Over this decade, the freight industry has witnessed a steady queuing up of stakeholders within the market toward digitalizing their workflow, with the hope of improving visibility into operations and end-to-end transparency across supply chains. Though the term ‘digitalization’ is now etched in freight industry rhetoric, it is no more than that – an umbrella term for several different ways through which technology and data could help transform the sector.
One of the earliest signs of change within the space came in the form of digital freight marketplaces – dozens of companies that seemingly mushroomed within a short period, with near-identical business models and approach to solving the visibility issue of matching capacity and volume.
Fretlink, a French freight matching startup, is swimming against the tide of conventional ‘pure’ digital marketplaces, and looking at a different business model that it claims will be the only way for freight matching platforms to survive long-term.
Paul Guillemin, CEO of Fretlink, believes that the absence of digitalization was never a problem within the industry, as matching volume and capacity was a manageable exercise even before the internet, and so was delivering freight on time. “The problem is not technology, it is the organization of the market,” he said. “These pure digital marketplaces and visibility platforms are just trying to improve the existing system by digitalization – which means that they are solving for the consequences and not the actual cause. And the root cause can only be tackled if we understand the reason for the existence of the spot market.”
Guillemin explained that pure digital freight marketplaces have a fatal flaw in their business models as they revolve around acquiring loads and capacity, rather than acquiring customers. This leads to a system where trustability between carriers and shippers is lacking. “Acquiring loads in such marketplaces is not about the services the platforms provide, but about the cheapest option available,” he said.
Such marketplaces scoop up loads and push them out to hundreds of carriers that are registered on the platform. However, if the hauling prices are too low carriers tend to leave them alone, forcing the marketplace to provide a price that is attractive for carriers, leading to them losing money via subsidies. Guillemin claims this is the reason why most of the pure digital marketplaces operate at a negative margin, while Fretlink makes money.
The idea behind Fretlink is to create a favorable alignment between pricing, capacity, and service. Unlike pure digital marketplaces, Fretlink does not look to base its capacity only by offering the most competitive rates, but also on how efficient and trustworthy a carrier is. Guillemin explained that it would be better for a shipper to pay €600 per shipment and know for certain that it would reach the destination on time, rather than take a gamble with a carrier that offers to haul the shipment for €500, but has no accountability on ensuring it reaches its destination on time.
“The shipper could be delivering to Walmart, where they will pay penalties every time they are late. If the shipper regularly sends loads to Walmart and chooses unreliable carriers just to save a fraction of the hauling cost, he might be looking at several thousands of euros in penalties for the trade-off,” said Guillemin.
Fretlink believes that by ascertaining service levels and keeping hauling prices consistent, it can help foster long-term partnerships between shippers and carriers, eliminating the need for spot markets that are notorious for their inefficiency in matching capacity and volume. By connecting shippers to a network of local and reliable carriers and helping them with end-to-end collaboration, Fretlink looks to push the industry towards a more streamlined form of load matching.