3PL Perspectives
Mike Albert | DrayNow, Inc.
“Creative destruction” is a World War II-era term that describes how innovation triggers the end of one thing (a business process, an industry), but also the birth of innovation.
We’re experiencing creative destruction in the freight industry as large, digital freight marketplaces like Uber Freight and Convoy seek to upend many aspects of the freight broker’s role. According to FreightWaves, venture capitalists poured about $5.6 billion into FreightTech in the first three quarters of 2019, putting investments for the year at more than $8 billion if that pace continues.
The digital freight marketplace model has yet to achieve scale within the intermodal freight industry, where Intermodal Marketing Companies (IMCs) manage drayage moves to-and-from railyards and ports in much the same manner as they did in the 1980s. But the digital disruption train is coming (no pun intended) and IMCs need to get ready. FreightTech is a formidable force because it feeds on inefficiency and seeks to eliminate just the type of non-value-added tasks that dominate a front-line freight broker’s day, (and cripple IMC productivity).
• Calling carriers to source capacity
• Calling carriers to check a driver’s location
• Chasing carriers/drivers for shipping documents, which are sometimes faxed over or even sent by mail
• Compiling manual performance reports that aggregate self-reported data from many carriers
These are the non-value-adding activities of a middleman—a toxic label in the digital age. It’s simply not a sustainable way of working, yet many are in full-on, head-in-the-sand denial that their operating model needs to change. The arguments we often hear are, “It’s not broken,” or “That’s just the way it is.”
Well, these models weren’t technically “broken” either:
• Supermarket Checkout. Remember when the most important decision during your weekly grocery shopping trip was choosing the fastest cashier line? Today, self-checkout rules. Cashier jobs that may be lost are replaced by tens of thousands of new jobs building the technology that helps supermarkets increase efficiency and gives consumers a better shopping experience. Creative destruction at work.
• Toll Collection Operations. The advance of RFID technology is eliminating the role of the highway toll collector. The move from manual to automated cash collection has reduced toll-related traffic jams, fuel consumption and carbon emissions. Old, non-value-added tasks destroyed; a more efficient toll payment method created.
The technology-aided processes that are changing the face of traditional OTR freight have yet to be widely adopted in the intermodal freight industry.
Changing the IMC’s Traditional Role
To the extent that the activities of front-line brokers are dominated by chasing carriers for capacity, data and paperwork, they risk extinction. But solutions exist to help IMCs and brokers evolve their roles into something far more strategic to avoid that label of “non-value-added middleman.”
The same marketplace model that is transforming over-the-road freight is now available to connect intermodal freight with carriers. Only instead of trying to displace brokers, as some FreightTech start-ups aim to do, there are intermodal freight marketplaces that seek to help brokers by providing them with a digital platform for broker-carrier collaboration that virtually eliminates time-consuming phone calls and emails. Drivers that haul for the marketplace install an app on their phones that constantly updates the platform with real-time location data and completed paperwork. IMCs can use the marketplace to book loads and monitor the entire shipping process.
IMCs should no longer need to contact carriers to get shipment data and paperwork. The tools are available right now to help them 1) improve productivity by economically digitizing operations and 2) elevate their value proposition with shippers.
Creative Destruction: There Are Winners and Losers
IMCs are in a precarious position these days. The technology-aided processes that are changing the face of traditional OTR freight have yet to be widely adopted in the intermodal freight industry. But the change is coming and shippers will challenge the value of IMCs if their role is simply that of messenger between carrier and shipper.
If you are an IMC, or any freight broker with largely manual work processes, the current cycle of creative destruction in the freight industry is forcing a choice.
Do you want to remain complacent with the current model that is being challenged, or embrace the creative destruction that leverages innovation? Today it’s still your choice. A year from now you may have missed the opportunity.
Mike Albert is CEO of DrayNow, a national freight matching marketplace for drayage service to and from rail yards.
Image credit: Christos Georghiou/Shutterstock.com
