The US Freight Brokerage Technology Landscape

Dave Menzel, the President and Chief Operating Officer at Echo Global Logistics, gave a good speech in which he overviewed the US transportation landscape at the Descartes Evolution conference last week. At the same conference another top executive of Echo – Jay Gustafson the Senior Vice President of Carrier Operations – spoke on a panel with two other logistics service providers about technology trends enabling growth in freight brokerage. Between Mr. Menzel and Mr. Gustafson, Echo provided a good overview of the US freight brokerage technology landscape.

Descartes is a provider of a variety of logistics software solutions including transportation visibility. Echo Global Logistics, a customer of Descartes MacroPoint visibility solution, has $2.4 billion in revenues and provides brokerage and managed transportation solutions.

Mr. Menzel’s general point was that trucking was a very important mode, and that small firms carry a large portion of the freight:

  • Trucks move 71% of the nation’s freight by weight. This equates to 10.5 billion tons of freight moving on trucks.
  • There are 3.5 million class 8 trucks operated by 780,000 carriers in the US. 97% of carriers operate 20 trucks or less. This represents 30% of the total capacity for this class of trucks.
  • Echo has grown very rapidly since they were founded in 2005. Their technology enabled brokerage has grown largely because of their ability to connect small and midsized shippers to small carriers and then pay these cash flow strapped carriers quickly.

Mr. Menzel also pointed out that there is something of a tech race going in surrounding transportation technology. In 2018, $2.7 billion was invested in transportation. $1.3 billion was invested in 2017; And $849 million in 2016. Though he did not mention it, Descartes has been one of those investors. They purchased MacroPoint for $107 million in 2017. In fact, for some years Descartes has been an active acquirer of logistics technology firms.

While Echo has historically built a very large portion of their tech stack, they did choose to implement the Descartes MacroPoint solution. There is a demand among shippers for more near real-time visibility into their shipments. Echo certainly had the internal IT talent to build this kind of solution. But Mr. Gustafson said they went with MacroPoint to be able to rapidly provide this solution to their customers. “MacroPoint is integrated to a 100 plus transportation management systems (TMSs)” and all the major mobile phone carriers. MacroPoint’s near real-time shipment visibility is based on the integrations they have done to a plethora of ELD devices, TMSs, or allowing small truckers to download an app on their phone that allows the truck to be tracked.

Descartes’s MacroPoint Permits Near Real-Time Truck Tracking

In addition to speed to market, another reason Echo went with MacroPoint was the ability of Descartes to integrate their visibility solution right into Echo’s custom built TMS. This allows Echo’s planners to use screens they are familiar with.

Mr. Manzel said that new technology is paving the way for the transportation industry to provide better service. “The good news,” is that because of ELD regulations “there is more data than ever.” Previous to these regulations there was just “too much paper.” This is opening the door to getting better data on transit times and carrier locations. “Data is flowing,” the next step is to apply technology to better predict when trucks will actually arrive despite weather, traffic, and other unpredictable events. This visibility is paving the way toward more efficient load matching and pricing. “Digital freight marketplaces are emerging.”

When it comes to investments in transportation technology, much of it has gone to digital freight matching startups like Convoy and Transfix that seek to connect shippers and carriers using slick technology that is similar to the way Uber connects drivers and passengers. And, of course, Uber Freight gets a lot of attention when this topic comes up. Mr. Gustafson’s view is that this is an evolution more than a revolution. “It is a slightly different approach on how to do brokerage. They are hiring the same people we are hiring.” In other words, they are hiring not just IT people, but customer service personnel as well. The industry has been changing for 30 years and part of that change is increased technology investment among brokers.

In short, freight visibility is hot; better visibility provides a path toward digital freight matching; but the digital freight matching game won’t necessarily be won by the tech startups. Existing logistics service providers own customer and carrier relationships, have domain knowledge, and are also investing heavily in technology.

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