Jeff Tucker's guest column in yesterday's Wall Street Journal pointed to the pivotal role of technology, including DAT Load Boards, in freight logistics today. Jeff also highlighted the contribution of freight brokers to the efficient movement of cargo. Jeff has been a leader in freight logistics since 1992; he is president and CEO of Tucker Company Worldwide and Chairman of the Transportation Intermediaries Association. Jeff knows this business, and he has an innovative approach to logistics management. I'm going to summarize his column here, but it is well worth reading in its entirety: "Technology Provides Opportunity, Not Disruption to Freight Brokers."
Jeff notes that there has been a lot of talk lately about the disruptive influence of technology, especially mobile apps, in transportation. App-based taxi services such as Uber and Lyft are in the news constantly, and a different article that appeared in the Wall Street Journal in early May touted the benefits of a similar approach in freight transportation. Jeff was quoted then, but his column yesterday clarifies his views on the importance of technology as an enabling force, rather than a disruptive one, in our industry.
As Jeff says in the column, the idea of using apps to match empty trucks to loads certainly sounds appealing. If it works for taxi passengers, why not for shipping? Some of these apps are pretty cool -- DAT has an app just for drivers, and all DAT products are in constant use on all kinds of mobile devices, too. But the role of technology in freight transportation is far from disruptive.
Technology is an integral part of U.S. domestic freight transportation and logistics. As an example, Jeff was kind enough to cite freight matching, which was pioneered in 1978 by Dial-a-Truck, now DAT.
The founders of DAT owned the Jubitz truck stops, and they wanted to help truckers by automating the low-tech way that drivers searched for loads. Thousands of drivers would leave handwritten notes on bulletin boards at truck stops around the country, while shippers left notes seeking trucks.
DAT made that business electronic, turning the freight matching process into an "app" -- before apps were invented. DAT Load Boards are still the premiere freight-matching service by volume and by reputation. Online load boards handle most of the more than $150 billion freight brokerage market. That is the business that today's app developers are trying to capture.
In nearly 40 years, those load services have grown with the economy. but they have not pushed aside freight brokers, who continue to bring together countless large and small businesses, retailers, manufacturers and others with truckload-sized shipments and smaller loads, to match them to the many trucking companies and independent drivers on the highways today.
This arrangement works so well that the shippers, who own the freight shipments, are the ones who are least likely to use freight matching services, including the latest apps. Instead, freight brokerage and carrier companies are the primary users of load boards. That’s because most companies that are not directly in the freight business simply don’t want to spend the resources that are needed to operate in the daily market and come out ahead.
Jeff's column continues:
Freight brokers are the most voracious consumers of new technologies in industrial transportation. To live and thrive in an industry with razor-thin, shrinking margins, a company needs data and technology that allow a business to act effectively on fast-moving information flows. Freight brokers consume data directly and they combine information from numerous sources, from the owners of capacity and the owners of cargo. They manage the data through sophisticated transportation management systems that draw in information from carriers that already are in a broker’s primary-carrier network and integrate that with load boards.
Apps have been successful in dis-intermediating the taxi business in a number of cities, but freight transportation is different. For one thing, people come in a range of predictable sizes, and they fit in most car seats. But shippers and cargo can be unique, with dock availability, temperature and security requirements, insurance and liability needs that must be matched to a carrier and a truck by equipment types, driver expertise, and regulatory compliance.
Brokers make sense of that dynamic environment, while easing the shipper's logistics management burden. Most manufacturers, for example, are pushing for smaller staff and virtual, asset-light, outsourced operations, especially when those operations aren't part of their core business. Freight brokers orchestrate outbound customer orders, and some engage in inbound management, as well, managing supplier relations to improve on-time production scheduling, reduce inventory and bring new efficiencies to the supply chain.
Jeff concludes that apps may play a stronger role in the future, but they are unlikely to replace freight brokers and other third-party logistics providers:
The time will come when off-the-shelf technology will handle far more variables in shipping than it does today. That technology, for instance, may be integrated with electronic logging devices on all commercial trucks, and that will surely make shipping more efficient. And certainly the capabilities that new technology deliver may speed consolidation among freight transportation providers.
But no provider worth its weight faces true disruption from technology. If that were the case, the company isn’t providing a valuable service anyway.
Jeff Tucker is the President and CEO of Tucker Company Worldwide and chairman of the Transportation Intermediaries Association (TIA)