While the first quarter of 2020 has so far delivered the expected post-peak season soft market, the FreightWaves 2020 Freight Market Outlook predicts that capacity is slowly tightening. ACT new Class 8 truck orders ran below replacement rates for all of 2019 (see chart below), and prices for used trucks were in a steep decline during the second half of 2019. While the market turn will not be as dramatic as the one in 2017-2018, the excess capacity is not expected to last.
Source: FreightWaves analysis of ACT research data
Meanwhile, digital brokerages are starting to gain momentum in the market. Advances in technology have made it possible for drivers and carriers to book loads with a few clicks, which lowers the bar for well-funded, tech-inclined entrepreneurs to enter the market by hiring a small team to create automated software.
But ironically, as digital brokerages grow and try to drive everyone to their marketplace, they hire more people to cover their freight. That has industry observers wondering if automation alone is enough, especially as capacity tightens.
“Technology is set up to be this elixir that’s going to solve all of the world’s problems, but it won’t for a number of reasons,” said Ryan Schreiber, director of engagement at Carrier Direct. “Technology needs to be built with the idea that humans are an integral part of the process. Certainly automate where you can, but use technology to enable humans to do things that they’re best at, and humans are particularly better than machines at building relationships.”
Those willing to eschew relationships for automation open up a larger question — what value will they have if automation allows shippers to do the job themselves?
“Quality brokers don’t just cast a wide net and wait for capacity to come to them,” said Noam Frankel, founder and CEO of FreightFriend. “They get to know their carriers and leverage those relationships for their customers. If brokers focus on relationships with carriers first and then automate, they will build a huge competitive advantage over those that passively rely on inbound calls and public load boards.”
Because of the tremendous risk involved in transportation, such as commodity and liability, there’s such a thing as too much visibility, which can undercut the trust shippers have with brokers.
By adopting the right truckload procurement software, brokerages can strike the right balance between providing extensive networks for their shippers and still prioritizing relationships with their carriers. Unfortunately, a lot of procurement technology focuses on passively communicating freight to the world and expecting automatic matchings. That method might work when the market is soft, but once it tightens, brokers that can control communication and have been building trust with carriers will have a competitive edge.
Frankel has built businesses, such as American Backhaulers and the truckload side of Echo Global Logistics, and technology for the non-asset side of the Chicago-based industry for 35 years based on a belief that the transportation industry relies on relationships between trusted partners. He founded FreightFriend to allow brokers to use technology to prioritize strong relationships.
FreightFriend serves as a carrier relationship management platform (CRM), a marketplace based on mutual friendship, and an intelligent data warehouse with freight matching. Soon to be released, FreightFriend 2.0 will expand on its intelligent routing engine called Capacity Guru. It optimizes machine learning to help identify the right carrier for the right load by adding bid and tracking data, automated communication for waterfall, blast or manual tender, and other user experience improvements. Shippers and brokers will also be able to customize how they prefer to weight their data sets.
“Once you have a routing engine with the right carriers for any given load or regular lane, you can do a lot of things with it,” Frankel said. “You can waterfall tender to the carriers, you can blast tender or you can manually control how you want to manage the tendering process. And you can communicate to those carriers via our mutual friendship marketplace.”
The software differentiates among private, public and shared data, so brokers, shippers and carriers can share information exclusively with whom they choose. Public data might come from the Federal Motor Carrier Safety Administration (FMCSA) or other open sources. Private data, for example, could be a client’s load history, bid data or previously gathered information on carriers. Shared data may be information that carriers provide the broker, such as electronic logging device, tracking or preferred lane data. In the case of shared data, carriers have complete control over which broker or shipper has visibility.
“[FreightFriend] blends private, public and shared data and gathers carrier feedback to deliver unique results to a broker or shipper,” Frankel said. “It’s hard to build a relationship with a carrier if you don’t know lanes they run and what they’re looking for. Anytime you are in communication with a carrier, you can quickly see all matching opportunities based on their entire network so you can leverage every engagement and book multiple loads with your core carriers.”
Like connections made on LinkedIn or Facebook, either party has the authority to unfriend the other and opt out of sharing data if the relationship changes.
“I don’t know anyone else who has some of the functionality that FreightFriend has, particularly around that relationship management piece,” Schreiber said. “The market is soft right now, but that’s actually a reason to dig in on something like FreightFriend today because the work that people are putting in today is what’s going to pay dividends when the pendulum swings the other way in the carriers’ favor. So starting to implement it right [when the market turns] is not necessarily going to give people an advantage they’re looking for.”