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Since 2000, the transportation industry has seen many technology-focused startups come and go. With each failed attempt, investors lost millions and the industry showed little change because the following fact was overlooked:
Successful innovation demands more than just whiz-bang technology, it requires a strong command of operations and a deep understanding of the industry.
Today, a new crop of startups has emerged—including front-runners like Cargo Chief, Transfix, Convoy and Trucker Path—and they are being hailed as the “Ubers of Trucking”. These companies have flashy websites and mobile apps but, beneath the surface, they leave us wanting more.
The truth is, like the startups which failed before them, these businesses will likely be defeated by their inferior command of operations and surface level knowledge of the industry.
So before believing the hype, everyone (shippers and carriers, in particular) do yourselves a favor and learn about the 5 lies these new startups may tell you.
Lie Number One: An Open Marketplace Benefits Smaller Shippers and Carriers
Most of these startups are licensed freight brokers who try to differentiate by selling their services as a “marketplace.” They claim this benefits their target market—small-to-medium sized carriers and shippers—but there are many reasons why an open marketplace does not actually benefit smaller players.
These “marketplaces” contain mostly spot shipments—meaning freight that is typically last-minute or loads that incumbent carriers have rejected. With short lead times and irregular requirements, this type of freight can be extremely risky, especially for smaller carriers. On the shipper side, sourcing capacity from a spot environment leaves them highly susceptible to pricing fluctuations and unpredictable capacity, making it difficult to forecast efficiently.
Lie Number Two: Carriers Don’t Need Large Shipper Freight to be Successful
The truth is: they do, but what they really want is a mix of large and small shipper freight.
88 percent of carriers own less than 9 trucks, and the less equipment a carrier has, the more consistency they need from their shippers.
"Successful innovation demands more than just whiz-bang technology, it requires a strong command of operations and a deep understanding of the industry"
That consistency can typically only come via a large source of freight, like an established shipper or 3PL, and due to the complexity of their supply chains, these players will never use a mobile app to find capacity.
That being said, small carriers can benefit from having access to the growth opportunity of a smaller shipper. That balance of large and small, consistent and growing, is the perfect growth formula for small-to-medium sized carriers. Without the access to these large shippers, however, the “Ubers of Trucking” can’t deliver for their target market.
Lie Number Three: Relationships Aren’t Paramount
The “Ubers of Trucking” pride themselves on being highly automated, and have downplayed the role of humans in our industry. While automation can increase efficiency and drive down costs, transportation is still an industry built on relationships. Successful businesses must have a strong foundation and a team of experienced logisticians to navigate exception management and relationships.
Driver Dave Bush says it best in his comment on an article about Cargo Chief: “Do you ask your phone what to do with the 4 pallets that were rejected and put back on your trailer? How about that 2 hours of detention you need. When your phone says no, I guess you just roll with that? Not a chance. This is a business that needs living, breathing people to run it.”
Lie Number Four: Sharing assets in transportation is new and disruptive
“The Shared Economy” is an economic system based on consolidating and recycling resources. For some, this idea is revolutionary, but for the transportation industry it’s actually nothing new. The sharing of assets has been done with less-than-truckload/partial shipping, drop trailer programs, and load boards for the last 20 years. Today, many of these startups claim to have “reinvented the wheel.” In reality, the transportation industry has been sharing for years, and the companies that execute these “sharing” services best are those who have built a solid operation based on a deep understanding of transportation.
Lie Number Five: Standard Compliance Means Stellar Service
Many of these startups have compliance protocols in place (checking auto insurance, cargo insurance, safety rating, etc), but there is typically not enough data or service history to allow for any REAL evaluation of the carriers they work with.
Why is service so important to measure? Take Walmart, the largest retailer in the world, for example. Walmart has imposed up to a 3 percent penalty of total cost of goods per shipment to their suppliers for late deliveries. That means, without the help of an experienced carrier partner, shippers run the risk of racking up substantial penalties. An “Uber of Trucking” can find a truck, but that’s only half the battle. With high-stakes freight on the line, rigid appointment times from their retail customers and zero room for error, simply having insurance and a safety rating will not suffice.
These shippers need proven on-time percentages, high-quality equipment, experienced drivers, and low claims ratings to be successful. While the “Ubers of Trucking” boast about their efficient websites, and incredible cost savings, they forget that the most important thing is that without proven compliance processes and partners, freight does not arrive safely, on schedule or as required.