The App Age Has Come Far. Look at Long-Haul Trucking.

Date: Thursday, August 29, 2019
Source: The New York Times

With a one-stop app, Convoy hopes to make more money for truckers, reduce costs for shippers and take a cut for itself.

A dining room table that started out as lumber might have ridden on six trucks from the forest to someone’s home. Trucks move about 70 percent of freight by weight in the United States, but the industry is inefficient, with more than a quarter of trucks on the road riding empty. Until recently, the internet forces that have disrupted taxi rides and food delivery weren’t quite ready to take on this challenge.

A fast-growing class of app-based businesses aims to change that. One of the biggest, Convoy, has pushed to eliminate the paperwork and streamline the calls, emails and faxes that have been the unavoidable bane of truckers everywhere.

With a one-stop app, the company hopes to make more money for truckers, reduce costs for shippers and take a cut for itself.

Convoy, begun in Seattle four years ago, counts Bill Gates and Jeff Bezos as early investors and has grown to 700 people from 250 in the last year. In 2018, it reached unicorn status as a privately held start-up valued at over $1 billion.

Trucking is a decentralized industry, with more than a million trucking companies in the United States, a vast majority of them small businesses, according to the American Trucking Associations.

There are hundreds of thousands of shippers in North America and about 16,000 brokers, said Silpa Paul, a commercial vehicle analyst for the research company Frost and Sullivan.

Trucking is a “highly inefficient, low-margin” business, Ms. Paul said, and long-haul trucks drive empty 25 to 40 percent of the time. This, combined with long idle times and other inefficiencies, adds up to wasted fuel, wasted time, and unnecessary pollution and traffic.

Tim Knaup, network operations manager for Steve Crawford Trucking in the St. Louis area, said the Convoy app had freed up a few hours each day he had spent trading phone calls to manage the pickups and deliveries for his company’s 12 trucks.

“Now we can use the app to look at jobs where we are and where we’re going and get all the information and pricing on the load,” he said.

Payment is also more efficient through the app, Mr. Knaup said. It takes an average of three days for his company to be paid after its driver has scanned in the paperwork for a completed job, rather than the industry average of two weeks, he said.

Ms. Paul said on-demand brokerage services like Convoy were one of “the hottest technologies in the trucking industry globally.” An app that can take the place of countless emails and phone calls and provide load and truck availability, rate negotiations, proof-of-delivery and payments is extremely valuable to trucker and shipping company alike.

As part of an industry study, Ms. Paul estimated that services like Convoy’s were expected to grow rapidly, from posting $210 million in broker fees in North America in 2017 to $6.7 billion in 2025. The efficiencies are not expected to cause any truckers to lose their jobs because there is a shortage of over 60,000 of them in the United States, according to the American Trucking Associations.

The apps also promise a positive environmental impact. Improving efficiency means fewer empty trucks on the road, which would lower carbon emissions.

More than 40 companies just in North America have been founded in this business over the last seven years, including Uber Freight, Loadsmart and Transfix, attracting billions of dollars in investment, according to Ms. Paul. Traditional brokers and logistics companies are also trying to modernize their operations, she added.

The two largest entrants in this market are Convoy and Uber Freight, she said, with 2018 revenues estimated at $300 million for Convoy and $500 million for Uber. Convoy does not disclose its revenue but said its growth was “significantly accelerating” this year.

Convoy’s phone app lets truck drivers set their parameters: where and when they want to drive, and the type and size of load they can carry. The paperwork flows electronically. On the shippers’ end, they can put out requests and have them matched automatically instead of calling each trucker.

Truck drivers typically can’t schedule a run until their current job is complete. That’s because weather, unloading time and other factors make their exact availability unpredictable.

“They may get on the phone while their truck is being unloaded to start looking for their next job,” said Dan Lewis, Convoy’s chief executive.

If truckers call their usual brokers and no one has a job, they may need to drive home empty or wait days for a new load. “With a centralized database, there are more jobs available,” Mr. Lewis said.

On the shippers’ side of the Convoy platform, companies award shipments to Convoy, which lists those jobs on the app for carriers to see. Shipping rates typically fluctuate, depending on destination, urgency, available drivers and other factors. Convoy automatically prices the job based on this data and its own algorithms, but truckers can also bid for a job if the stated price seems too low.

The technology to make this all happen has been available only in the last few years, Mr. Lewis said. About five years ago, data plans became affordable enough for drivers to have smartphones, he said, so they could use an app and file paperwork electronically. The phones’ location data helps match drivers to jobs, and allows shippers to track their inventory better. Data science has developed in that time as well, he said, which makes the matching algorithms better.

A host of other supply-chain elements can be streamlined with technology, such as scheduling more precise load or unload appointment times, stringing together multiple deliveries and making automatic payments to drivers for the time they spend waiting. Improving these areas simultaneously creates “a compounding effect that makes us amazed at how big the opportunity is,” Mr. Lewis said.

A major challenge for Convoy as a technology company is the personal side of the business. “Freight brokerage is a very much relationship-driven industry,” Ms. Paul said. Shippers of expensive cargo “won’t just entrust their goods to a faceless, voiceless anyone on a digital platform.”

To gain volume, the new platforms need to assure shippers their goods will be safe, drivers will be available and the system will be reliable, Ms. Paul said. “And only when they gain volume,” she added, “will they be able to guarantee loads to carriers that will not require them to drive several miles empty or wait around idling.”

 

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