2020: The Year of Digital Freight – 5 Predictions by our Chief Product Officer

This is the 3rd edition of my predictions for the 12 months ahead. You can check my January 2018 and January 2019 editions and decide for yourself if I was too off (yes, some of them were too optimistic!).

Here are 5 predictions that will either happen behind curtains or appear in news headlines for 2020, the Year of Digital Freight:

Emergence of Carrier Digitization: Motor carriers are feeling the pain of being held prisoner by legacy systems that don’t allow for them to tap into their own data. This limitation manifests itself in every aspect of the business: activities like network planning remain highly manual and decisions are made without complete data.

Small and medium sized fleets with homegrown operating platforms built on cloud architecture will emerge and partner with digital brokers and other tech-forward logistics players. Scaling for these carriers will be gradual due to the capital expenditures, but the industry will start to pay attention to these nimble operators with their data management and ability to automate decision-making.

Major fleets will also more aggressively start adopting new technology platforms, working closely with digital partners and becoming more open to real-time data sharing, realizing that the benefits outweigh their concerns.

Rise of Multi-Digital Mode: Shippers are still captive to supply chains that are planned based on annual averages. The most forward-thinking shippers will begin linking together solutions based on real-time market and capacity data that are able to plan modes of shipping on a load-by-load basis: drayage, rail, transload and OTR. The rail might be congested in Chicago, but, before converting that load to OTR, what are the rates and expected service outcomes if that load is railed to Kansas City or Dallas? This type of automated decision-making will be possible with real-time load-specific data (eg. must arrive by date/time, commodity type, etc.) together with real-time capacity (rail congestion, OTR vs Rail price gap, transload cost vs mileage).

The most forward-thinking shippers will begin linking together solutions based on real-time market and capacity data that are able to plan modes of shipping on a load-by-load basis: drayage, rail, transload and OTR.

Digital Distribution Centers: Having benefited from integrations with their transportation providers, shippers are hungry for opportunities to put more of the data they consume to good use. One prime target is distribution centers – especially since dock space and door availability is highly subject to late (and early) arriving shipments. Combining location data from transportation providers with DC data from dock management software could lead to dynamic scheduling and auto reassigning of appointments, keeping detention to a minimum and improving internal DC efficiency.

Freight Brokerage Incumbents Day of Reckoning: Traditional brokerage margin was necessary to fund floors of people endlessly scheduling loads, calling carriers or explaining why that load needed to roll. Now technology is leaning out org structures and operating costs, putting downward pressure on broker’s margins. The historical margin gains from spot portals will be largely dominated by digital brokers, pushing bids as if they were high frequency trading firms. Carriers, which historically were very relationship driven, are now moving towards the ease of digital tools, decreasing their cost per load and making life simpler – although this adoption will take time. Simply put, brokers with legacy, monolithic systems and insufficient will to reinvent themselves are now going to face serious challenges.

The historical margin gains from  spot portals will be largely dominated by digital brokers, pushing bids as if they were high frequency trading firms.

We will probably see aggressive cost cutting from large brokers to appease Wall Street, the beginning of the struggle of brokerage long tail (1-20 people brokerages) due to lack of technology and volume efficiency, and the announcement of big “technology investment” from large brokers with the pitch that they will transform themselves from a traditional player to a technology company, which will be met with obvious skepticism (when was the last time a large company transitioned successfully from legacy to tech?). Add corporate culture conflicts to the mix, the lack of public market long-term patience driven by a quarterly reporting structure, and short- term management incentives, and you create an environment unprepared for the adaptation their investment requires to be successful.

Major Companies Make a Move: Digital Freight as a service will proliferate in 2020 as major companies who have been waiting on the sidelines make a move. Carrier-side companies will fight competition (with the added threat of OEM hardware/software offerings) by expanding their focus and services, including freight matching. Major retailers will seriously consider leveraging their volume and footprint to offer freight as a service. Other international logistics players – parcel shipping companies, freight management solutions, major logistics asset heavy companies – all look into the in-land digital freight service industry do add value via network effects and digital integrated services, to scale and adopt technology to their own operations, customers and portfolio companies.

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