We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • ::COVID-19 COVERAGE::
  • INDUSTRY PRESS ROOM
  • ABOUT
  • CONTACT
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC.
    • Podcast
    • Blogs
      • Analytics & Big Data
      • Best Practices
      • Dispatches
      • Empowering Your Performance Edge
      • Logistics Problem Solving
      • One-Off Sound Off
      • Public Sector Logistics
      • Two Sides of the Logistics Coin
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • MODEX 2020
    • Upload Your Video
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC.
    • Podcast
    • Blogs
      • Analytics & Big Data
      • Best Practices
      • Dispatches
      • Empowering Your Performance Edge
      • Logistics Problem Solving
      • One-Off Sound Off
      • Public Sector Logistics
      • Two Sides of the Logistics Coin
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • MODEX 2020
    • Upload Your Video
Home » Capital amnesia
outbound

Capital amnesia

July 25, 2017
Mitch Mac Donald
No Comments

Money has a short memory. Seventeen years after billions followed the Pied Piper of dot-com over the cliff, the cycle appears poised to repeat, only this time it's tied to the dubious quest to disrupt freight brokerage.

Nary a week goes by that we don't run one or more stories of logistics IT startups landing significant capital with the mission to bring brokerage to heel using the latest digital tools. No one has a firm fix on numbers, but Jett McCandless, founder of startup project44, estimates that in 2016, there were 315 deals involving logistics tech companies valued at more than $5 billion, both record highs. The trend is likely to continue through the rest of 2017, he said.

The most recent money grab centered on a company called Transfix, an online marketplace that pulled in $42 million in its third round of funding, bringing its total to $79 million. Not bad for a company that appears to have an app but no profits.

Transfix hit all the proper talking points: The U.S. truckload market and the brokerage industry that supports it are inefficient and fragmented. Yes, there's competition, but our visibility and transparency solution is more robust and comprehensive. We have scale, scope, analytics, big data, etc.

Then there was a comment attributed to a KPMG consultant in a recent news story we did on Transfix that a "profitable model today is not as important as the size of the total addressable market." That took us back a few years and made us instinctively grab for our wallets.

Needless to say, we have a few problems with the evolution. The truckload and brokerage markets are fragmented, have been fragmented, and will likely always be fragmented. Getting motor carrier authority today requires paying a filing fee, completing a two-page form, and getting insurance. Brokers confront similarly low barriers to entry. Fragmentation is as natural as breathing, and consolidating the sector is about as easy as getting a bill through the U.S. Senate.

The new players, and the venture capital/private equity money backing them, think they are entering a world full of Luddites. Yet the brokers we've talked to—and we know it's not everybody—are quite IT-oriented. In a world where visibility is paramount, they are keenly aware of technology's role in keeping them competitive. They are investing in IT and will continue to do so as prices drop. Meanwhile, many bring vast experience in mastering the physical part of the solution that the startups can't touch.

To that end, the newbies will compete against incumbents that have spent decades assembling formidable physical and IT networks. As David G. Ross, the perpetually candid transport analyst at investment firm Stifel, said at an industry conference in late June, "J.B. Hunt has an app. C.H. Robinson has an app. So why wouldn't you want to do business with a proven service provider with thousands of carrier relationships?"

The biggest newbie on the block, Uber, plans to grab share by narrowing the gap between brokers' buying and selling prices. Yet Uber has virtually no installed customer base, and with the parent embroiled in big-time turmoil, whoever replaces founder Travis Kalanick may start asking questions about whether brokerage needs to be on the plate of a company that's already dealing with more than a few distractions.

McCandless of project44 takes a dim view of how this will end. "Most of these deals have nothing more behind them than marketing," he told us. "Only a few of these companies have market-ready technology. Even fewer have robust solutions that can make an immediate and widespread impact on how the industry functions." Project44 has been the recipient of private funding, but it can be argued that its model, aimed at replacing a legacy technology (EDI) with a newer and faster mousetrap called an application programming interface (API), has proven viability. It should also be noted that McCandless and Tommy Barnes, project44's president, have a combined 40-plus years of experience in physical distribution along with IT.

There is room for IT innovation in brokerage, and we don't doubt that a handful of startups will endure and flourish. But we're old enough to have lived through the past, and we see it pretty much as prologue to what lies ahead.

Transportation Technology Trucking
KEYWORDS CH Robinson Worldwide J.B. Hunt KPMG project44 Stifel Financial Corp. Uber
  • Related Articles

    Transport executives to boost capital spending

    Truckstop.com lands investment from venture capital firm

    Online freight broker turns to cryptocurrency to raise capital

Mitchmacdonald
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.

Recent Articles by Mitch Mac Donald

Thought I’d something more to say …

Digital supply chains, circular economies, and a whole bunch of uncertainty

Sorry, folks. This is not normal

You must login or register in order to post a comment.

Report Abusive Comment

Most Popular Articles

  • Cold chain giant Lineage Logistics buys its own rail operator

  • For container lines and ports, what a difference a year makes

  • Outlook 2021: What’s in store for logistics supply chain?

  • Cushman & Wakefield Brokers Sale of 170 Acres plus Lease for 1MSF Build-to-Suit for Home Improvement Retailer in Commerce City, CO.

  • Capacity challenges will continue in 2021

Now Playing on DCV-TV

2mw 01 11 21 thumb

Ocean Sector Shaping the Next Shipageddon

DCV-TV 4: Viewer Contributed
If you're a shipper, it's never good when a rep for an ocean carrier tells you, "You better sit down before you read this." We've been seeing astoundingly high increases in the ocean sector and they seem to have staying power. While the ocean carriers used blank sailings last year to tip the balance of supply and...

FEATURED WHITE PAPERS

  • Proven Benefits: A Compendium of Slotting Optimization Success Snapshots

  • Bridging Information Gaps in Dock and Yard Operations

  • How Intelligent Sensor Solutions Turn Data Into Action

  • Order picking Solutions: Understanding Your Options

View More

Subscribe to DC Velocity Magazine

GET YOUR FREE SUBSCRIPTION
  • SUBSCRIBE
  • NEWSLETTERS
  • ADVERTISING
  • CUSTOMER CARE
  • CONTACT
  • ABOUT
  • STAFF
  • PRIVACY POLICY

Copyright ©2021. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing