Key takeaways from Stifel’s FreightTech panel

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Stifel Financial Corp. has gathered shippers, carriers, and logistics providers at the Fontainbleau Hotel in Miami Beach to talk about the state of the transportation industry and give presentations in front of a large audience of investors. Tuesday morning John Engstrom, an investment banking associate with Stifel, moderated a ‘FreightTech’ panel. The panelists were Craig Fuller, CEO of FreightWaves, Abtin Hamidi, Cargomatic’s VP of Sales, Kevin Haugh, the Chief Strategy Officer at Omnitracs, Tom McLeod, the president of McLeod Software, and Edward Ryan, the CEO of Descartes Systems Group

FreightWaves presents highlights from the discussion here.

When asked what they thought the biggest challenge facing the transportation was, the panelists were in agreement: the driver shortage. Craig Fuller said, “Drivers are not going to be replaced by technology, at least for a decade out in my view. We still have a fundamental problem with recruiting, retaining, and providing quality of life. Drivers have the most important outcome in freight—their ability to deliver freight efficiently and on time… our whole industry is dependent on what the driver does.” 

Kevin Haugh thought that the ‘driver shortage’ could be addressed by improving utilization and productivity. “We’ve got an ever growing demand to deliver products,” said Haugh. “Our current models to do that are a bit outdated and inefficient. We need better route optimization that uses all our capacity.” Tom McLeod agreed, saying “I’m very much on the same page with Kevin. Biggest problem is utilization—driver time and assets. Technology can bring single digit improvements in utilization.”

Still, the panel agreed, recruiting and retention remains a must-solve problem. The panelists talked about how to attract a new, younger generation of drivers with higher pay and technology that make driving more enjoyable. McLeod said, “New drivers expect to be able to see realtime traffic and better planning; mobile apps, what’s my next plan and what’s the plan after that. Am I working for a company that’s gonna give me visibility and go to bat for me? Planning—where am I gonna stop for the night?”

Abtin Hamadi has been using machine learning to better understand and even predict driver behavior. “We’re trying to get bits and pieces of data to try to predict where the driver wants to go,” said Hamadi. “Sometimes the driver doesn’t know where he wants to go: they have to do a lot to make sure the current transaction goes well—they aren’t necessarily putting themselves into a profitable lane ahead of time. First mile and last mile is a little easier… we can extract things with machine learning and educate the driver, sending them an alert saying ‘hey, you might be interested in this lane for these reasons,’ and we’re finding that yes, they’re interested. These are incremental improvements… we can still take advantage of the assets and infrastructure we already have.”

Fuller spoke about how new technology—like ELDs—can help carriers hold shippers accountable and charge problematic, inefficient shippers with long on-duty/not-driving times extra fees. Using data to tie costs to driver time could truly revolutionize driver pay. “You have to change what drivers get paid,” Fuller said. “They have to have trust they can make a good living. Technology can create accountability for the shippers. The average truck gets 6.5 hours of utilization out of 11 hours… we know for a fact that three of the four worst sites in America for dwell time were the same shipper. Once we combine the ELD data with delays, with machine learning, we can get more sophisticated pricing models—like time cost. Drivers ultimately want to be paid by the hour, and we can start pricing freight from inefficient shippers differently.”

Then Engstrom asked the panel, “What is going to separate winners and losers in the freight tech space going forward?” Haugh replied, “Harnessing information in unique ways. Where assets are, which ones might be most appropriate to bring to bear given the situation, and doing it better than the competition. In my view, those who can make superior use of info and technology will have a huge competitive advantage. By leveraging tech and info better than others they can achieve improvements in cost and service simultaneously and achieve out of scale competitive advantage and take market share.” Ryan said, “What separates winners and losers is access to capital and ability to consolidate. Find smaller companies with great ideas, add them together, and tackle bigger problems with bigger ideas.” 

On winners and losers, Tom McLeod said, “Only the paranoid survive. It’s not the big that eat the small; it’s the fast that eat the slow.”

The panel took a question from an audience member who asked about the suitability and implementation of blockchain in transportation. “Who or what will be the driver for transportation to adopt blockchain? Is transportation going to be a leading industry in implementing blockchain, or a laggard? Will it be a quick transition, or is it not going to take root any time soon?” Edward Ryan was a bit skeptical of some of the hyped claims that blockchain will replace other ways of communicating data between interested parties. “On a regular basis it seems that one platform comes along that says it makes the others obsolete and that it will be the only one—but what happens is that it’s just added to the pre-existing platforms. Now you have to be able to learn the new one, but you still have to be compatible with all the previous generations of technology, too.”

Craig Fuller agreed to a point—“it’s an iterative process”—and said that one of the problems is that Silicon Valley thinks that the transportation industry does not stay up to date, that it lags behind in the adoption of technologies and never fully exploits the technologies it does use. “We’ll see a slow but progressive adoption of individual use cases, then you’ll see combination layers. A couple of use cases are driver ID, and you’ll also see payment solutions… factors charge so much because there’s fraud—did the truck get there, is the shipper actually going to pay?” Fuller went on to explain how blockchain can speed the verification of transactions and dramatically accelerate the payment process, which, as it exists today, is labor-intensive and time-consuming. 

In general the panelists agreed on the problems facing the industry—driver shortages, chronic inefficiencies in payments and documentation, and a lack of visibility into the supply chain itself—but offered different strategies for tackling the issues. What the panelists shared, though, was the recognition that transportation has reached the point where the pressure to change is sufficient, start-ups and capital are beginning to spring up, and soon we will enter a phase of testing and implementing these solutions on a widespread basis.

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