Source: Cargo Chief
People in the technology industry often talk about waves. Waves of innovation, waves of adoption, waves of development.
For Abtin Hamidi, the freight brokerage industry is in the midst of what he called a “third wave.”
“For a traditional company, they start out with the idea that ‘I’m a broker,’” he said. “It’s more about a relationship. The second wave of brokers applied some technology to automate the process, but it’s still a traditional process. With the third wave, now you have rapid integrations, machine learning. We make money the same way, but we approach it technology first.”
Hamidi is co-founder and executive vice president at Cargo Chief, a freight brokerage that began operations in 2013 with the idea of shaking up where technology fits in the broader freight broker model.
Cargo Chief co-founder Abtin Hamidi Source: Cargo Chief
Those three elements are layered on top of what is essentially a “normal” brokerage—normal in the sense that Cargo Chief secures capacity from trucking companies and sells it to shippers. But the company, which Hamidi founded with Silicon Valley veteran Russell Jones, sets about accomplishing those transactions in an entirely different manner.
“I’ve spent much of my career identifying the pain points of carriers, brokers and shippers and applying technology to those problems,” said Hamidi, whose previous roles include stints at fellow brokerages Echo Global Logistics and XPO Logistics, along with a number of technology startups. “There was so much inefficiency and no shipper was really thrilled. The whole industry suffered from bad technology—replicating bad processes with incrementally better technology. But the technology deployed is not designed to handle the marketplace. It’s a transactional world and the technology doesn’t have the horsepower to handle that.”
Hamidi spoke of Cargo Chief’s other differentiating feature—its drive to collect internal and external data points that inform its customers’ decision-making.
“We’re collecting data from all over the world, whether from load boards, shippers, carriers or unusual sources, like weather or Amazon,” he said. “We bring that data together and apply it to machine learning, so we can identify patterns and problems surfacing. Then we develop disruptive products to solve issues that are there. We’re a traditional broker, but we’re applying very sophisticated Silicon Valley technology to solve those problems.”
“The No. 1 pain point is on the carrier side: there’s a catastrophe happening with losing drivers,” he said. “So there’s all this pressure on carriers in the near term having a dramatic effect (especially, as he noted, with regulatory constraints potentially making it harder for carriers to find drivers in coming years). What can a broker do to ease the driver experience? If I do that, I will get first crack at capacity, and a discount. Then we can make a cultural change.
Source: Cargo Chief
“By collecting all this data, and developing these products, we make them a lot more efficient. It changes the way we think about buying and working on transportation. Instead of a dollar more per mile, we’re collecting data and creating situations where we give them freight not one mile or lane at a time. We can keep them busy for three weeks—but only if they want to be busy for three weeks. We work with guys that are underserved. It makes small guys feel like they’re big and efficient,” he said.
Cargo Chief is one of many technology-focused startups addressing perceived inadequacies in the freight transportation world, be it domestic or international. Hamidi embraces the idea that his company has been compared to Uber. But he noted the comparison isn’t totally valid due to market characteristics.
“This world is not ready for a marketplace,” he said. “The marketplace concept is good, and needed, but the world is not ready. The transportation world wants full-service treatment that a marketplace doesn’t provide.”
“It’s an enormous marketplace that’s incredibly fragmented,” Hamidi said. “Only 7 percent of available freight was funneled through a broker a few years back (according to numbers he cited from the analyst Armstrong & Associates). Now it’s about 20 to 26 percent. It’s a huge increase from just a few years ago. I think that market’s going to go up to the mid-70s in the next five years. We’re not competing against brokers, it’s against the carriers.”
Hamidi said that technology’s focus on transportation—through a raft of startups and private equity investment—has come about because investors see an industry that has lagged behind in modern technology adoption.
“This rash of technology companies has popped up because for the first time in long time they could invest in this industry,” he said. “There’s working capital and investment dollars available to invest in technology. Three years ago, if you tried to raise investment, they would have laughed at you. Now, transportation is a hot market.”
Now the discussion has turned to which technology-oriented companies will be successful in the freight world. As to whether there are too many startups attacking the same space, Hamidi again referenced the size and fragmentation of the logistics industry in general.
“Transportation is a big-data game. No one ever thought about it before. But there are a million variables in every transaction, wildcards like seasonality. Wall Street is the most similar industry to ours, and yet look at the technology they have and what they’re doing. We should be like them, and we’re like a hot dog vendor. It’s an irrational industry.”
Source: Cargo Chief
A trend that’s played in Cargo Chief’s favor, he said, is that big companies that had centralized procurement have gone away from that approach.
“They’re handling it more locally,” Hamidi said. “The reason is, they’re putting more emphasis on value than price. A relationship with a driver in Omaha is way more important than saving three cents per mile. The way that Cargo Chief has started to pick up customers is it’s a cloud-based way to pick up hard-to-find capacity. When they’re stuck and they call us and we get them capacity in a few minutes and they say ‘how’d you do that?’”
For Sunterra Chicago, a produce brokerage that supplies primarily to retailers but also grocery stores, wholesalers, and food processors, working with Cargo Chief has helped with a specific pain point—on-time deliveries.
Sunterra uses Cargo Chief’s Cargo Locate product, which gives shippers real-time location of their loads on an interactive map. The shipper chooses the Cargo Locate option when requesting a quote through Cargo Chief’s web portal, and the driver opts into the service, with updates provided on the driver’s smartphone.
Sunterra can provide as much, or as little, access to Cargo Locate information as a specific customer of theirs wants, Black said, and the information can be conveyed in the medium they want, whether it be text or email.
The company does $40 million to $60 million in sales annually, sources from all over the United States and sells primarily to customers in the Midwest, with some sales in the East Coast and South. Being a broker of perishable items, the capacity available to Sunterra is limited, but largely known, so the priority in using Cargo Chief wasn’t sourcing capacity, it was improving visibility to delivery times.
“In the year we’ve used Cargo Chief, we’ve improved on-time deliveries just shy of 20 percent,” he said. “We’re almost at 95 percent on-time. It’s easier to attain those levels in dry-van. It’s much harder in produce.”
“That’s what Cargo Chief enables for us,” he said. “It allows us to properly communicate. We all have to deal with good and bad drivers, that’s just part of the business. That hasn’t changed and I don’t anticipate it changing. What you have to do is get creative. You have to motivate them, make accountable, babysit, and track. That’s what they’ve been able to do.”
Black said Sunterra decided to work with Cargo Chief “because the technology was available, but also because I couldn’t keep beating my head against the wall. They’re flexible, ahead of their time technologically, always striving to do more. They have tons of stuff they have that we don’t even use.”
More than features, Black said Cargo Chief adapted to his company’s needs.
“Other companies will have models with less variables and won’t care about what we care about it,” he said. “Everyone has different needs in the industry, and you need suppliers who cater to your needs, because you have to cater to your customers’ needs, and that creates exposure if you don’t have it.”
But if Hamidi is right, a larger proportion of broker business will migrate to technology-oriented companies.
“There are a lot of folks doubting this, but technology companies are here,” he said. “It’s not about us making it. It’s how fast will they scale and adapt to technology. Personal relationships work because you get stuff and you give up stuff. And that’s where the technology steps in. You stay friends with your carrier, but you diversify your portfolio, so you can be more efficient, get better visibility, and hopefully my price is better too.”