As predictions of freight doom descended on the industry as COVID-19 quickly spread across the U.S., Dan Lewis, co-founder and CEO of Convoy, saw something others didn’t.
“I think the freight industry was able to adapt to that because, what people outside freight don’t realize is, freight is very volatile [anyway],” he told FreightWaves in a recent interview.
Even Lewis acknowledged that there was plenty of uncertainty, and Convoy saw freight patterns change as more medical and COVID-related supplies such as personal protective equipment become hot freight shipments, replacing nonessential goods as a great “reshuffling of the supply chain” took place, he said.
“The freight market definitely did not disappear,” Lewis said, “but there was a moment where we thought it had, and that was in April and May when the rates crashed.”
“Trying to predict the future and know what is coming and bet on that on a quarter-by-quarter basis this year and into next year … I think is a fool’s errand,” he said.
The uncertainty, Lewis noted, is just too great right now. Things are looking good for 2021 in terms of freight volumes and rates, he said, but the virus remains a great unknown, especially if states begin shutting down businesses again.
Truck drivers deliver
Lewis said throughout the pandemic drivers have done what they always do: deliver the goods.
“Trucking is a first-responder kind of organization in many ways. When something happens, truck drivers hop in their cabs and [respond],” he said. “I think people in the industry are really proud of how the industry responded to the pandemic.”
That said, Lewis noted that some drivers did opt out due to concerns over the virus, which, when combined with many CDL schools shutting down and drivers simply leaving the market, helped contribute to the rate rise that has taken place since May. The increase in rates has many in the owner-operator and small-fleet space feeling optimistic heading into 2021, he added.
“There’s two stories here,” Lewis said. “There are the drivers that are comfortable being out on the road, excited to take advantage of a market that is paying them for their work and that group is optimistic about Q4 and next year because rates are high. The other side is people are very concerned about their health.”
While many businesses struggled to adapt to the conditions 2020 presented, Convoy never missed a beat and Lewis believes its approach to the digital freight marketplace helped set it up for success and growth, not only this year but moving forward.
Saying the company was “already designed to work from anywhere,” Convoy made the decision to start remote work three weeks ahead of many other brokers, giving it a head start on learning a new normal. Unlike other businesses, though, Lewis is not ready to declare Convoy a work-from-home company.
“I do believe that being in person is very important for building community and being innovative,” he said. “I think an in-person environment will be part of our future. What that exactly looks like [I don’t know]. We do value in person and we’re going to continue to evaluate. … We don’t want to pick a path in the middle of the pandemic.”
Managing through the pandemic
Convoy has weathered the pandemic well, Lewis said, and seen an increase in interest for its solutions, including Guaranteed Primary. The service offers shippers the option to move all their loads on a given lane through the Convoy network without the need to submit to the RFP process. Shippers can allocate volume on any lane to Convoy, which works with the shipper to establish a fixed margin for the loads along that lane. This could reduce margins up to 50% for shippers over industry averages, Ryan Gavin, vice president of marketplace growth for Convoy, told FreightWaves earlier this year.
Convoy guarantees 100% tender acceptance on loads in the program. While the margin is fixed, ultimate pricing is based on Convoy’s predictive pricing models. Shippers that suddenly lost truck capacity at the outset of the pandemic only to see it return with higher-than-expected rates are increasingly looking for stabilizing solutions, and Convoy is trying to deliver those.
“This is why we need these programs — because they are designed to embrace the reality of freight … especially during unpredictable, challenging times like right now,” Lewis said. “We just have to have flexible solutions, be partners and work on programs that are flexible to changing market conditions.”
The pandemic has also allowed Convoy to promote its extensive data sets and insights, helping shippers navigate unpredictable times.
“We’re seeing people who want to have security, consistency and safety in their [shipping] that want to have programs like this,” Lewis said.
The pandemic has not slowed Convoy’s approach to innovation and it won’t as long as the company’s customers continue to ask for new technological solutions.
“Technology is designed to solve problems,” Lewis said. “We don’t want to build technology for technology’s sake. We want to build technology because it sheds light on [a problem]. I actually think that most if not all of the investments we’re making line up to a need. In an environment like this where [things] are changing, there is some risk. Maybe our customers’ needs change, but we haven’t seen that.”
Journey to today
Looking back at the journey Convoy has been on since its founding in 2014, Lewis pointed to two decisions that helped shape the company.
“When we got started, we had to decide if we were just going to build technology that connected brokers and carriers,” he said, noting that several other startups chose that route. “I think all of those didn’t work out. They either went out of business or pivoted to [offering] only technology. We made the call to add human services. We needed to do the whole thing, and if we can do 80% to 90% with tech, we still needed to do the other 10%.”
The other decision was to require the use of the Convoy app for any carrier that hauled a Convoy load.
“We made a decision in 2016 to explicitly require that drivers use the Convoy app when doing the job and that may seem obvious, but almost all of the other digital providers at the time didn’t do that,” Lewis said, adding the company received some “light ridicule” for the decision. “Because we did that, we have incredibly high app usage and visibility into our network” that has allowed Convoy to build out additional solutions.
Convoy has raised nearly $668 million in four rounds of funding, according to Crunchbase data, but a possible sale or initial public offering (IPO) does not appear imminent. Saying he would be open to an IPO at some point, Lewis’ focus right now is on growing the value of Convoy.
“My priority is we should try to realize the potential of the opportunity for Convoy,” he said. “There is a huge opportunity to create an [incredible value] for the company. Let’s create the most value possible for the company.
“To the extent an IPO helps us achieve this, as a business, as a company that is motivating high-performing employees, that could be part of the path we would go down,” Lewis added. “I’m not against it, but it’s not imminent.”
Lewis specifically mentioned the company’s investors are “on board with the current strategy.”
Investors in the last round of funding included T. Rowe Price Associates, which co-led with Generation IM with additional participation from Baillie Gifford, Fidelity, Durable and Series C investors CapitalG and Lone Pine Capital.
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