Pros and Cons of Digitalization in the Freight Industry

The whole freight sector is entering a “freight recession” period after shipping rates have reduced significantly due to inventory gluts across the US lowering demand. This has placed the sector at a disadvantage during annual contract negotiations, though it means that retailers and other customers will benefit from lower transportation costs. This also means that multiple parts of the industry are seeking new ways to make a profit.

The brokers, who match trucking companies, often small one truck companies, with loads that need to be shipped, have also been put in difficult situation. Some of the incumbent companies have found efficiencies by digitalizing what had before been a transaction done with phone calls and paper. For example, Brett Suma, chief executive officer of Loadsmoth, started his career in the truck industry a couple of decades ago. His job then was to open packets of paperwork delivered by courier to log the deliveries made by drivers for Knight-Swift Transportation Holdings Inc. Now the company he runs is trying to eliminate all that paperwork.

“The haves of the technology are going to grow”, Suma said. “The have-nots of the technology will be consumed.”

C.H.Robison Worldwide Inc. and RXO Inc. are expanding automated systems against the newcomers in the industry, so called ‘digital natives’ such as Uber Freight unit and Convoy. However, even though Uber Freight and Convoy have gobbled up market share, they struggled to make a profit. Convoy, which raised $260 million in April led by Baillie Gifford Is still investing in its technology and capturing market share. Large trucking companies are adding more competition by building their own digital brokerages.

Most brokers don’t own trucks. Instead, they are tracking freight from origin to destination by playing matchmaker between shippers and truckers. Brokers build capacity by signing up as many of the 2 million US freighters that they can. The automation technology removes labour by providing a computer application for truckers to find freight and accept the price for hauling it, a kind of digital market. There is still a lot of paperwork in the industry, but services such as Thansflo allow drivers to scan trip documents at truck-stop kiosk to digitalize the paperwork for fleet operators.

Personal Comment:

A lot has changed since the times when all of logistics was manual and included a lot of paperwork. Today there are fully automated port terminals, autonomous ships, and drones being used for cargo deliveries. It seems like it is time to make the trucking industry to both automated and digitalize. The article suggests digitalizing the role of a freight broker in order to reduce hauling prices and increase efficiencies.

There are already some digital freight brokerage solutions available as online platforms that shippers directly use to run their shipments. The most obvious advantage is lower prices. The brokers try to sign up as many freighters as they can. So, it seems to me that digitalization is what is needed here as it reduces the amount of labour used on operations.

Another advantage is that digitalization at least opens the door for complete automation, which could lead to more saving and efficiencies. For example, empty trucks, or trucks that aren’t hauling freight, account for a third of all miles driven. This reduces wasteful emissions and unnecessary costs.

On the other hand, one of disadvantages of digital brokerage is that it might be less flexible and understanding than a human broker. This might have a negative social impact on the industry.

Written by Kateryna Melnyk,
RISE Mobility & Systems