Startup using artificial intelligence to build a better brokerage model

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The freight industry is as disoriented as it is enormous. Navigating its different channels and connecting the three lynchpin players - carriers, shippers, and brokers - could take a lot of effort and countless man hours of redundant work. FrAIght, a startup based out of Chicago is looking to introduce an artificial intelligence powered freight broker service into the market, hoping to make a difference.

FrAIght works at the intersection of connectivity and technology by intelligently automating and mimicking existing workflows including email, fax, and EDI. The startup believes in collaborating with customers and carriers in the way they are used to working, and does not force them to change behavior to suit their processes.

Parker Holcomb, the founder of FrAIght, has had a varied experience that cuts parallels with the technology he is working on in his startup.

“I had a career in the field of logistics and technology for about a decade, with a background in enterprise supply chain management. During college, I had worked on jobs that required me to source deals and distribution centers giving me a glimpse into this field,” he says.

FrAIght exists to create an even playing field in a market which houses tens of thousands of brokers and carriers in the country.

“Unlike the parcel industry where FedEx, DHL, and UPS control around 50% of the market, the freight industry is highly fragmented,” explains Holcomb. “There are over 500,000 fleet companies out there, with 90% of them owning six trucks or less, having an average fleet size of two trucks. On the broker side, there are thousands of them as well.”

The issue here is that the freight industry, although competitive, has a very low threshold for entry.

“All you need is $50,000 in capital, a phone line and a fax machine to start shipping loads,” notes Holcomb. “But then, even if the barriers to entry are low, it is extremely difficult to reach economies of scale for such companies. Especially because these players depend heavily on humans for scaling up and humans are not very efficient at scaling.”

Optimizing the scaling-up process has been a prevailing issue even amongst the circle of more prominent players like C.H. Robinson, Coyote, and Echo Logistics. “CH Robinson described that their number one risk to scaling up is their dependence on humans in growing the company,” says Holcomb.

“If you look at the financials of these companies, they are spending 50-60% of their operational expenses on sales and operation personnel. When you start a business, you either run it small scale, or scale up and make massive warehouses - both of which are run by humans,” he adds. “Today, freight logistics depends predominantly on humans, and humans create bottlenecks. When information is stuck in somebody’s inbox, the whole system suffers because of it.”

In a typical brokerage company that employs humans for maintaining relationships with carriers, scaling is inadvertently pushed to the backseat. “A mid-sized brokerage firm can maintain somewhere around 50 relationships with carriers. Though this isn’t a small number, if we compare it to the size of the market, this number is probably one-thousandth the total size,” adds Holcomb.

Artificial intelligence works well in that stead, with it learning about the team and also the parameters involved in creating a relationship with carriers and shippers alike. The technology has very minimal adoption costs and has the potential to lower the friction of getting people onboard. It also works splendidly with technophobic people, because people don’t need to realize they are interacting with an automated bot, as AI perfectly mimics the actions of a real human.

FrAIght gathers historical and real-time data sets about the issues in the market and puts them through its AI models to create better insights compared to its brokerage peers, Holcomb says.

“We want to interact with everyone and understand how they work. It would help us evolve and create services that can be easily adopted into their workflow,” Holcomb says.

“We don’t want to create applications and ask people to install it. Apps designed for the freight industry have low penetration, with less than 5% of the drivers using them and probably 1% of them use an app daily,” continues Holcomb. “We don’t want a 99% visibility on 1% of the market, but rather 95% visibility to 100% of the market. We believe that by procuring a lot of data, we can leverage that with our machine learning models and deliver super-human recommendations to the industry.”

FrAIght has raised $850k in its seed round of funding and would be looking to go for Series A funding earliest by spring next year. Apart from the founding team, FrAIght has some big names from Uber and AT Kearney, who have joined the startup seeing its potential for growth. Holcomb concludes by saying that they wish to create a system that reduces the logistics process cycle from four man hours to four minutes.

“We don’t want to replace humans, but help them oversee the process by giving them superpowers,” he says. “We at FrAIght aren’t building robots, but cyborgs.”

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