ARC has recently completed global market studies and supplier selection guides on transportation management systems and managed transportation services. In the process of completing those studies, we spoke to some of the brightest executives in logistics about digital freight brokerages. With the rise of Uber Freight, and the amount of venture capital that has flowed into companies like Loadsmart, digital freight brokerages have gotten a good deal of attention. A digital freight brokerage uses technology to make the process of working with a broker to secure a move more automated and less time consuming.
loadsmart Screen Shot
When companies want to reduce their transportation costs, while maintaining or even improving customer service, they have two main choices: implement a transportation management system (TMS) or outsource transportation to a managed services firm. A transportation management system helps companies move freight from origin to destination efficiently, reliably, and cost-effectively.
The managed transportation services (MTS) – also called managed trans – providers have planners in a control tower using TMS technology, who plan and execute loads on behalf of their customers. Some MTS providers have developed their own TMS, some have purchased an off-the-shelf transportation management system from companies like Oracle or Blue Yonder.
Digital Freight Brokerage Partnerships
Several leading transportation management system suppliers – whether off-the-shelf or MTS providers – have chosen to partner with digital brokers. Brett Minner, Director of Logistics as a Service at BluJay Solutions, said “We are investing in partnerships for digital brokerage.” BluJay has developed application programming interfaces within its TMS to Uber Freight, Loadsmart, Convoy, and Sleek Fleet. This integration allows for “a real-time rate quote with guaranteed service. Our customers do need freight contracts with those providers.”
Uber Freight Screen Shot
According to Derek Gittoes, Vice President of Supply Chain Management Product Strategy at Oracle, “nearly every (Oracle) consumer goods customer is currently using one or more of the digital freight markets or, at the very least, is exploring using them. The majority of large shippers rely on contract rates, so the volume within digital freight marketplaces will be low. Most companies will only go to an outside market when they don’t have enough capacity on that lane or don’t usually ship on that lane, so it doesn’t make sense to have a contract carrier.”
But the COVID-19 pandemic is increasing the need for digital freight solutions according to Keith Whalen, Vice President of Product Management at Blue Yonder. “The need for real time capacity commitments are top of mind for certain industries such as CPG, food & beverage, grocery, and pharmaceuticals. With capacity constraints in certain lanes, customers can now examine how to move goods between private fleet, common carriers, or digital freight marketplaces.”
Gregg Lanyard, Director of Product Management for Transportation Management Systems at Manhattan Associates about what is driving customers to digital brokerage. According to Mr. Lanyard, “there is indeed a rise in digital brokerage usage for freight matching. Fluctuations in available capacity and pricing are driving more shippers to this medium. However, companies are taking different approaches to the problem – some guarantee capacity while others don’t; some use sophisticated algorithms and machine learning to provide dynamic pricing while others simply automate the age-old process of matching a truck with goods to be shipped.”
The COVID-19 pandemic has changed the nature of global commerce and shipping. Travel and trade restrictions remain in place, even as economies continue to re-open around the globe. As Till Dengel, Global Head of Digital Logistics Solution Management at SAP, pointed out “trucking capacity is no longer available across borders. Contract carriers can still only go to certain places and companies need to figure out where available capacity is and how much it costs. This is where digital brokers come into play for cross-border commerce.”
Digital Freight as a Benchmarking Tool
While digital freight matching marketplaces continue to gain traction for finding capacity on seldom-used lanes, they are also being used as a benchmarking tool. Uber Freight has made a lot of noise with its real-time pricing capability. Essentially customers do not need to put out a full bid; instead, they can push out a load to one of their lanes to gage the market. Multiple TMS providers are seeing their customers use digital brokers for this very reason.
In a conversation with Carolyn Hunt, Director of Go-to-Market for TMS at Alpega Group, she pointed out how their customers are using digital brokers for benchmarking purposes. According to Ms. Hunt, “if you’re tendering once a year, anything that shifts the demand and supply can have a big impact on freight costs. Although it’s still not the norm among our clients, we are seeing an increase in spot requests. As supply chain managers are under extreme pressure around costs, they are now using more benchmarking tools or looking at e-tendering solutions – which simplify the tedious tendering process — to launch RFQs to carriers more frequently.”
The real-time nature of a lane quote allows shippers to gage whether what they are paying is on par with the market or whether they should look at alternative carriers. As part of its TMS and digital freight strategy during COVID-19, SAP has included 90 day, free of charge service to connect to Uber Freight or InstaFreight to pick up spot market carriers.
Managed Transportation Providers Build their Own Digital Freight Solutions
In other cases, large MTS providers and brokers are building their own digital freight brokerage solution. For large freight brokers the Uber Freights of the world are a threat. Mr. Commiskey from GlobalTranz mentioned they have 300 plus developers building out analytics to support their digital freight matching solution which is called GTZamp.
From Mr. Commiskey’s perspective, it is not the instant gratification of digital brokerage that provides the most value. “The greatest value of a digital freight brokerage comes from reducing empty miles. Nevertheless, they can get a spot freight rate quote to customers in minutes, not hours.
Mr. Commiskey also argues that the entire value proposition associated with a digital brokerage solution is overstated. “Execution needs to be seamless. At the end of the day, logistics is not perfect. You need great people who can do the right thing.” When there are exceptions, people are needed to fix things.
Another significant managed trans supplier, Transplace, has a different kind of digital platform for securing lower cost transportation capacity. Transplace acquired Lanehub, a cloud-based platform that encourages shipper-carrier collaboration, in January 2020. The platform encourages shipper-carrier collaboration by digitally identifying and connecting companies with complementary freight lanes to save on shipping expenses. The goal is to find recurring, consistent lanes at a sustainable lower cost from carriers and private/dedicated fleets by matching headhauls and backhauls. The platform creates visibility to over $23 billion in truckload spend over 180,000 lanes in North America. Over 150 shipper members have connected with 250 carrier members. This has resulted in more than 26 million matches.
In conclusion, the term ‘digital transformation’ has become ubiquitous. There is a good deal of hype around this term. But the freight industry is becoming digitally transformed in front of our eyes.
This article was cowritten by my colleague Chris Cunnane.
