What are the pros and cons of digital freight brokerage, and how can technology be used to enhance the shipping customer's experience?
Eric Masotti, our Vice President of Logistics here at Trailer Bridge, joined Dooner and The Dude on What the Truck?!? this week to chat about trends in transportation logistics and shipping technology—specifically, the impact of VC-backed digital freight brokerages on the market and how technology can best be used for more successful loads across the supply chain.
Check out the entire What the Truck?!? episode above, or roll ahead to 09:40 to catch Eric's segment with Dooner & The Dude on FreightWaves radio. Here's a small excerpt, in case you missed it:
Eric Masotti: "I think some of this is a solution for a problem that doesn't quite exist. In our space—in transportation and 3PL—and here at Trailer Bridge, we have ocean business, we have trucking/drayage group, and we have a logistics brokerage, as well. In terms of serving clients, we service them with year-long pricing, or sometimes two-year-long pricing with annual increases, and then also there is spot pricing.
Customers have advantages and disadvantages with all of those choices, including reliability of the pricing structure (as long as the provider is willing to uphold that pricing, and the shipper has to uphold that shipping volume, too, not giving the freight to other providers).
In terms of the set pricing margin and fluctuating with the current costs, it's really just a spot solution. The only difference is, they're trying to market it where instead of using multiple providers on the spot, it's only one provider. If you can market that correctly, that's a great opportunity for that business (or any business)."
Tim Dooner: "Yeah Eric, that's a solid point. It comes down to when you're talking about markup or set markup on spot... on the same lane, there's not a set spot market price, right? Whoever is willing to go the lowest or whoever is willing to pay the highest is going to set the spot, and it can fluctuate throughout the day and from carrier to carrier, correct?"
Eric Masotti: "Exactly! When you think about all of the original zips and destination zips and you multiply those together with all of the different possibilities of lanes... think about how many millions of origins and destinations there could be, and then to your point, the market sets the price in terms of supply and demand and finding a balance.
But with that said, if a company really wants to get aggressive, they can go under market. I mean, that's how many transportation providers have gotten their share of business. It's not been some technology that's given them an opportunity to get more freight than a competitor. They've priced under market in an effort to get more scale and get more relationships. And at some point, they've turned those into a profitable business."
Digital Isn't a New Concept in Transportation Logistics
Tim Dooner: "You know there's been a few different companies arguing about this online. We're not going to name names here, but let's define this a little bit. When I've been listening to some of these arguments, it seems that when you talk about digital freight brokerage, what a lot of people are actually complaining about are venture or capital-backed companies that are using tech and also picking up market share maybe at a loss using that money, versus human brokers.
Most brokers now have some sort of digital component. Digital freight brokers still have humans on the back end, but what's your take on that argument between the digital freight broker and the traditional freight broker?"
Eric Masotti: "You're right. At least with the top tier people on the freight brokerage space, technology is hugely involved. At Trailer Bridge, we're in the process of transitioning from multiple CMSs for different divisions to one CMS, to give us better access to our account managers in terms of the equipment that we own, and also to our partner carriers so we can leverage those two together to provide the best solution for the client.
But in that space, our account manager who is working with the customer—it's going to give him carrier history, lane history, pricing history... And so tons of technology is coming to our expert, our account manager. We just think that person provides so much importance.
You know, one of the things that make our space a lot different than say, passenger traffic, is that if you're going to catch an Uber or a Lyft, you can put in the type of car you want, where you're at, and how many people—and that's really all the variables involved.
Well in our business, there are loading times, appointment times, product types (some drivers don't like shipping different types of product), weight... I mean, I could go on with a list of 30 or 40 different variables. Those make it very complicated, which doesn't mean that technology can't help you solve it but a human needs to be there working with the customer. They understand their preferences.
At the end of the day, if you grab an Uber but it cancels out on you, that works in passenger traffic. But if you're shipping for FEMA doing supplies and somehow the load doesn't match up so it just falls off—that's not an acceptable solution. Someone has to be there ready and able to provide that solution for the client if they're going to be successful."