Palo Alto, Calif.-based Cargo Chief is his fourth startup, and he said the reason he began the firm goes back to his experiences running his first company, a manufacturer of headsets for mobile telephones, called ClearVox, in the late 1990s.
As CEO of ClearVox, which was eventually acquired by Plantronics in 2000, he said he faced three frustrations as a small shipper:
“I couldn’t shop my freight buys without spending a lot of time; I was told on some days there’s not a truck available when there probably was; and third, potentially the most important, was the truck would leave my warehouse in San Jose for Best Buy, my most visible customer, but I had no idea if the truck driver was driving diligently across Kansas or partying with his girlfriend in Las Vegas. I started Cargo Chief to solve those problems.”
He compared Cargo Chief to the travel aggregator Kayak, a meta-search engine that searches other websites like Travelocity and Orbitz to help consumers find good airfares, hotel prices, and car rentals
The company has direct relationships with carriers, but also uses intermediaries such as brokers, consolidators and load boards. In total, Jones said the company is tapped into a network of 500,000 trucks.
That large universe of trucks gives the company the best chance of finding someone an empty or partially empty backhaul, especially when capacity is tight. He said 28 percent of trucks are empty at any point in time.
(Trucking economist Noël Perry of FTR noted while the weighted average across all truck types, including tank trucks, might be 25-30 percent, the percentage is lower for some types of trucks. He said truckload carriers commonly say their trucks are full 85-88 percent of the time and LTL trucks nearly always have some cargo in them, though they may have room for additional shipments.)
“Our strategy is we think by having a very broad net, we can hopefully find that carrier who is looking to get the truck back to the destination. That’s really our secret,” Jones said.
With other freight boards or competitors like Freighquote.com, he said, “we have a relationship that I call 'co-opetition'—some days, I’ll cooperate with them and be their customer or they will be my customer; on other days we are both competing for the same shipper.”
Track Cargo, Rate Carrier. In addition, Cargo Chief offers several other services, including tracking of the shipments and carrier ratings.
In the case of LTL carriers, the company aggregates ratings from a variety of sites and with truckload shipments it allows shippers to provide their own ratings, much the way users of the website Yelp rate retailers or restaurants, or users of Uber rate drivers. (It does not attempt customer ratings for LTL shipments, since often these carriers move so many shipments it would not be practical to put in the time to rate them, Jones explained.)
Jones said two hours before every pickup, Cargo Chief verifies the authority, safety record, auto insurance and cargo insurance of each carrier. The carrier is checked to make sure it meets the Federal Motor Carrier Safety Administration’s compliance, safety, and accountability requirements. Cargo Chief also has freight brokerage insurance as a backup to protect its customers should a carrier’s insurer fails.
When the cargo goes out for bid, the carrier knows the customer wants to track his or her shipment. Drivers must opt into the service while the shipment is being loaded, not on the road, by sending a phone number to Verizon or AT&T and they reply back with longitude and latitude of where the phone is.
The driver does not need a fancy smart phone or have to download an app—the phone company is able to determine the driver’s location by triangulating the signal strength of the phone.
“They literally just drive down the highway and leave their phone on,” Jones said. The accuracy depends on the spacing of cell towers. If the truck is in Manhattan, he said, the system is probably accurate within a tenth of a mile, while if it is in Wyoming, it’s probably accurate to two miles.
That kind of accuracy is good enough for most of Cargo Chief’s customers—they know if their freight is two hours out of Miami or two days, and whether their driver is rolling down the highway or rolling dice. When the shipment reaches its final destination, the driver disconnects from the tracking service.
“Let’s say shipper Sam is in New Jersey and he has a truckload of flooring materials that has to go to San Diego. He calls around and the best price he gets is $3,750. The problem is, there are 600,000 other trucking carriers that he can make contact with. Literally he is making a decision on who to go with when there’s all these other people who could help him out who he doesn’t even know.
“He could have gone to Cargo Chief. Within a minute, he puts in his information, he can access over 100,000 trucks directly. We have multiple capacity partners. And we are already integrated into 40 load boards,” he said.
“We also have access to private fleets," such as those operated by supermarket chains, Jones said.
“We have an owner-operator, his daughter’s 10th birthday is coming up, and he has to get back to San Diego. He bids a crazy low price, a private-fleet operator marks it up, and we sell it at $2,900. We save shipper Sam $800 and everyone is happy.”
He said it has been designed so Cargo Chief can integrate with other systems—a carrier, load board, or government database in just hours.
“We can do all these integrations very quickly and easily where it is challenging for other people because of their technology,” he said.
When Jones demonstrated the Cargo Chief website in his office—asking LTL carriers for quotes on moving a couple of pallets of cargo from Chicago to Oakland, Calif., some 60 quotes were returned in seconds, and the first 20 prices ranged from $1,328 to $3,000.
The Cargo Chief website always displays the three lowest prices from carriers that have been ranked as premium, preferred, and value carriers by shippers. During the demonstration, he found a trucking company considered to be a premium carrier, Saia, actually quoted a better price than the less highly rated “value” trucker.
“The carriers love working with us because they have this excess capacity and when we help them sell that excess capacity two-thirds of that revenue falls to the bottom line because they have a lot of fixed costs,” he said. “They also recognize that Cargo Chief introduces them to a lot of smaller accounts that pay a higher price per pound and are more profitable.”
Jones said Cargo Chief was designed for targeting smaller shippers, who he believes are underserved.
But he said he has also gotten interest from larger shippers and 3PLs that are attracted to the time savings they can achieve using the system.
As a broker, Cargo Chief makes its money by collecting a fee. He said the standard margin in the industry 15 to 25 percent, but his company charges between 5 and 15 percent. It can charge less, he said, because automation has lowered its back-office expenses.
The company also provides each customer with a dedicated team member.
He said Cargo Chief works with some 60 carriers in the LTL industry and has worked with a variety of shippers ranging from Polaroid TV to the French motor oil company Motul.
Cargo Chief has just started offering domestic intermodal service, and hopes to offer international container and less-than-containerload rates early this year working with a freight forwarder as a convenience to its customers.
Jones started Cargo Chief in 2012, and after the company built a prototype website and went through a beta phase with a handful of customers, did two rounds of financing this past spring and summer.
This article was published in the January 2015 issue of American Shipper.