Above the Fold: Supply Chain Logistics News (June 7, 2024)

Remember when I was supposed to go radioactive a few weeks ago?

Well, it didn’t happen. I was burned by a supply chain issue (a story for another day).

Take two is next week, so before I have to isolate myself for a few days, I’m going out for a bike ride today. I’m back on the low-iodine diet, which means I can’t have my usual hydration drinks and snacks. This ride will be powered instead by unsalted cashews and clementines. 

Let’s see how far they take me.

And now, here’s the supply chain and logistics news that caught my attention this week:

Transfix: Separating the Digital From the Freight

Is digital freight a threat or an opportunity for the logistics industry?

That was the question many folks were debating a few years ago as a crop of tech-savvy startups, which the press liked to call “Uber for Freight” companies, were raising lots of money and talking a lot of smack about how they were going to disrupt the freight brokerage industry just like Uber had disrupted the taxi industry.

Well, things didn’t go as planned.

Several big name digital freight players have either closed shop (see Convoy) or they have merged together (see CDL 1000 and Next Trucking). The latest player changing direction is Transfix. The company announced that supply chain solutions provider NFI “has acquired Transfix’s freight brokerage operation and that it will pivot its core business to solely focus on powerful software and data solutions for brokers, shippers, and carriers, with NFI set to be the first third-party customer to utilize Transfix’s TMS.”

Here are a couple of excerpts from the press release:

Established in 2013, Transfix was the first tech-powered brokerage. Since then, the Transfix Intelligent Freight Platform™, a TMS with cutting-edge technology that utilizes automation and machine-learning to drive processing costs significantly below industry standards, has helped power the logistics networks of hundreds of leading retailers, consumer brands, manufacturers, and logistics companies. By divesting its freight brokerage operation, Transfix will now entirely focus on taking its technology to market as a SaaS and data solutions provider that addresses the distinct needs of brokers, shippers, and carriers.

The newly launched Transfix organization will initially go to market with an expansive SaaS feature suite designed to bring operational efficiency and transparency to various stages of the truckload lifecycle for freight brokers, shippers, and carriers, and to deliver significant reduction in processing cost. 

So, what happened to the promised disruption?

First, the Uber analogy was always a flawed one, as I explained in an August 2019 post titled, “What Digital Freight Isn’t.” What disrupted the taxi industry is that Uber, Lyft, and others added a large amount of new capacity to the market — namely, you, me, and everybody else with a car willing to drive for them. That didn’t happen in the freight market. These startups didn’t add trucks and drivers to the market; they tapped into the same existing pool of carriers and drivers that traditional freight brokers work with too. While these tech-savvy startups arguably leveraged existing capacity more efficiently than traditional providers — that is, by reducing the amount of wasted capacity in the industry (such as empty backhauls) and matching freight with capacity more quickly — at the end of the day, they still had to compete for business with the same network of carriers and drivers as everybody else.

Second, the traditional freight brokers woke up and started investing in technology too, thus closing the gap with the startups.

Third, the freight transportation market, being cyclical in nature, went from a market with high rates and tight capacity to one with relatively low rates and excess capacity today. It’s a tough market out there for freight brokers at the moment.

And lastly, digital freight didn’t fundamentally change the formula for success in the industry. As I wrote back in August 2019:

It doesn’t matter if you’re a startup or an established provider, the formula for success in the freight industry remains the same and it depends on three things: (1) you have to build a critical mass of shippers and carriers and drivers; (2) you have to remember that transportation is not a commodity and that relationships matter (and take this reality into consideration in your operating model); and (3) you have to measure and control the quality of the end-customer delivery experience.

So, who promises to disrupt the logistics industry next? My money is on AI-PLs (see “Move Over 3PLs And 4PLs, The AI-PL Is Here”).

And with that, have a meaningful weekend!

Song of the Week: “Metaverse” by Cage the Elephant