The heads of a large third-party logistics (3PL) provider and one of the biggest less-than-truckload (LTL) carriers gave ringing endorsements Tuesday to an alternative data platform to power data communications between parties in one of trucking's supply chains, saying the companies needed a more rapid exchange of data to work in a world quickened by the influence of e-commerce.
John Wiehoff, chairman and CEO of 3PL C.H. Robinson Worldwide Inc., and James L. Welch, CEO of carrier YRC Worldwide Inc., said the $35 billion U.S. less-than-truckload market is being inexorably pulled in the direction of the Application Program Interface, or API, platform, which promises faster LTL data communication speeds than ever before. The technology is not new. However, backers of a new iteration known as the "direct carrier" model say it offers superior velocity in exchanging carrier-user data by allowing the software of carriers and users to communicate directly with each other, without data being routed through a third-party interface like Electronic Data Interchange (EDI), the system the LTL supply chain has relied on for years.
Wiehoff said that Robinson, which is the nation's largest freight broker, has taken "committed direction" toward greater API adoption. Welch concurred, saying the industry needs to migrate to a system with a proven ability to accelerate the flow of data. Both spoke at the Council of Supply Chain Management Professionals (CSCMP) annual global meeting in Orlando.
Robinson has for many years generated the bulk of its revenue from truckload brokerage. However, its LTL segment is growing at a much faster clip, albeit over a smaller base. Robinson generated nearly $100 million in LTL net revenue in its second quarter, a 9-percent year-over-year gain, and three times the pace of its top-line truckload growth. Net revenue is defined as revenue generated after transport costs are paid; Robinson is a non-asset-based provider.
Second-quarter LTL volumes grew by 7 percent, compared to 3 percent for truckload, Robinson said.
Robinson uses an API platform called "Freightview," which it absorbed from Freightquote,com, an e-commerce platform which Robinson acquired in December 2014 to get a sizable foothold in the LTL transactional market. Robinson is a very active user of EDI. However, Wiehoff's remarks indicate that API will represent a proportionally larger share of the Eden Prairie, Minn.-based giant's data budget, either through EDI conversion or network expansion.
At the time of the acquisition, transactional LTL accounted for two-thirds of Freightquote's business. Freightquote provided small to mid-size LTL shippers with access to multiple rate offerings, automated load-acceptance and -confirmation data, and digital payment processes. Through the acquisition, Robinson gained solid access to a shipper segment that had been underserved.
Robinson and Overland Park, Kan.-based YRC are benefitting from a firm LTL rate environment, which has come about even as the U.S. industrial economy—which is the sector's bread and butter—has experienced a mild-to-moderate recession. A concentrated provider environment has been a boon to pricing, enabling the carriers to impose one, sometimes, two published rate hikes a year, and make them stick. The top 10 carriers control about 70 percent of all capacity. "It's pretty good out there right now," said a leading LTL carrier executive, who asked not to be identified.
By contrast, the much-larger truckload market is more fragmented, because of fewer economic barriers to entry. The top 25 carriers control less than 30 percent of the $350 billion truckload market, according to industry estimates.
Wiehoff, who understands the truckload market better than virtually anyone, said he expects the market to remain extremely fragmented for years.