Convoy, backed by billionaire tech pioneers Jeff Bezos and Bill Gates, and Uber Freight, an offshoot of the globally disruptive ride-sharing giant, are trying to grab a slice of the fragmented US truck brokerage market, taking different routes to lure skeptical drivers and capacity-hungry shippers.
The two technology startups are attempting to persuade US shippers they can deliver immediately covered contract and spot market loads, new capacity, total rate transparency, real-time tracking and data analytics, and market intelligence that can drive supply chain decisions. Crucial to their ability to do this, 33-month-old Convoy and 9-month-old Uber Freight must convince independent truck drivers and those running small trucking companies that freight can be brokered, booked, managed, and monitored instantaneously with a single click on a smartphone.
It is a slow, steep climb in a lane becoming increasingly congested. Seattle-based Convoy and San Francisco-based Uber Freight are the two brawniest players in what has become known as the “Uber for freight” marketplace. In the United States, that market includes some 15 other digital brokerages and approximately 50 more that have big ideas but no funding. More than a dozen similar ventures also are trying to match loads overseas, from China to India to truck-dependent Europe.
Convoy and Uber Freight, however, are the investment darlings. Convoy raised $80.5 million, according to CrunchBase’s CB Insights in New York. Besides Bezos and Gates, eBay founder Pierre Omidyar, KKR CEO Henry Kravis, Expedia chairman Barry Diller, and Silicon Valley’s Greylock Partners and Y Combinator took positions to make Convoy the deepest venture-backed trucking technology startup in the United States. Uber Freight is not at a loss for funding, either; Uber has a $48 billion to $72 billion valuation, depending on estimates.
The entrenched brokers and third-party logistics providers (3PLs), which handle the vast majority of goods moving through the United States, are not about to concede to new entrants, nor have they sat still on pursuing their own tech capabilities. C.H. Robinson Worldwide, the biggest non-asset provider of truckload services in North America, accounting for 3 percent of the total truckload market in the hemisphere, started booking freight online in 1999 and added a load-searching mobile phone app to its Navisphere platform in 2011.
C.H. Robinson’s biggest competitors, XPO Logistics and the Coyote Logistics division of UPS, also offer mobile apps. Neither has totally automated its brokerage services, and also rely on manual processes.
William Lugo, owner of N and W Trucking in Douglassville, Pennsylvania, freely admits he is an “old school” trucker, but that has not stopped him from embracing the Convoy app. “This is one of the best things that’s ever happened to me,” he explains. “I open the app, see 100 loads and 10 are in my area. I certify the pickup and delivery day. Prices are set — on average $1,000 to $1,300. But if I feel it’s too low, say $900, I can bid, say $1,100. It’s a risk but I’ve only lost three loads on bidding.”
“Convoy’s app is more innovative. They show the rate they’re covering and what they’re paying the trucker. Traditional brokerages just throw the rate at you,” said Chris West, transportation director of McLane Food Services, which ships to 18 Yum Brands distribution centers nationwide.
When launched in April 2015, Convoy billed itself as the “Uber for freight,” and announced it would transform the industry, “improving the logistics ecosystem for truck drivers using technology.” The company pulled back on the Uber-speak when Uber Freight entered the race last May after snagging five brokers from Chicago’s 4Front Logistics.
Earlier, Uber Technologies signaled a diversification move from ride-sharing into freight transport when it acquired Ottomotto, a self-driving-truck startup, for $660 million. Unlike Convoy, which makes its digital freight brokerage automated once drivers get familiar with the app, Uber Freight still has some manual processes as part of its brokerage platform.
Despite the hype and heralding of a new era in freight brokerage with the arrival of the driver-payload matching app and a smartphone in every driver’s pocket, transportation analysts and logistics experts say the impact on the US trucking industry, let alone the supply chain, is overblown.
“It’s definitely not a disruptor of the business model,” said Bart De Muynck, research director for transportation technology at Gartner, an advanced tech consulting firm. “We’ve already had disruption in North American trucking when the load boards relying on telephone call-ins from drivers looking for loads were automated, creating a digital freight marketplace. The app is a service extension of that with greater technology benefits, but the fact is there is not a lot of volume going through them right now.”
He does not see the middlemen in the change-averse trucking industry — the traditional freight brokerages — being disintermediated the same way the retail travel agent selling paper tickets was rapidly cut out by Expedia, Travelocity, and Orbitz. Ground transportation is too vast, too complex, too fractured, De Muynck said.
However, he thinks Convoy and Uber Freight and their growing list of rivals can add capacity for mom-and-pop shippers searching for reliable deliveries and reasonable rates, plus cost and operational efficiencies for owner-operators and small carriers.
“Hard to imagine [tech companies offering app-based freight matching] being a disruptor in trucking, where we’ve already had fundamental change, but you can’t overlook the power of money and technology expertise,” said Avery Vise, vice president of trucking research at FTR Transportation Intelligence.
The legacy load boards, freight brokerages, and logistics houses insist they are not going to be run off the road by a handful of upstarts, either. Online marketplace DAT Solutions, which started 40 years ago as a blackboard in a truck stop, had 159 million load postings to 1.3 million vehicles in the United States alone and collected transactional data from 33 billion in freight bills for shipments moved over 65,000 lane pairs, according to a spokesperson.
“Between DAT and Truckstop.com, virtually the entire American trucking marketplace is on one or both of those platforms,” said Tucker, whose 57-year-old company is the nation’s oldest privately held brokerage. “None of these new trucking technology ideas will disrupt these industries. They will take a few people and processes out of the equation. But disrupt? No.”
Although they are bringing new transparencies to freight brokerage, none of the larger digital load-matching ventures disclose volume shipment growth, lane expansions, and market penetration. There is no reliable industry or government data source on size, revenue generated, volumes, and values of freight brokered and shipped through their automated channels.
Convoy said it is “handling thousands of shipments and millions [of dollars] in sales per week” in less than three years of operations. The company said it is working with 450 shippers, up from 300 last July, and that a national network of 20,000 drivers and motor carriers, up from 10,000 six months ago, now has its free, downloadable mobile app. Convoy said it operates nationwide and is “serving all the major epicenters where 95 percent of the country’s freight originates.”
Convoy’s founders say they saw their business opportunity as far more than just automating the customer-driver transaction, as Uber did in the ride-sharing industry. It wants to forge relationships, not one-off transactions. It needed a solution for a splintered, tradition-clinging trucking industry, with its entrenched brokerages and load boards, that was already wrestling with information technology change and facing a shrinking driver workforce, new regulations and tougher enforcement, traffic delays, and unforgiving delivery and pickup time demands.
Convoy brings new disciplines to trucking, said Dan Lewis, co-founder and CEO. Carriers and shippers get a firm price for a load, but if a driver feels it is too high or too low and it has not been snatched up by others in the network, they can bid on it. Traditional brokerages charge 20 percent or more of the total shipment price for arranging the match, and rarely disclose that charge or their rate margin.
Instead of just waiting for a load, drivers can proactively post their location, availability, trailer capacity, and capabilities into the app and have it automatically sorted, classified, and offered. The app tips off drivers to other loads for possible pickup near their delivery destination. Drivers also can get paid within 48 hours without a fee or a factoring charge.
The shipper gets immediate load confirmations, real-time tracking via GPS within the the app, and proof of delivery once made.
Early on, Convoy addressed a concern universally voiced across the trucking industry: are shippers tendering freight to rookie, unreliable, problem-plagued, uninsured drivers who have had run-ins with the law but have smartphones?
To allay those fears and a wide array of liability risks, Convoy verifies carrier and driver commercial licensing, vehicle and cargo insurance coverages, and carries its own contingent insurance for every shipment. It also monitors a list of driver-performance criteria.
Like the original Uber ride-hailing model, shippers also can rate driver-carrier performance, and drivers can rate shippers. A driver’s score is tracked electronically, and poor performers are dropped from the network.
Convoy is “very good with their updates and superfast with their payment to carriers with a no-fee, quick-pay 48-hour policy.” said Jimmy Nevarez, owner-president of Angus Transportation, based in Chino, California. He added that Angus does not rely on Convoy for the majority of its loads. “They’re helpful in filling in the gaps. I love the quick and efficient technology but it’s not the main source of our brokerage.”
Convoy is courting the full spectrum of the supply chain — from one-truck owner-operators to multinational shippers — and winning some big customers. A year ago, it was delivering freight for five Fortune 500 companies; today it has 20 Fortune-listed customers. It has landed multiyear partnerships with companies such as Electrolux, Unilever North America, and Anheuser-Busch that are more than just freight booking deals. Last year, Ties Soeters, Anheuser-Busch’s vice president of logistics, singled out Convoy as its first-ever “technology partner of the year” for supply chain innovation. Unilever gave Convoy its “visionary partner” award for 2017.
With truck capacity tightening and rates rising, the timing could hardly be better for the likes of Convoy and Uber Freight to help shippers find drivers. For example, Niagara Bottling wanted to ship 127 truckloads carrying 4.8 million bottles into Houston late on a Friday when Hurricane Harvey knocked out 45 local water treatment plants, Although Niagara was a 24/7 shipper through a crew of logistics providers, transportation vice president Brian Reed could not find weekend capacity
The average time it took to book a Niagara Bottling load Fridays in September from the time it appeared on the Uber Freight app until it was accepted by a driver was 34 minutes, Uber product manager Kyle Olney said, and some shipments were booked in under a minute. “That’s pretty paradigm changing, It proves the concept of the on-demand freight network that can scale elastically,” to meet fluctuating demand, he said.
“Uber Freight had a unique capability of accessing idle capacity in the hurricane-stricken markets that seemed to be a different supply chain than the traditional broker [where we were seeing massive premiums to move freight],” said Ashley Dorna, Niagara’s executive vice president of supply chain. “They were able to aggregate single trucks and very small companies to provide supply chain at less captive pricing.”
Bill Driegert, the Uber Freight director who previously was Amazon’s director of planning and innovation, said his prior company was “customer-obsessed,” and his current one wants to “driver-obsessed.” He did not disclose how many drivers have joined Uber Freight since its launch, but said the roster is growing rapidly and noted the company pays within seven days.
“We find drivers check their app first thing in the morning,” he said, “They’re drawn to the simplicity of the one-touch system. The traditional way they would access shipments is through multiple freight brokers, but now these drivers have direct access to that freight. We had a driver use a turn of phrase I love. We ‘liberate the freight’ for the smaller carriers.”
Dreigert, who also spent eight years with Coyote Logistics, most recently as its chief innovation officer, said the app-based digital broker model gives shippers in “today’s dynamic marketplace, especially [those] competing against companies like Amazon, an on demand spot-market solution that can provide a strong competitive advantage.”
Shippers approach Uber Freight much as they would a traditional broker, he said. “What we provide them ultimately is fast execution from a price and service perspective. We have real-time visibility to all the drivers on the platform.”
Businesses will slowly change how they book and ship freight, moving away from long-term contracts with static price lists to dynamic pricing, which is the Uber Freight model, Driegert said, but “that’s not going to happen overnight.”
Nor will Convoy, Uber, and other tech-driven trucker brokers be able to disrupt the traditional truck brokerage. But in an environment where finding drivers is key to unlocking capacity, data analysis makes better use of their time, and behind the wheel, they are hooked more to their smartphones than CB radios.
The brokerage and logistics industry already is responding to the tech-based startups by increasing its investment in technology. Convoy, Uber Freight, and their competitors may not be classic market disruptors, but they could be the accelerators needed to speed change.