At FreightWaves’ Transparency19 event last week in Atlanta, some of our industry’s best and most innovative minds came together to discuss tech, trends and of course, Amazon. Amidst the glitz and glamour of investment dollars pouring into our space and the excitement that comes from innovation, one thing was clear at the event. Tech is here to stay in our space and if you don’t have a strategy to digitize, you will not be around for very long.
Bradley Jacobs, CEO of XPO Logistics Inc (NYSE: XPO) and a keynote speaker at Transparency19, stated “There will be far fewer brokers around in the years to come.” His message was not that brokers will be going away, rather the idea that smaller brokers will be able to compete to survive is not likely to happen.
With companies like Convoy achieving a $1 billion valuation in roughly four years, or publicly traded companies like Uber and Amazon encroaching on the brokerage space, it will be far harder to compete in the future for the smaller, relationship-based brokers. Bradley’s message to those brokers that aren’t at the scale of larger players? “Get in front of your customers and stay in front of them. Use every transaction as an opportunity to delight your customers and put a smile on their face.” While this philosophy seems simple and almost obvious, it’s clear that Jacobs still sees potential for relationships to prevail over tech (for now), as long as service levels remain high.
Outside of Jacob’s riveting keynote, I was able to take away some more advice for brokers to follow on their path to the future.
Three key trends for brokers to be mindful of in building their strategy for the future were:
While market volatility created the opportunity for brokers to enter the trucking space in the 1950s and 1960s, that volatility is becoming more predictable and manageable through historical data and modern analytics tools. Large brokers like Echo Logistics have become more akin to freight management firms, acting as an extension of their clients’ traffic departments and winning freight en masse as a result of complicated bidding and the request for proposal processes. This comes in stark contrast to the responsiveness and knowledge of the spot market that helped legacy brokers win transaction after transaction. Echo’s CEO, Doug Waggoner, mentioned Echo can grow the smaller brokers they acquire by “giving them more loads to sell” from Echo’s enterprise clients. This is because Echo’s technical prowess gives it a data-driven advantage that allows the company to win massive volumes of freight that it then needs to move through its huge team of brokers, mostly in the non-contract carrier market. In the past two weeks Convoy and JB Hunt Transport Services Inc (NASDAQ: JBHT) have announced game changing drop trailer programs, which should enable the firms to address larger pools of freight from their new and existing customers. Whether it’s managed transportation, trailer pooling, warehousing or final-mile, brokers are looking for ways to increase their percentage of a client’s wallet share while also driving stickiness into the customer relationship.
With each transaction, brokerages amass hundreds if not thousands of data points. When organized appropriately, this data can help the broker’s customers operate more effectively. For example, electronic logging device (ELD) data is helping shippers stand out from one another by promoting companies that manage load times more effectively than others, keeping drivers out of detention. This was the second-highest ranking criteria for consideration among the Shipper of Choice awards at Transparency19. With Amazon moving to one-day shipping standards recently, more third-party logistics providers (3PLs) and brokerage companies are spending time helping their customers find warehouse space closer to their customers, enabling faster delivery without increasing costs. Ultimately, logistics firms are uniquely suited to become the data mining consultants our clients need to move into the future. As their supply chain partner, we often know and understand our clients’ customers, suppliers, vendors and partners. In addition to all that, we often also have at least a glimpse into the exact same information of our customers’ competitors. With the right amount of analytical insight, we can deliver suggestions to help our clients take their businesses to the next level and many brokers are already doing it. These are just a couple of ways that data is powering faster and smarter supply chains, and brokerages will continue to find ways to innovate into the future or they will go away.
Fully Automated Transactions
Convoy recently touted its achievement of 100 percent full automation in freight matching. Its innovation and development of technology has enabled the company to find loads and match drivers with zero human intervention. Off-the-shelf smart capacity tools, freight matching software powered by algorithms and smartphone apps have created the perfect storm for brokers to remove the negotiation from the truck sourcing process, especially in spot market scenarios. Companies like TruckerTools, Parade, Truckstop and DAT have all released or promoted a “Buy it Now” button that will enable automated booking between truck drivers, brokers and/or shippers. Meanwhile, companies like HubTrans and TrumphPay are automating the carrier payment side as we speak. This will empower brokers by reducing friction and releasing humans from the often times painful negotiation process. This will be a great thing as people who are good at building relationships are often not as good at negotiating discounts with drivers. While humans may beat machines on certain high-margin transactions, as a whole, humans will never outperform computers at scale. As brokerage companies continue to grow through client acquisition or mergers, scale is going to become the new normal and empowering people through automation will only fuel the best brokerage organizations to continue innovating to serve their client’s needs.
With more automation coming to the actual freight transaction, brokers will spend their time collaborating with customers and delivering insights which should, in theory, strengthen the shipper/broker relationship. This again, was the theme of Brad Jacob’s message to the attendees of Transparency19 – brokers will only go away if their customers let them go away. Finding the next service to offer a customer or right services to bundle will deliver value as the transactional side of our business fades into a robotic abyss. Suggestions, advice and insights are what our industry has always been built on. That’s why we can all still agree that we’re in a relationship business. Whether or not that can be automated, is a debate for another day!
Image sourced from Pixabay