Cargomatic and Convoy are two West Coast start-ups that want to revolutionize the trucking industry the way Uber and Lyft have revolutionized the people moving business. As reported by Forbes, both companies are making it possible to replace the brokers and middlemen who control much of the trucking industry today.
While freight brokers are essential today, the way they do business is woefully inefficient. A broker may make up to 200 phone calls an hour trying to connect cargo and drivers. It is also expensive. In some instances, the broker gets up to 45% of the gross shipping charge, leaving little left over for the people who have to pay for the trucks that do the actual work. While both companies charge fees for their services, they are far less than what traditional brokers charge.
In a world that increasingly relies on overnight deliveries, connecting goods with people to carry them has created spot markets that are hard for traditional brokers to manage. According to Dan Lewis, founder and CEO of Convoy. “Shippers need trucks to be available on a just-in-time basis more and more, but the carrier industry is very fragmented. Anything that makes the middle work faster, more efficiently, and transparently saves money at both ends,” Lewis says.
Any type of shipper, from those moving parcels to those with a full container of goods, can make use of the technology. Like an Uber driver, the carrier selected by the company algorithms can accept or decline the opportunity on the app. If it consents, it then uses the app to assign the job to a driver. For shippers, there’s no waiting, haggling over price, or managing paperwork.
The new apps may make it possible for small operators — who carry 90% of the nation’s freight each year — to grow larger. Up until now, growth has been constrained by the inefficiencies built into the system. “It’s common for the owner to be one of the company’s drivers, making it difficult for these businesses to grow beyond three trucks,” Lewis says. “More trucks means more drivers and more work to manage them. Beyond six trucks, companies need to hire back office staff or simply stop growing.”
The apps also could lead to higher profits. Trucks that once returned home empty can now find new business to generate more income. “Shippers and carriers are realizing this is where the industry is headed,” Lewis says. “The old ways of doing things no longer make sense.”
Using apps to connect people in efficient new ways is becoming more mainstream every day. Apps like Roadie connect people who need things moved from one place to another with people who are going that way and are willing to take a few packages along to help pay for gas. The app is the new face of successful businesses.