Digital Freight Matching Platforms
Sharing Economy and (Road) Transportation Disruption
Abstract: significant investment into transportation has been made over the last 3 years, with the primary effort going into the US$800 Billion commercial transportation sector intent on matching over-the-road (OTR) carriers’ capacity with shippers’ demand (freight matching). Many of these solutions allow shippers to instantly book carriers for the loads they want to haul and similarly provide carriers an opportunity to make their capacity available to the market.
These on-demand services, aggregating the needs and offerings of a broad community of online shippers and carriers, are being noticed globally in small and large markets, supported by significant investment by private equity.
Market Position and Adoption Speed of Freight Matching:
The number of platforms for commercial transportation are increasing and entering the market in the Americas, Europe as well as in Asia.
The solutions appear to be positioned into three offerings;
- Shipper-centric platforms making carrier capacity available and instant, or near-instant, matching with available carriers based on pre-contracted rates and services,
- Carrier-centric platforms aggregating loads in the form of a curated list of business opportunities, with pre-contacted rates; and
- Simplistic broker-centric digital “load boards” providing a platform for middlemen to peddle their services.
Short-haul and last-mile logistics solutions represents a good near-term opportunity for the “shared-economy” in transportation. Traditional asset-heavy business approach to last-mile delivery is both expensive and inflexible. Operational costs rise as service providers attempt to gain a competitive advantage by offering next-day and same-day delivery options. It has been shown that particular commodities or products (e.g. food, flowers, groceries, couriers), are easily adopted and integrated into business practices. These pioneers have proven out both the delivery method and the business models.
When assessing the heavy-haul or long-haul components of trucking transportation, the resistance to change is palpable. Traditional trucking has a long history of being heavily relationship driven with decision makers relying heavily of their industry contacts rather than high fidelity communication or reliable, robust data. Also, much of this freight moves under contract of carriage with a commercial (asset-heavy) transportation carrier, and this cargo generally moves over longer distances, often between different jurisdictions. This scenario raises the complexity and routing, heightened in the LTL (Less Than full Load) sector, and as such a more sophisticated solution is required – both in the offering and in the communication.
It is also worth noting that much of this cargo is expensive and delivery is time-sensitive, which adds to the demands put on to the Carrier market.
High volume shippers tend to only use the spot market for a small portion of their transport needs; here freight is offered to brokers with the hope for a reduced rate compared to the pre-contracted rated offered by asset heavy carriers. While the freight-matching platforms may be very attractive to these shippers, the longer distances, lack of transparency and real-time information, visibility throughout the supply-chain as to who is involved, and the dominance of large carriers already in the space will likely continue to push barriers to entry, at least in the near term.
Bearing this mind
It is more likely that smaller, less sophisticated companies are more likely to try this model. Likely because their appetite for disruptive opportunity to complete is heightened as well as their increased ability to pivot on policies and procedures. Small and mid-sized companies will have an easier time of accessing carrier capacity and make greater use of brokers.
The digital freight matching platform solutions will most likely provide an alternative to today’s brokered freight, but will have to incorporate significant automated processes.
While most shippers currently use contracted freight carriers and private fleets, the looming changes to the status quo within the road transport industry will bring with it deliberate and significant risk, instability and demand for agility and ingenuity.
Great concerns have been raised over carrier capacity and looming driver shortages. Similarly, changes to shippers and consumer demands, e.g. transparency, visibility, accountability and on-demand services, will drive changes to workflows and how the service of road cargo capacity is delivered.
The on-demand, digital freight-matching platforms will fill these gaps as long as they can install confidence and certainty as well as deliver convenience to shippers in a way that is non-disruptive to their current operations, all the while offering increased value for the same dollar spent.
At the same time as offering shippers these conveniences, the successful platforms will ensure that carriers get top-dollar per loaded mile, increasing load percentage and reducing or eliminating empty miles or under-capacity miles.