The Litmus Test for Small Trucking Tech

Welcome to the 90th edition of The LogTech Letter. TLL is a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, guest contributor Robert Petti took a look at next steps for Flexport in the wake of them hiring Amazon vet Dave Clark. This week, I’m exploring a theme I’ll be watching the rest of 2022: to what extent will technology enable small carriers to “stay in the game.”

As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.

For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@spglobal.com or on Twitter at @LogTechEric.

Note: I’m on vacation next week and taking a break from the The LogTech Letter next week. Next edition will come your way July 8.

As freight demand began to soften in the first half of ‘22, I began to think about a clutch of JOC.com stories I’ve written the past two years over the pandemic. These stories tended to revolve around a similar theme: technology arriving to help small fleets or independent owner-operators better manage their businesses. That could mean everything from simple accounting tools that a driver could manage on a smartphone in their cab, to efficient dispatching or invoicing tools, to access to payment and credit facilities, to more sophisticated optimization products.

To be more specific, the companies I’m thinking of are ones like SmartHop, CloudTrucks, TrueNorth, Optimal Dynamics, BasicBlock, Alyvs, AxeleTMS. Those go along with digitally native intermediaries like Transfix and Convoy that have free or low-cost carrier TMSs, and incumbent providers like AscendTMS.

So here’s my line of thinking: those companies all saw massive uptake of their various products (and some of them landed massive venture capital rounds) during a period of huge freight demand (ie second half of ‘20 through the first quarter of ‘22). These now look like the halcyon days, where drivers were lured into the market and where employee drivers decided to go independent to take more direct advantage of a market flush with cargo. In that context, easy-to-implement and easy-to-use tools to help manage the freight deluge at a reasonable price were like manna from heaven.

But here’s the thing: the true measure of these platforms will come over the next year, in the trough of the cycle, when freight is harder to come by. That is when the broad hypothesis behind these products will be stress tested. That is, that these systems and products should be able to allow smaller carriers to weather the market downturns, not just maximize the upside of a hot market. Generally, down cycles lead to small carriers, and new entrants, that don’t survive. Trucking is an unregulated market, meaning new entrants can come and go with the greatest of ease.

The promise of these tools - from basic ERPs to sophisticated routing - is that those smaller players have a better chance. They are designed to democratize access to technology in a way that hasn’t been possible before. The founders of these companies tend to have an underlying assumption that large fleets have had the ability to invest in technology that drives a bigger gap between the haves and have-nots when the market gets a little loose. And they want to rectify that by putting affordable, easy-to-use, mobile-first products into the hands of people who basically just want to drive.

With all the money having flooded into the market through these tools, we ought to be able to discern a difference this time, that the number of small carriers exiting the market will be relatively lower than in past cycles. Perhaps we’ll need to measure companies individually to understand whether it was basic back office tools that were more important, or whether applying tech to the revenue-driving aspects of the business was more valuable.

We’ll have to wait to see how this plays out. The down cycle is just beginning. We can’t ignore the volume of new entrants that came in, but nor can we ignore that the peak was higher than it has ever been. A drop in freight demand is coming off the peak, not off equilibrium, so carriers that have adopted these solutions still have freight to target. It’s not a Charles Dickens novel out there, but rather an anticipated return to more moderate volumes.

I’ll be watching intently, to see if these platforms retain customers, if the rate of industry fallout is less severe than it might ordinarily be, and if the survivors end up that much stronger coming out of the down cycle.

And not only will I be watching the situation, this will be the focus of a session at our JOC Inland Distribution Conference Sept. 26-28. I’ll be joined by SmartHop CEO Guillermo Garcia, CloudTrucks CEO Tobenna Arodiogbu, and Alyvs CTO Leo Gorodinski.

Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):

• CH Robinson told my colleague Bill Cassidy that demand for digital spot quotes is on the rise.

• FedEx has opened it data war chest to FourKites, which the visibility provider will use to underpin a new platform for large shippers based around planning and disruption avoidance.

• Germany-based Flowfox is tackling the automation of a range of import processes, including container release. The company walked me through the nuances of adapting that product for container release in North American ports last week.

• Transporeon has long been thought of as a freight procurement and carrier connectivity platform first and foremost, which made the advent of its freight matching capability so interesting. The company specifically said it is designed to weave around the inefficiencies of broker subcontracting that’s so prevalent in Europe.

And here are some recent discussions, reports, and analysis I found interesting:

• Great conversation on the economy and the impact on freight between DAT’s Dean Croke and Michigan State’s Jason Miller here.

• Bjorn Vang Jensen with a super valuable look at BAF here.

• Really in-depth story on the travails of Tiger Global, which has invested in a number of LogTech startups, especially in 2021.

• Interesting to revisit this slide from my colleague Rahul Kapoor, which he presented at TPM22 in early March. Clearly stating the first half of ‘22 would be the turning point and that significant inventory buildup would mean volumes would normalize amid “reversion in demand.”

• If you missed my discussion with Priya Rajagopalan, chief product officer at FourKites, on last week’s LogTech Live episode, catch the Twitter restream here. Subscribe here to get show updates or go to my Twitter feed for a livestream of the show.

Some upcoming events I’ll be involved in:

• I’ll be joining representatives from the Hershey Co., ABInbev, Accenture, and Buyco for this free webcast at 10 am ET July 12 on determining where outsourced ocean execution makes sense in a volatile market.

• As noted above, our Inland Distribution Conference in Chicago Sept. 26-28 is coming up fast. I’ll be doing a one-on-one with Emerge CEO Andrew Leto and then leading four tech-oriented discussions, including the one on small carrier tech, as well as sessions on LTL tech, freight procurement advances, and venture’s future role in trucking. Don’t miss this - it’s the most substantive surface transportation conference in the market.

Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or S&P Global, and any opinions are mine only.