LoadExpress

Deal Direct. No Brokers.

As we talked with our users on both sides of the market, particularly carriers, some perceive our auction model as unfamiliar or unworkable. After some explaining and clarifications, then they get it. Why? The main reason is they don’t realize they are already engaged in an auction every day with a broker.  When a broker gets a request for quote from a customer, he would immediately go out to his carrier network and try to get the lowest bid from a carrier. A small broker would do this directly; a large broker has multiple carrier reps internally to go to and get bids form their respective carriers.  Whoever is chosen by the broker gets the load.  Unless a carrier or broker is tied by long-term contracts with fixed rates, this is the essence of today’s broker-driven spot market process repeated thousands of times a day.

What we offer is a totally superior form of auction that’s better for carriers and shippers. Today, a carrier is essentially bidding blind against others and himself, with the broker controlling the process and target price. We at LoadExpress support an open auction with total price transparency.  It’s the free market and dynamic pricing at its purest. Using a poker analogy, a broker who sees his hole cards and everybody else’s cards is engaged in bids/offers with 10 players who only see their own cards and nobody else’s.  Would you want to play in that game?

Second, LoadExpress is a marketplace for buyers and sellers of freight so they can deal with each other directly.  It’s not for brokers where they control the process and flow of information and keep both sides in the dark.  Third is the transaction fee.  A broker will try to maximize his margin on each deal as any business would. Typical broker margins are 10-25%+ depending on the deal, with 40% not unheard of. As usual, the big guys get the better deals, and the smaller ones not.  CHR’s annual margin was 16.5% in 2016.  We charge a flat, and lower fee for using the platform.

LoadExpress                Current Process

Pricing                       Open Auction                Closed auction

Relationship             Direct buyer-seller       Broker

Fee                              Flat, lower                      Variable, higher

Another misconception that some carriers had was that an open auction model is a race to the bottom with the last one in at a dollar lower getting the deal.  That’s a misconception we do not see.  What shippers want is a reliable network of dependable carriers who offer good service at a good price. In LoadExpress, the shipper picks the winner, based on the price, his rating, and possibly direct prior experience. Price is very important, of course, but a reliable carrier who bids a few dollars more will usually win.

So in reality, we are offering a fair, open and transparent auction system vs. today’s blind, closed and opaque system.  We bring power and control back to carriers and shippers.  The way it should be.  But participants in today’s system are so ingrained in the old way of doing business they don’t always realize the improvements.  Thus our central mission as we scale up our operations is: to educate and make aware of our innovation, get people to be comfortable with it, and help them use the system.

PS:  We’ve been pretty hard on brokers.  Our attitude towards them is summarized below:

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Our first whitepaper is here, and on our homepage, ready to download. It starts out by showing how the top 5 airlines joined to form Orbitz in 1999 which caused the online travel industry to take off, and asks the question: does the trucking industry have the same leadership and vision to do the same, and why not?

The rest of the paper discusses:

  • The need to be more productive and cut costs in this cutthroat business has finally moved the industry to start the digitization process other industries have started 20 years ago.
  • The airline industry got together and said “we are not going to pay the 7% commissions anymore.” Shippers are paying 10-25% on truck loads, meaning billions of dollars.  What more incentive does the industry need to become more efficient?
  • A big part of the unnecessary cost and inefficiency lies with the brokers, who exist to make the logistics process function but doesn’t solve the problem.
  • The solution is LoadExpress, which moves the trucking market towards the future: a direct model with the ultimate efficient pricing model, auctions.

Hope you enjoy it, and look forward to hear your feedback.

After nearly two years of hard work, LoadExpress has finally launched two weeks ago, at the Mid-America Truck Show.  With the great reception we got (more on that in a later post), we are ever more confident we have built a unique product and business model that provide great benefits to both shippers and carriers, owner operators and drivers. We have something important to contribute to the logistics industry, starting with the truck freight market, and we are in the right place at the right time.

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What do we see, and what are our operating principles based on our vision?

  1. The U.S. trucking industry is one of the largest and most critical industries in the U.S.  It is also one of the most technologically backward.  Much of the industry is run with brokers and lots of people using phones, faxes, spreadsheets, and home grown “systems” to conduct business.  Today’s logistics process is universally recognized by everyone involved as highly inefficient, frustrating and therefore unnecessarily costly.  There’s got to be a better way.

    LoadExpress exists to provide that better way.

    We’re using proven web-based technologies that transformed many other industries such as travel, e-commerce, real estate and countless other services. We’re taking that technology and applying it to the logistics industry.  Through automation and eliminating the middlemen and all the inefficiencies that come with them, carriers will make more money, shippers will lower their costs, and both will enjoy higher productivity and customer satisfaction.

  2. Studies and surveys point to these elements as the key components of technology needed by the logistics industry: Internet, open standards, direct models and data, data and data.  Our web platform and mobile app are designed from the ground up with those elements in mind.
  3. The logistics industry is highly fragmented and intensely competitive with margin pressures on both shippers and carriers.  The 10-25% margins charged by brokers and the highly inefficient, nearly manual process in the daily operations of logistics represent a huge opportunity for improvement. LoadExpress’ mission is to unlock billions of dollars in profits and lower costs for the logistics industry, starting with the $250 billion commercial truck freight market in the U.S.
  4. Finally, this is critically important: we play for the long haul.  What does that mean? We are veterans in the enterprise software, startup and navigation industries.  We are very skeptical of hype and the latest fads.  So is the logistics industry. We know the logistics industry is big, tough, and takes a long-term approach to win, through hard work and providing real solutions that work and generate real benefits.  It’s a very complicated business to get right.  Our customers don’t tend to read the Silicon Valley press or care about the self-claimed next disruptive technology. There already have been a handful of startups in our space using “Uber for trucking” and Silicon Valley money/mindset which have become roadkill or the severely wounded.  We will not do that.  We play for the long haul.

Thanks for reading. Stay tuned for our saga into the digitization of the logistics industry.

 

We’ve just deployed another simple but powerful tool to make LoadExpress the most automated and comprehensive freight marketplace in the industry.  The LoadExpress Express Load Builder is a simple template (see below) where a shipper can fill out some basic info, email it to postloads@loadexpress.com, and voila, that load is automatically populated in the LoadExpress marketplace.  It’s as easy as 1-2-3.  That load will show up in the shipper’s Open to Bids panel as well as the whole marketplace.  Only after a bid on that load has been accepted will the shipper then fill out the rest of the site and delivery info needed.

Template

 

This tool does three things: 1) conforms to the main tool that most small/medium shippers live off daily, namely, email.  We don’t require them to change their habits; 2) eliminates any unnecessary data entry if a load did not receive any acceptable bids, and 3) automates the load building process.  Once done, a BOL and rate confirmation are auto generated by the system, and the rest of the transaction flows as usual.

We have customers marveling how they can build a load, put it into the marketplace, see bids, accept them, and track it from pickup to delivery, ALL WITHOUT HUMAN INVOLVEMENT.  And that’s the whole point of LoadExpress, to automate as much as possible to generate savings and productivity gains that we can pass along to our users.  Our fees are 50% less than typical broker margins as a result.  That’s the kind of savings worth changing for.

The quick answer is yes.  Of the 16,000 registered brokers, the top 25 garnered 71% of the $38 billion in fees.  The nuanced answer is that it will happen to the vast majority of the mom and pops and small shops who offer 1) basic services in the commodity truck freight market, and 2) no scale or technology to compete against the biggest brokers.  A Rolodex, email and bunch of phones are no longer viable.  The C.H. Robinsons, Coyotes would be fine.

Travel agents are very similar to freight brokers in that both provide basic services in a fiercely competitive commodity transportation business (one people, the other freight) with tightening margins.  Twenty years ago, travel agents handled more than 70% of consumer travel bookings; today it’s less than 10%.  Looking underneath a bit more, you’ll find that travel agents book a much larger share of cruises and tour packages–more complex travel.  Just ask yourself: when’s the last time you booked a plain old airline ticket, hotel or car rental through a travel agent?

travel agents pic

So the lesson is clear: brokers must provide more than the basic commodity transport services in order to survive in the future.  You might ask: they’ve been doing this since time immemorial, so what’s changed now?  Because the digitization of the freight industry is finally here, albeit 20 years behind the travel industry.  Big existing players, startups, investors, foreign logistics companies, not to mention Amazon and Uber, have pumped in billions to jump into the $260 billion commercial trucking market.  The overriding goal is the same: to wring $ billions of waste and inefficiency out of the industry through automation.

A big part of that waste is the $38 billion in brokerage fees, out of a $260 billion market, or 14.6%.  A 10% reduction means almost $4 billion in annual savings.  With only a 3% net margin for the consolidated logistics industry, that’s a game-changing opportunity.  We’ve been the most explicit about this part of our value proposition because our auction model hits straight at the problem: the excessive broker margins for the basic services they provide.  LoadExpress has developed a platform that automates a big part of the basic broker’s services, which will result in reduced cost for customers. Our transaction fee is competitive or lower than typical brokerage commissions, especially when the labor savings and the reduced aggravations we deliver are accounted for.

The online travel industry was created in 1996 by Expedia, and then Travelocity and some others followed suit. But it wasn’t until Continental AirlinesDelta Air LinesNorthwest AirlinesUnited Airlines, and subsequently American Airlines invested $145 million to form Orbitz, that the online travel industry took off. That’s because the five airlines controlled 80% of the airline capacity. The chief motivation of the bold move, against heavy opposition from travel agents, consumer groups and fledgling competitors, is simple yet powerful: they didn’t want to pay the travel agents 7% anymore, and thus save billions of dollars every year.  The industry is saying:

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The airlines took a leadership position to eliminate 7% commissions. Why isn’t the trucking industry, or the biggest shippers, doing the same for 10-25% brokers’ commissions?  What more motivation do they need?

While both industries are notoriously fragmented and can’t achieve the same concentration with a handful of even the biggest players, I still think such an alliance from either side, or both, will be a huge catalyst for the much needed digital disruption in the trucking industry.  Will it ever happen?  Don’t know.  In the meantime, we are busy executing our plans.

Internet technologies have transformed countless industries ever since the Web browser came on the scene in 1994.  The trucking industry has been lagging in technology adoption for the past 20 years.  But starting several years ago, there has been a boom in technology innovation and adoption in the entire logistics ecosystem across all segments.  In our space of digital load matching in trucking, there are probably a couple dozen known startups joining the spray, as well as large players investing heavily to automate or web-enable their operations.  J.B.Hunt’s latest announcement of its marketplace, as well as Uber and Amazon’s upcoming offerings, prove beyond doubt that the future is here.

What’s happening in the logistics industry today reminds me of the online travel industry at its beginning in 1996, when Expedia is credited with starting the online travel industry. Very quickly, Travelocity, Orbitz, Priceline.com, Hotels.com et al.  came afterward and changed the travel industry forever.  What’s happening in our space is exactly like that.  There is a lot of experimentation going on, with different features, business models, partnerships and relationships.  I have blogged about our approach, benefits and differentiation previously.

All reports and surveys agree on the need of technology in the logistics industry, for two main reasons.  In the trucking industry:

  1. it is notoriously inefficient with a semi-manual process consisting of a hodge podge of emails, spreadsheets, home-grown apps, and lots of yelling and aggravations for all participants.  Less than 20% of participants use any TMS or load tender systems. A simple “where’s my shipment?” question from a customer may require 5 people (customer, broker rep and operations guy, dispatcher, driver) making round-robin calls resulting in “I’ll get back with you when I know” an hour later.  This produces high costs and depresses productivity.
  2. The industry is fiercely competitive in an environment of squeezing margins.  This is especially true of the commodity truck freight business, which has the lowest margins in the logistics industry.

So it’s quite simple, only the efficient will survive.  Those who don’t adapt and change will die.

What the LoadExpress platform has provided is a level-playing field for small-medium shippers and carriers vs. their big competitors to take full advantage of benefits that technology has proven it can provide.  To enjoy those benefits, users need to change their mindset and habits.  The current process can be roughly described as “yell at the broker and hope he’ll take care of it. If he does, great.  If not, yell at him some more.” They can’t continue to operate like that, and can’t continue to complain about their present plight without doing anything and expect things to improve.  LoadExpress provides the proven technology to enable shippers and carriers to do their work more efficiently and cheaply, on their own and control the process.  At LoadExpress, there is no one to yell at.

Any successful new product must provide enough benefits that overcome the switching cost of using that product.  The “hard dollar” benefits our platform provides are significant, but using it requires a shift in attitude and work habits, as is the case in many business applications.  Namely, carriers and shippers need to adopt a “do-it-yourself (DIY)” mindset to enjoy an automated, direct-dealing, auction-based marketplace, vs. the current state of “yell at the broker and he’ll take care of it.”  The current process, with all its dysfunctions, extra costs and complaints, is what most players in the freight/logistics business know and grown accustomed to.  So it’s our job to provide the user-friendly path to switch to a different and much more efficient workflow and provide the significant incentives to change.

So let’s talk about those benefits.  For shippers, LoadExpress provides two major benefits specific to them:

  1. Cut freight spend. This is achieved primarily through getting bids directly from carriers, and not brokered rates from brokers, which could contain margins anywhere from 10-25%+.  Smaller shippers tend to get gouged due to their low purchasing power; 40% (margin) loads are not unheard of.  And brokers control that margin and change it per load depending on supply/demand, equipment type, type of load, how desperate the carrier/shipper is etc.  In other words, the broker maximizes his profits.

In contrast, LoadExpress just charges a flat transaction fee for each shipment through the marketplace.  It would typically be lower than broker commissions.  We do not gouge, take advantage of a user’s “weak” position with surge pricing.  This is why LoadExpress will save its customers significant money by both lower freight rates as well as our usage fees.

2. Reduced Shipment “Give-Backs” from Brokers. A major complaint from shippers is that brokers often “give back” a shipment after getting it to fulfill, because they’ve found some better deal or couldn’t get it covered, perhaps by trying to squeeze the carrier too much on the rate.  This causes the shipper to scramble frantically to find another party to cover the load, sometimes within couple hours of pickup.

With LoadExpress, carriers bid directly for a shipment.  Most truckers are honest, hard working people who want and deserve fair pay.  When they bid, they are signalling the price they are willing to accept.  By eliminating the broker in the middle arbitraging the deal, there is less likelihood of give backs.  If a carrier is abusing the system, shippers can rate them poorly in our rating system and warn others to ensure the quality of our users.

For owners operators and carriers, the benefits are equally large:

  1. Make More Money. By setting their own rates carriers make more money. On LoadExpress, carriers get paid the rate they bid for when it’s accepted by the shipper.
  2. Proactive Load Matching. Using us as another, totally FREE marketing channel, carriers can set their load profile for any time period and get an active alert of a shipment that matches their needs and bid for it.  This enables our users to go after as many customers/ loads as they want, all for free.
  3. Reliable and Fast Payments. This is the lifeblood of carriers.  Brokers are       notorious for playing with carriers’ pay.  Our motto to carriers is very simple: you did your job, we pay you what you earned.  LoadExpress pays carriers their full invoice amount on any completed delivery with proof of delivery within 24 hours with ExpressPay (money code), and 2-3 days via ACH.  No processing fees, holdbacks, or hassles; just hard-earned cash. Fuel advance of 50% of the invoice is available for qualified carriers.  Carriers do not need factors by using LoadExpress.

We provide two major benefits shared by both parties:

  1. Reduce Aggravations of Managing Logistics.  Through our comprehensive automation, we cut out a lot of the daily aggravations of running freight operations, a scene straight out of the 1980s.  Everywhere I go, the #1 feature both sides go nuts over is the ability to track the shipment 24/7 via GPS. This is 2017. I was fascinated by GPS when I first saw it depicted at the end of Dr. No, when James Bond inserted a tracker in the tailpipe of the car he’s abducted in, and thus saved himself and the world 10 minutes later. That was 1962.  We simplify your life.

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2. Platform for Managing Spot Markets.  We consolidate the above desk into one web platform with which you can manage your freight operations, especially your spot market needs.  Instead of a hodge podge of paper, faxes, spreadsheets, load tenders, phones, and lots of yelling, you have one place to transact and manage freight.

In summary, LoadExpress provides enough benefits to both sides that can’t be ignored.  We will use our product, friendly customer service and sales staff to convert our users to the new way to move freight, one at a time.

The digitization of the logistics industry is in full swing, yet just beginning. Billions of dollars have been poured into various segments across the globe.  Our space is so new that there is not even an agreement on what to call it, and there are various products, pricing plans and business models offered by our competitors.  Digital load matching (DLM) comes close so we will use it for convenience sake.  Surveying the field, we believe we are different–and superior–in three major areas:

  1. Auction. The most cited problem we hear is that brokers play with margins to maximize their profits, which is what a rational business should do.  Most of the other startups or services from established players are effectively glorified load boards and online brokers, or they provide some “quick quote” using pricing databases.  We eliminate all that.  Carriers and shippers bid and negotiate directly; we don’t get involved at all.  This is the most efficient and TRANSPARENT pricing mechanism, and solves the biggest problem.
  2. Pricing. We use a very simple pricing approach.  It’s totally free to join and use for carriers. We charge one transaction fee to shippers on each shipment which is added to the carrier rate. We pay carriers when they submit a clean POD approved by customer, within 24 hours or 2-3 days.  We deal with shippers on getting paid.  No subscription fees, different pricing levels, charging both sides, nickel diming stuff etc.
  3. Spot Market Management Platform.  DLM products typically have 2 feature sets.  The front end is what most people have in various degrees of completeness and usefulness: load matching, tracking, quotes/pricing, and paying carriers.  What separates LoadExpress from the rest of the pack is the back-end which allows the parties to complete a transaction on our platform without leaving it and dealing offline in the traditional way. Things like exception handling, of accessorials, detentions, lumpers, dispute resolution etc.  We obviously can’t automate everything and take the human element out of it completely, but we try to do what’s practical.

So our definition of DLM is much broader, and not just a glorified load board.  The LoadExpress platform can be used by both small-medium carriers, owner operators and shippers to manage their spot freight market.

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We had a very successful launch two weeks ago at MATS in Louisville, the largest truck show in America.  Traffic was steady and at times heavy throughout the 3 days.  We received enthusiastic endorsements from hundreds of truckers.  This was a typical reaction.  Can’t get any better:

We achieved two important goals:

  1. Confirmation that our product, business model and value proposition is right on the money, and unique.  We indeed are offering a new way to move freight:
    • We are not just another glorified load board or partial app, but a web platform that a small-medium carrier/owner operator and shipper can run their truck freight operations on.
    • A pure auction model between carrier and shipper.  We don’t broker pricing or give you a quick quote based on some database. Buyer and seller deal directly, based on the supply/demand conditions of that day.
    • It’s absolutely FREE to join and use for carriers.  Shippers pay one transaction fee on a completed shipment on our marketplace.  That’s it.  No hidden charges, no small-print conditions, no nickle and diming. Many truckers could not believe it (“No fees to join?”) since they’ve been so used to the current way of doing business and load boards that charge a monthly subscription fee.
    • Since this is a trucking show, we focused on benefits to truckers, which are many.  Using LoadExpress, carriers/owner operators set their own rates–what they bid is what they get.  They can make more money by taking as many customers and loads as they want to, reducing empty miles and getting backhaul loads.  They get paid immediately once they deliver the goods and submitted a clean POD approved by the shipper.  Above all, they can take back the control of their business again. (Details in a later post.)
  2. Above all, we hit upon a nerve among the trucker community and got a visceral reaction to our offering and what it means to them.  It’s clear that there is a love/hate relationship between the typical owner operator/carrier and his brokers. We heard from many their war/horror stories about dealing with brokers.  They can be summarized as “while you feed me, I hate the many things you do to me.” (Hey, there ought to be a country western song about this! Should be a hit among truckers, and send me my royalty check when you write the song.)

We signed up a lot of truckers, and gave away 10 Omaha Steaks packages for those who signed up.  These guys love their steaks! Dave Nemo of the Dave Nemo Show on SiriusXM satellite radio paid us a visit too. A good time was had by all!

steak winner

LoadExpress

Deal Direct. No Brokers.

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