The launch of Uber Freight got quite a bit of press last month, as Uber shared its vision of cutting out the middleman in freight movement by connecting shippers directly with available carriers and providing real-time pricing.
Uber is not the first to attempt this model. Other companies have tried it with mixed results and minimal disruption to the traditional freight brokerage industry.
While Uber clearly has a track record of success in connecting passengers with drivers, the world of commercial trucking and large freight movement is much more complex.
Bob Costello, chief economist at the American Trucking Association summed it up best when he said: “It just seems like there is interest because being ‘Uber-like’ is sexier than saying that you are a truck freight broker.”
While freight brokerages may not be perceived as sexy, they play a critical role in logistics and offer a great deal of value, more than justifying their fees.
Here are 3 ways freight brokerage firms add value that an Uber-like shipper-to-carrier model can’t beat – volume pricing, accuracy and accountability.
Freight brokerages move a tremendous amount of cargo in a year – and that high level of volume gives freight brokers leverage in pricing. Companies like GlobalTranz are able to negotiate better rates with carriers because they are able to guarantee a consistent level of business. As shipper profit margins grow tighter and tighter, any dollar saved in shipping is a dollar toward the bottom line. While freight brokerages add some cost to the supply chain, they also remove a lot of cost by offering lower carrier rates and reducing shipper overhead in managing freight movement.
While the idea of replacing the middleman may look attractive, freight shipment is not simple. Freight brokering is a complex operation that involves many variables, almost all of which can results in a significant cost to the shipper in terms of in time, risk, and hard dollars if not completed efficiently and accurately. Freight movement requires adherence to shipper requests, freight-specific requirements and compliance with state and federal laws. In addition to regulations governing freight transport, each shipper often requires compliance with its own unique set of shipping policies regarding rates, insurance, and carrier attributes (like on time delivery).
To ensure accuracy and compliance, a freight agent must take the basic parameters a shipper provides and use these data points to seed decisions around a much larger set of information and actions. For example, the size, weight, and commodity type or freight class may require a nuanced carrier class or carrier service selection (e.g. van, side loader, flat bed). Freight shipment reclassification alone can result in high, unexpected costs for the shipper if not handled properly. For example, if a shipment is booked at an LTL-negotiated rate, but in reality should have been moved as a volume shipment, significant disconnects can occur in pricing. A shipment of 10,000 ping pong balls may show a cost of $200 (not a real value) as a result of low weight, but the reality is the amount of space the shipment actually requires is half a trailer, so the rebill could be $10,000. Freight brokerages have the insight and experience to flag these potential issues, facilitate resolution and ensure shippers have the appropriate documentation to negotiate effectively with carriers.
For an Uber-like service to gather this information accurately at the time of the freight service request is likely not feasible as most small-to-medium shippers would not be able to answer many of these questions. Whereas an experienced freight agent using GlobalTranz’ advanced logistics technology and freight transport database, combined with their own experience and knowledge, has the ability to make the accurate, real-time decisions necessary to ensure successful and compliant freight delivery.
Freight brokerage firms often have long-standing relationships with carriers, giving shippers peace of mind in knowing that the carrier is trustworthy, reputable and reliable. Freight is precious and expensive cargo – shippers need to do everything possible to minimize the risk of loss, damage or theft. Freight brokerages play a critical role in screening carriers, providing oversight to ensure loads are correctly matched with the right type of carrier and equipment, and ensuring shipper expectations are met. This takes a load off (no pun intended!) of shippers, allowing them to stay focused on running their core operations.
What Does the Future Hold for Logistics?
That said, Uber is offering an exciting alternative to the industry and will likely be successful in carving out a niche in on-demand freight movement. The company is also investing in advancing innovative technologies like self-driving trucks which will benefit the logistics industry as a whole, and deliver valuable new options for both shippers and freight brokerages alike. Automation in logistics is a topic unto its own, and one we’ll explore in a future blog post.
At GlobalTranz, we look forward to working alongside or in partnership with Uber and other on-demand freight options as we continue to grow our freight brokerage and 3PL service offerings. Contact GlobalTranz today to discuss how we can add value to your business.