Truckers Go Digital in Search for Big Rigs
Big trucking companies, scrambling along with their customers to keep up with fast-growing U.S. economic demand, are plowing millions of dollars into technology to build up services as digital freight middlemen.
The growing investment in online freight brokerage is aimed at building on operations many truckers have used to supplement their core transportation businesses, even when that means turning shipments over to other truckers or independent drivers.
Customer demand is driving the expansion, as is the need to compete with a growing lineup of upstart companies using new technology to grab a slice of a U.S. freight market that’s growing at a fevered pace.
Like the Uber Freight unit at Uber Technologies Inc. and load-matching startups like Seattle-based Convoy, the trucking companies’ platforms aim to automate tasks like phone calls and booking shipments. They also harvest information that trucking companies say can help find space for customers grappling with one of the tightest freight markets in years.
“This is a new way for us to think about getting efficiency into and waste out of a very large system that is under a lot of pressure today,” said John Roberts, chief executive of J.B. Hunt Transport Services Inc., one of the largest carriers in North America. The company’s online marketplace generated about $137 million in the second quarter, up from $96 million the previous quarter, and accounted for about 40 percent of its overall brokerage revenue.
The digital brokerage push comes as many U.S. manufacturers, distributors and retailers say tight transportation networks are driving up their operating costs, pushing down profit margins and in some cases holding back growth.
That’s pushed more business to third-party brokers that don’t own vehicles and make money off the spread between what they charge shippers to move a load and the price they pay truckers to haul it.
Domestic transportation management, which includes freight brokerage and logistics companies that handle outsourced transportation services for shippers, was a $71.7 billion business in 2017, according to research firm Armstrong & Associates, and grew 16 percent from the year before.
Truckers still earn the bulk of their income moving freight on their own equipment, but the middleman business is growing.
Revenue in J.B. Hunt’s brokerage division in the second quarter increased by 56 percent from the same period in 2017. Schneider National Inc., which is investing in software to automate those transactions, saw a 41 percent increase in brokerage revenue.
Source: Wall Street Journal