New Age Transportation Service Providers have to Own Assets too, It Appears

The action continues hot and heavy between new age digital startups in the freight transportation sector and traditional players.

Supply Chain Digest Says... Convoy began testing drop-and-hook service in 2017 and says carriers using its increased their productivity by up to 50%. What do you say? Click here to send us your comments Click here to see reader feedback

At the Gartner Supply Chain Executive Conference in Scottsdale last week, one analyst noted that digital freight brokers such as Uber Freight, Convoy and many others have the cool technology that can link shippers and small to mid-sized carriers, general using smart phone apps, but they lacked the long standing relationships with shippers.

Conversely, traditional brokers have those long-terms relationships with shippers, but in general are behind in technology, though both traditional and new age brokers are working hard to close the gaps.

On the startup side, those capabilities are being enabled by the billions of dollars investors are pumping into digital freight companies, with dozens of new players trying to disrupt the movement of every type of freight.

Now a new wrinkle in this fierce battle: according to a recent the Wall Street Journal, several digital freight brokers are investing in assets to enable dropped trailer programs, which can provide operational advantages to both shippers and carriers, though they require a lot of capital to pull off, as large carriers know.

The Journal says Uber and Convoy have each acquired fleets of trailers, which can be positioned at shippers for pre-loading. These "drop-and-hook" services allow more flexibility in trailer loading for shippers, and dramatically reduce the time carriers need to pick up a load, since the trailer has been filled in advanced of their arrival at a distribution center.

Giant JB Hunt is said to be piloting a similar program for its electronic brokerage arm, with a national US rollout coming later this summer.

Of course, this type of program is a big shift for digital freight companies which undoubtedly didn't see the need for expensive physical assets when they created their business plans.

But having those assets gives traditional trucking companies an advantage versus their new age rivals, forcing some to change course. Not only do the startups need to acquire the trailers by purchase or lease, it will also require new software to manage the program and not lose track of those assets, as well coordinate their deployment.

A drop trailer program would enable smaller independent owner-operators to compete with larger firms by tapping into shared trailer pools created by the digital brokers, in a touch of irony.

Owner-operator and small trucking companies make up the majority of US carriers, with 96% of the businesses operating six or fewer trucks, according to the American Trucking Associations.

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A dropped trailer program available to smaller carriers "opens up the ability to service that box…to the largest part of the market," Shelley Simpson, chief commercial officer for J.B. Hunt, told the Journal. "It changes what price you can actually move that good for," since loading time is eliminated.

Convoy began testing drop-and-hook service in 2017 and says carriers using its increased their productivity by up to 50%.

The company rolled out the program nationally in April with a fleet of leased Convoy-branded trailers being leveraged by shippers that include Unilever, Procter & Gamble, and Anheuser-Busch InBev.

Convoy stated that its Universal Trailer Pool "creates a seamless "grab and go" system, where carriers simply bring their power unit, pick up a pre-loaded trailer, and hit the road."

Uber Freight's Powerloop venture, which rents leased trailers to carriers for $25 a day, launched last year in Texas.

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