DC Velocity - February 2017

16 DC VELOCITY FEBRUARY 2017 www.dcvelocity.com newsworthy

go figure …

50%

The percentage of more than 600 DHL customers surveyed who said inconsistent customs documentation requirements were impediments to international trade. Respondents also cited improvements in digitizing customs rules and procedures as the technology innovation they would most like to see, topping the Internet of Things, self-driving vehicles, robotics, and drone deliveries.

SOURCE: DHL

“Our decision to diversify years ago did reduce risk
in our business model, but our main motivation was to
position ourselves as one integrated source for multiple
solutions across the supply chain,” he said. “We acted
proactively to give customers what they increasingly
want.”
Zvi Schreiber, CEO and founder of Freightos, a Hong
Kong-based logistics technology company, said in an
e-mail that the battle for brokerage share will take the
form of an “e-commerce Cold War” to be won by
the companies best equipped to leverage technology to
expand their services. Schreiber acknowledged that the
traditional brokerage model has stood the test of time.
However, its biggest test may lie ahead, because Amazon
and Uber have “shown [a] willingness to use tremendous
amounts of capital to enter new markets,” he said.

To survive, incumbent brokers will need to “improve technology, differentiate with decades of experience, and, most likely, reduce margins in order to retain market share,” Schreiber added.

PREMATURE DEMISE REPORTS

Others remain skeptical, having heard the story innumerable times in recent years. Benjamin J. Hartford, transport analyst for investment firm Robert W. Baird & Co., said that any near-term impact from Amazon’s purported entry into brokerage would be limited by the amount of time needed to scale up an effective brokerage operation as well as by the sector’s extreme fragmentation. After big companies like Eden Prairie, Minn.-based C.H. Robinson Worldwide Inc., XPO, and Chicago-based Coyote Logistics and Echo Global Logistics Inc., the vast majority of brokers fall into the small to mid-sized category. Coyote is a unit of Atlanta-based UPS Inc.

Evan Armstrong, president of Armstrong & Associates, a research consultancy that closely follows brokers and third-party logistics service providers (3PLs), said it will be extremely difficult for any newcomer, regardless of its cachet, to challenge the established providers, which possess formidable scale and unmatched access to carrier capacity. “This is why anyone’s pitch to charge customers lower margins is countered by the market reality that a large broker such as Coyote or Robinson, with billions of dollars of purchased transportation, can make a 15-per- cent gross margin on a load and still price lower than a small broker only making a 10-percent gross margin,” Armstrong said in an e-mail.

Armstrong said he has a metric in mind to determine when Amazon might become a sustainable player in brokerage. “When Amazon has $1 billion of purchased transportation running through its freight brokerage operation, then it might have something disruptive,” he said.

—Mark Solomon

Supply chain software developer project44 will integrate its less-than-truckload (LTL) transportation solutions with McLeod Software Corp.’s transportation management system (TMS), the firms said.

The move allows project44 to expand its presence in the relatively new area of data interchange services known as application programming interfaces (APIs). APIs allow automated systems to communicate directly with each other instead of routing data through a third-party interface or relying on partners using formats like electronic data interchange (EDI).

Project44 landed $10.5 million in venture capital funding in September and is using the money to expand its technology beyond its core less-than-truckload (LTL) market into truckload, intermodal, and final-mile delivery services.

Customers of McLeod’s TMS, which is known as
“PowerBroker,” can use APIs to instantly collect data from
carriers directly connected to the project44 network, thus
gaining a competitive edge over rival logistics companies
in managing LTL freight for their customers, McLeod
founder and CEO Tom McLeod said in a statement.
Deploying APIs can help users improve productivity by
more efficiently handling back-end tasks such as tender-
ing, dispatch, and document imaging, project44 president
Tommy Barnes said in an interview. McLeod will also use
the firm’s rating API to help its clients avoid the laborious
process of managing contracts with rate bureaus, he said.
While transportation tends to lag behind other indus-
trial sectors in adopting new technologies such as APIs,
many companies now have an opportunity to “leapfrog”
directly from legacy phone-and-fax networks to modern
APIs, thus bypassing EDI, Barnes said.