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Freight Brokerage Idea Proposal (CHRW, JBHT, LSTR, XPO)

Freight Brokerage Idea Proposal (CHRW, JBHT, LSTR, XPO)
 

Will freight brokerages successfully adjust as digital brokers disrupt the industry? Which companies are best positioned to thrive?

 

Report Available: November 1, 2017

 

Blueshift’s initial research found that the automation of the freight brokerage business is well under way. There is a plethora of trucking apps challenging the traditional methods of the trucking logistics business as drivers are now using apps to book loads, choose routes, negotiate rates, and set up faster forms of payment. With the recent launch of Uber Freight and its multi-city expansion in the next few months, disruption appears inevitable and legacy shippers, carriers, and brokers will have to adapt. Asset heavy companies are rolling out capabilities themselves, while large shippers like AMZN are considering whether to enter the freight brokerage business as well. Driver shortages and the development of autonomous trucks are also playing a role in the evolution of the freight brokerage business.

 

Observations

  1. The huge and fragmented trucking industry has been slow to embrace technology, but a wave of tech firms are doing their best to change that. Since disruption of the taxi industry by Uber, tech firms have viewed the trucking industry as a major opportunity for freight apps. A 2016 study revealed 60 key trucking apps from start-ups and traditional tech and freight companies. More players are entering the market and Amazon is said to be creating its own brokerage app.
  2. The freight brokerage and logistics segment of the shipping industry has existed for three decades following deregulation. It provides a valuable service to the industry, matching carriers to shippers and providing backroom support operations. One report shows 15,000 registered brokers in the U.S. which will generate over $40 billion in revenue in 2017. But these brokerage services have challenges, including inefficiencies brought on by reliance on legacy systems based on people and phone calls, limited use of technology, missed opportunities due to limited shipper networks, and the reputation for slow payments and exploiting carriers. The use of technology and mobile apps is expected to reduce freight match time, provide better visibility of available loads, eliminate paperwork, provide access to a wider shipper network, reduce the dependency on brokerages, and allow for faster payments.
  3. JBHT launched J.B. Hunt 360, a freight marketplace that connects shippers and carriers by using real-time data and artificial intelligence to match freight with capacity while also being transparent around rate and delivery time. This is an effort by an asset-heavy incumbent to innovate and compete with the startups while also increasing utilization of its fleet of trucks. Asset light brokers like CHRW and LSTR may have different motivations than JBHT but they are also developing their own logistics technology to push back the threat from startups. CHRW started testing a predictive analytics-based service with MSFT to keep track of loads more precisely in real time. It also introduced its Navisphere Driver app in July, which the company said has been downloaded 6,000 times since, while its Navisphere Carrier app has been downloaded 37,000 since its August 2016 launch. The company is also counting on shippers preferring to deal with the established leaders instead of jumping to unproven new entrants.
  4. Other factors affecting the freight brokerage industry include a driver shortage as older experienced drivers move toward retirement without enough young drivers coming in to the pipeline to fill those slots, making it increasingly expensive to retain quality drivers. The electronic logging device (ELD) mandate going into effect in December is also leading some veteran drivers to retire instead of accept these more restrictive rules.Autonomous trucks will address some of the driver shortage, though timing remains uncertain.
  5. Blueshift’s March 9, 2016, Trucking report found freight-shipping rate pricing pressure and challenging federal regulations were unlikely to drive a lot of small trucking companies and owner-operators out of business in 2016. However, ELD and hours of service rules were expected to hurt small trucking companies and owner-operators following the December compliance date. Most large trucking companies were already using ELDs and were expected to benefit as small truckers are forced to comply with the new regulations.

 

How will digital freight brokerage apps affect the trucking industry? How are traditional freight brokers adjusting to the rise in startup drive technology like Uber Freight? How will the logistics and trucking industry adjust to and incorporate the digital brokerage services? How are drivers responding to these brokerage apps? Who is most at risk of disruption? What are traditional freight brokers doing in response? Who are the winners and losers? What role is AMZN playing? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Truck drivers for large organizations, Independent truck drivers working for multiple companies, Individual drivers, Shippers/trucking companies, Brokers, Regulators, and Industry specialists.

  

Companies: C.H. Robinson Worldwide Inc. (CHRW), Echo Global Logistics Inc. (ECHO), J.B. Hunt Transport Services Inc. (JBHT), Landstar System Inc. (LSTR), Werner Enterprises Inc. (WERN), XPO Logistics Inc. (XPO)

 

Research Begins: October 9, 2017