Management at the top-5 freight brokerage told Stifel that the complexity of the truckload market will make it difficult for Uber-like platforms to disrupt the freight brokerage market.
Executives with the freight brokerage and managed transportation provider Echo Global Logistics believe the “Uberizing” of the truckload brokerage business will difficult due to the complexity and exceptions inherent in the business, according to a note from the transportation and logistics group of the investment bank Stifel.
In a meeting with Stifel, Echo Chief Executive Officer Doug Waggoner and Chief Financial Officer Kyle Sauers said that “with 20 percent of truckloads moving under one or more of 88 total possible exceptions, automating the problem solving aspect of the business would appear to be very challenging, especially for the plethora of Silicon Valley start-ups that have recently developed, what are rumored to be, uber-like platforms,” the note said.
“While these new technology platforms are intriguing, none of the system development firms have been able to test their systems to any reasonable scale in a live freight environment. Many of these firms have offered to partner with Echo on the development of their systems.”
Waggoner told Stifel he prefers not to assist a company that ultimately has the potential to disintermediate traditional truck brokerage functions.
In other topics, Echo management expects to fully integrate the systems of its major acquisitions in 2015, fellow brokerage Command Transportation, by summer 2016.
“Until then, the two companies will continue to run independently,” Stifel wrote. “Once the Command Truckload operating system has been functionally inserted into the broader Echo system, all sales and capacity sourcing professionals in the combined network will be able to see all available capacity and all available loads. Command’s Truckload operating system is particularly strong as many of the routine functions performed daily for repeat customers have been fully automated.”
The idea is for Echo’s database to be combined to facilitated unified proposals that harness the strength of Command’s legacy systems in truckload brokerage, the sourcing of capacity from private fleet, and the Eastern United States and Echo’s historically strong presence in the less-than-truckload market and the Western United States.
Meanwhile, Echo management views the acquisition of one of its chief competitors, Coyote Logistics, which was acquired by UPS in 2015, as reducing competition in the truckload brokerage space.
As Echo sees it, UPS will use Coyote to focus on filling empty capacity and sourcing capacity during peak season. The company also expects UPS to refocus Coyote away from growth (and aggressive pricing as during its formative growth years) to more of a margin maximization objective, Stifel said.
Echo sounds off on Uber, Command integration and Coyote
