By Jeff Tucker, CEO, Tucker Company Worldwide
There’s a lot of hype in the transportation industry today around the digitization of freight. It’s a theme that's dominated headlines the past few years and caused billions of investment dollars to flow into the industry as investors and startups seek to “Uberize” the industry, assuming freight transportation resembles moving passengers.
Certainly, the next digitally-led transformation of the freight industry is well underway and will continue to be in earnest for the next several years. It’s only a matter of time until we take a page from the Human Genome Project and identify, map, and analyze the several hundred data points within each transaction, the prior transactions, and the potential future ones. But we’re further away from that than many think. And we’re much further away than Wall Street and private equity investors believe.
While I don’t work for Uber, Convoy, or any other of the many startups, I have strong feelings about how they could have revolutionized the industry, and how they’ve swung for the fence and missed in spectacular fashion. I don't see this transformation coming from the outside. There’s a place for almost any new startup with a solid business plan, just like there was a place for freightquote.com way back when. You see, I see the transformation coming from within — from the actors already dominating the marketplace: the freight brokers and forwarders of today.
Why? Well, first, we have the volume, customers, and systems. Second, and more importantly, we know what the “disruptors” still don’t seem to get — that the customer wants service that’s customized to them and their business needs. Third, we know that if getting good, decent, or even “somewhat adequate” freight service was about hooking a load to an empty truck, this business would be easy, and it’s not.
The customizations each sophisticated shipper needs today flies in the face of those who advocate for the “democratization of data” or the watering down, commoditizing of the industry’s justified diversity. This, coupled with the fact that there are 250,000+ (and growing) active for-hire carriers in the U.S., demonstrates the infinite and accelerating complexity of trucking service.
Most disruptors, and even “tools only” tech startups, have focused on improving back-office broker efficiencies seemingly without any regard for the intensive service performance demands and customization that today’s shippers demand. They make the assumption that all truckers are the same and all freight is the same, which couldn’t be further from the truth. Differentiation among trucking companies is almost impossible to underestimate. You just can’t build a business model that ignores the customer’s needs, regardless of the sizzle and sparkle.
Of course, price is always a huge consideration for shippers (and a huge selling point for the digitization of freight), but cost is constantly being wrung out of the transaction costs in a number of ways, none of which have the shipper’s best interests in mind, and don’t improve service, in an increasingly service-intensive and service-required industry.
Today's mad dash, hair-on-fire rush to digitizing freight brokerage is almost entirely cost-focused. It ignores the most important part of any transportation service: what the customer needs. It’s not customer-centric at all … it’s broker-profit-centric. What value have we placed on the customer? What value on customer-specific needs? Shippers are tired of fitting into a mold their providers make. They want it the other way around.
Our customers don’t want frictionless freight connections that don’t perform. I can only imagine the response if one of my account managers asked a customer, “Do you mind if I send in a trucker we don’t know, may never use again and haven’t bothered to speak to about your freight?” We’d be fired!
Shippers today are more sophisticated than ever before. Their service needs are more differentiated and individualized than ever before. Two shippers using the same TMS, shipping similar products to the same customers have different service and data expectations, requiring modifications. Those modifications don’t lend themselves easily to brokers placing blinders on, finding the nearest available truck.
Most of the digitized frictionless freight market changes will occur in markets where their top three priorities are price, price, followed closely by price.
I’m talking about products that are commoditized, like building materials, lumber, sheetrock, metals, and other raw materials where freight literally breaks a deal, service isn’t important, and they’ll deal with any potential ramifications for the sake of a dollar. Frictionless freight digitization will also get its hold with some small shippers where shipments are transactional and, frankly, performance doesn’t matter.
It won’t happen with important freight like pharmaceuticals or groceries, where timeliness is rewarded and lateness is punished. I don’t see it happening in hazmat or over-dimensional freight, and I can’t imagine fashion or consumer electronics shippers throwing all caution to the wind.
For these industries, many of which are moving high-value, high-security goods, digitization platforms would have to offer a customized experience that takes millions of data points into account. We’re 10-15 years away from having enough data gathered; and even then, we’ll have primarily carrier and broker data.
The transportation industry is rushing headlong into the future. It always has been, and always will be. But too many of us are quick to overlook the most important details that make all the difference in the world: follow the customer's needs, build technology around those needs, and we’ll ride the technology wave for many years to come.