DC Velocity - September 2018

THE CEO AND FOUNDER OF DIGITAL STARTUP Trucker Tools, Prasad Gollapalli, did not launch his company in 2009 with the mission to disintermediate traditional freight brokers. The Trucker Tools model was developed instead with a goal that some startups might today find counterintuitive: to help the broker.

The Reston, Va.-based company boasts that brokers can use its technology to book truck capacity several days before the next load actually needs to move. The software provides brokers with real-time visibility of loads booked through a transportation management system (TMS) or a Trucker Tools app, the trucks currently hauling their loads, and all the trucks controlled by brokers’ preferred carriers but that aren’t being used to haul freight for another Trucker Tools customer at that moment.

According to Gollapalli, the technology, called “Smart Capacity,” offers several advantages for the broker: First, it expands a broker’s universe of carriers. Second, because no one else can see which trucks are moving a broker’s load, that broker has first dibs on booking the next load with the same carrier if the circumstances warrant. That is important because brokers aren’t generally fond of sharing their carriers, he said.

What’s more, the tracking information fed into the
brokers’ platforms allows them to see days ahead of time
when the load will arrive. This gives brokers a jump
on their future booking needs, according to Gollapalli.
“Predictive capacity” technology, as it has been dubbed,
has become a valuable tool in a constrained market
where, in some cases, shippers desperate for capacity
assurance have resorted to buying a truck’s backhaul
move even if they have no freight to fill it.

A CHANGE IN ATTITUDE

Gollapalli’s model is designed—with apologies to Shakespeare—to “praise the broker, not to bury it.” In his view, his company succeeds only if the brokers do. That attitude runs counter to the mantras of many newbies, however. If their external messaging over the past three to four years is taken at face value, they view traditional brokerage as slow-footed, inefficient, and ripe for “disruption” because its markup margins of 15 to 30 percent can be compressed by converting antiquated manual processes like phone calls and faxes to digital technology.

But a funny thing happened on the way to disruption. Digital brokers discovered that shippers wanted more from a relationship than just load-matching services that were the core of the startups’ value propositions. Many of the new players thus found themselves becoming the businesses they looked to upend. This put them right in the traditional broker’s wheelhouse. Meanwhile, they discovered that the digitalization of transactions was so effective at margin compression that it was squeezing them as well.

One of the more well-known digital brokers, Seattle-
based Convoy, has a profit margin of about 2 percent,
according to a person familiar with the privately held

A broker by any other name

Digitally focused startups believe there is
much low-hanging fruit in traditional brokerage
operations. But the fruit picking has taken
an unexpected turn.