Will Uber take control of the market for freight matching services?

Freight matching services, or freight exchanges, have become one of the hottest topics in freight transportation. Investors have poured hundreds of millions of dollars into on-demand freight platforms, and new companies keep entering the space. Even Uber moved into freight matching with its Uber Freight division. What is the attraction?

Freight matching has been around for decades

The world's first electronic freight exchange, Teleroute, launched in France in 1985. In North America, load boards such as DAT, Truckstop.com, and 123Loadboard have offered, for a fee, a process for shippers and brokers to post loads and for carriers to highlight available capacity.

In addition to load searching and truck posting, these services may provide broker credit scores and days-to-pay details, fuel tax reporting, mileage and routing information, match notifications, backhaul links, toll information, and access from virtually any smartphone. When loads and trucks are posted, postings are compared against availability in the system. If a match is found, one or both parties are notified so they can make shipping arrangements.

The new cloud-based digital freight matching services

The latest freight matching services use cloud-based digital platforms to match a shipper's freight with available carrier capacity. The goal is to better utilize motor carrier capacity through a convenient app that connects shippers and carriers. Digital freight matching apps borrow functionality popularized by ride-hailing apps, such as algorithmic pricing, map integration, track-and-trace, and mobile transactions, along with features specific to trucking like trip planning, digital document storage, and TMS integration.

Freight matching meets big data

The basics of freight matching have not changed. Carriers still search for loads that meet their criteria for origins, destinations, and equipment types. But some platforms can now suggest loads and routes that a carrier might not otherwise have considered, helping maximize profits.

Round-trip pricing. Some tools benchmark spot and contract rates, giving small carriers the same kind of lane and pricing analysis that large carriers use to make routing decisions. A chosen lane, say Atlanta to Dallas, would show contract and spot-market rates along with recommended backhaul options, so carriers see the two-way pricing they need to cover their costs for the round trip.

Private optimization. Third-party logistics providers often use private load boards to expedite matching with their pre-qualified carriers, taking a targeted approach to get quick responses. Carriers can automatically accept a load at the contracted lane rate or respond with a bid increase or decrease. This selection process can run as often as every 15 minutes, though the cycle is typically one hour.

Intermodal exchange. Some cloud-based pricing platforms include intermodal freight matching. With more shippers and 3PLs converting over-the-road shipments to rail for cost savings and environmental benefits, carriers are following suit.

What impact will Uber-style players have?

The appeal of freight transportation is easy to understand. Empty-mile estimates range from 10 to 23 percent, while e-commerce fulfillment costs keep rising. The natural response is to improve trucking efficiency with an app-based solution, much like ride-hailing tackled underutilized taxi capacity.

But freight transportation is not as simple as hailing a cab. North American freight is not a simple commodity. There are specialized equipment types, multi-mode shipments, customs clearance, and service issues like equipment breakdowns. Shipments are high-value and time-sensitive. Placing an app atop a complex industry does not by itself solve the problem.

In fact, most digital freight matching companies are not simply mimicking the ride-hailing model. As one logistics analyst put it, applying matching technology built to displace the taxi industry does not translate directly to freight: underutilized capacity is not just "sitting around" as it is with passenger cars, and each load is a little different, with dozens of factors to consider in most truckload transactions.

It would be foolish to underestimate large new entrants. But any of them will have to raise their game considerably to gain a real foothold in this far more complex market.