Speaking as the son of a trucker who spent a summer helping my dad negotiate and optimize his freight rates and schedules, the freight brokerage business is not one I would consider getting into. There is also a ton of competition in the freight brokerage space and the problems associated with shipping are due to poor warehouse management and unreliable truck drivers.
Unlike hailing rides in a taxi, manufacturing and shipping generally holds a regular schedule. If you build a reputation as someone who always shows up on time, you can make a lot of money as a truck driver (more than most programmers). After building a good reputation you cut out the broker and work with the manufacturers directly. All you need to do is find two manufacturers in a high paying industry, (pharmaceuticals, chemicals, specialized plastics) whose pickup and dropoff points are near one another and you can be set for years.
Most poorly run warehouses can be backed up for 4-6 hours before you can begin unloading. Most standard contracts allow 2 hours from the point of arrival to fully unload your truck. We would negotiate our billing like a lawyer. For any additional time after that grace period we would charge in hourly blocks at over $100 per hour. Companies try to abuse their power by wasting the time of drivers by not paying them to sit idle at their warehouses. Amazon and Walmart are notorious for these practices.
I think there is a lot more money to be made using technology to run a high tech fleet of trucks than there is a freight brokerage company. Trucking is an information game for sure but there is too much competition in the freight brokerage space and you can be easily side stepped by savvy truckers.
One interesting thing that Uber/Lyft/similar did in terms of markets was make it much simpler for people to track and view the reputation of a particular driver - which shapes behavior.
I wonder if something like Convoy would do similar -> rapidly highlight the unreliable truck drivers. Allow a good truck driver to carry their reputation from manufacturer to manufacturer, etc.
There's another side to that, too: Highlighting shippers that are unreliable or hostile to drivers. E.g. shippers or facilities that have disorganized staff, incur egregious waits, etc.
Is there something that incentivizes the facilities to stay unorganized? If no, then maybe there is a way to help them get better (and make money on that helping)?
As someone who worked in a will-not-be-named supply chain, the incentives are a combination of the silo-ing that occurs in any sufficiently large corporate structure, and the simple fact that if a corporation can not spend money, they will not spend money.
Case in point: In our (relatively small) facility we had two different switcher trucks (the really tiny semi trucks with hydraulics in the backs so they could jack up trailers without assistance, and without the driver leaving the vehicle). Over the course of one Christmas, both broke down because the company was always cheap about maintaining the things, which is especially bad because in our climate not maintaining trucks is a terrible, terrible idea. For about a week near end of December, route drivers were having to dock their own trailers on the building and according to them, were not being paid for that time, so they either had to hand the keys to their $90k-ish trucks over to complete strangers to let them do it, or do it themselves without pay after having driven usually 3-4 hours before.
Most of the disorganization in places like this is simple shit, but the corporates constantly decline to spend literally ANY money on maintaining literally ANYTHING, plus as a corporate entity we're incentivized to be as quiet as possible, i.e. not submitting things up the chain that need doing or buying, and even better to cut costs continuously, usually by sidestepping maintenance or janitorial work.
Mind you: this business was not even remotely in trouble, it's one of the largest shipping companies on the fucking PLANET, it's just in a corporation's DNA to be stupid and cheap.
Yes there is. It costs money to train and retain good workers. Cut costs, increase revenue, decrease service. As long as it's not too terrible you still have a business.
There are a lot of people running businesses poorly (from and efficency standpoint) and still making a buck.
I feel that for most companies playing in this space, freight brokering is just a transitional step. It can't work long-term, just like Uber can't be viable without self-driving cars.
However, it's the best way to understand how the industry operates - if you're serious about disrupting it.
This really is the other side of the automated trucking coin. This way they can build enough of a network to start brokering freight for autonomous trucking companies and hiring short distance truck drivers, much like pilot/captains in shippng.
What's the cause of "unreliable truckers"? Is it that their ability to be on time is unreliable because of uncertainty in the travel time and traffic, or that the humans themselves do their job unreliably?
I was left asking, what is the real difference between Convoy and any other freight broker? The collect more data? I thought IBM was already in that business.
I have a vague recollection of IBM working with trucking companies to collect routing and shipper's source and destination information to optimize routing.
Possibly part of their "smart shipping containers" thing that has apparently evolved into the blockchain Maersk deal.
I guess, it gives you extra free storage and workflow contingency. You tell the trucker you need them early. If they turn up early and you happen to have the stuff ready early great - you have some warehouse space freed up. If you're late however - no biggy - the transport is available to take it, immediately, effectively in demand when it is effectively ready. Maximum flexibility, zero additional cost.
Walmart just lightly threatened carriers & owner operators that if they work for Amazon they can expect lower priority from Walmart in the future (1)
Walmart presently represents ~14% of the total capacity of one of America's largest carriers - Swift transport - and likely similarly important elsewhere. (2)
Obvious outcome down the road is that one of these behemoths snaps up a convoy / other plays in the space to secure capacity.
But would they rather buy an "asset light" business like Convoy, that has no actual trucks / drivers / or control, or will they be more interested in an "asset heavy" carrier that has technology / driver / and trucks?
Kind of tangential to the discussion here, but Walmart's threats are empty. Amazon is currently constrained by trucking capacity, and would gladly swallow up more.
YC companies beware. YC "Continuity" will come talk to you to learn the ins and outs of your business and then go fund a non-YC competitor. The whole idea of the fund was to use it to support YC companies at the next stage but now they're funding companies like Convoy that compete with YC companies like Flexport, while using their access to the YC businesses to do diligence. That's fine, normal investor behavior, but you can't treat YC like trusted insiders any more (prob never should have).
“Flexport is a licensed freight forwarder that uses people and software to manage the complexity of international trade.”
Do these companies really compete? It doesn’t seem like Convoy is focused on international trade. It also doesn’t seem reasonable that if YC funds one company in transportation (or healthcare or some other big sector), they can never fund another one in that sector.
I used to work for startup called OpenMile in 2012. We were trying to do pretty much the exact same thing. We might have been too early, but it was hard. We had the tech, but the trucker and other brokers were not very tech savvy. The margins were low and there was too much hand holding.
I used to work at a startup called Trusker doing the same thing, I can't give your comment enough up votes on 1. not very tech savvy, 2. margins were low, 3. too much hand holding and I would add 4. a 1200 mile trip between commercial locations with weird hours and instructions is nothing like the intracity taxi markets.
The article states that truckers lose up to 25% of the job price to freight brokers (obviously a ceiling). Were your margins far smaller than that?
It seems like the reputation feature and the ability for truckers to find a load on shorter notice would be incredibly valuable. I'm guessing if a broker is already making $13b in revenue, they've already experimented with some similar evolutionary changes to their negotiation process.
In some ways, it's more challenging than building "an Uber", once you get into different cargo and body types, document management, insurance, etc. We launched in Russia first, and not being able to do electronic signatures added a set of challenges.
In any event, glad these investments are happening. Trucking is badly broken, especially in the US.
I'd like to see this supported, particularly the "especially" part, given the extraordinary scale of hauling going on in the US via trucking. The economic facts on the ground in the US overwhelmingly disagree with you.
If it's so broken, and the US economy relies so much on it, how is the US GDP per capita so high? Both can't be true. It's either functioning well, leading to the high reliability and predictable delivery times we see today, assisting the US in having the most powerful economy on earth, or it's badly broken (where is the supporting economic evidence?).
"There are also more trucks operating in Europe than there are in the United States, with 63 trucks per 1,000 people in the EU — compared to only 21 trucks per 1,000 people in the United States." [1]
The USA uses long distance rail freight far more than Europe, where the railways are full (i.e. at capacity) with passenger rail. That's in spite of much stricter controls on driving time.
(I think there's also a fair amount of water transport in Europe. When I moved house from England to Denmark, my belongings were transported on a ship across the North Sea.)
There are several ways trucking could be badly broken but still consistent with your statements:
a) Say today, company X sells a thing for $100, of which $15 covers shipping cost, $15 is profit and $70 is what they paid their middleman for the thing. Suppose further that shipping cost could be reduced to $11 just by properly managing trucking, increasing the profit margin by 27%. These are of course made-up numbers, but just because a business is successful doesn't mean there are no inefficiencies left.
b) It is well known that certain jobs take a huge toll on the people doing these jobs, causing early burnout, physical and/or mental health problems up to and including suicide, etc. E.g. drone pilots, people working with social media illegal content filtering have been covered in the media recently. If trucking causes lots of health issues, it's not just "badly broken" in the human compasdion sense, it also leads directly to reduced national economic output (with a 2x multiplier, you're taking away a taxpayer and adding an additional user of Medicaid/whatever).
I would give another example: the US government subsidizes trucking (especially long distance trucking) to a much greater degree than freight railroads through building and maintaining highways. All things being equal the marginal cost of shipping via freight rail should be lower given its higher fuel efficiency.
See the table on page 22. When you add together extra road maintenance, accidents, particulate & NO emissions, congestion and subtract the taxes and fees you end up with a cost to society of $55 per million ton-mile for trucking and $9 for rail.
I live pretty close to some train tracks, so I observe trains on a regular basis. There are a fair number of coal cars, which I guess is a "low value commodity", but that portion is dwarfed by the overwhelming majority of rail cars that transport intermodal shipping containers. Is everything in a shipping container a low value commodity? Would it really be faster to transport containers by truck, so they would actually only travel 10 out of every 24 hours? You seem to really misunderstand freight shipping.
I owned a trucking company and my family owned a freight brokerage business.
Trucking is a hard lifestyle, especially over the road. The job is physically demanding and there are a lot of ways to do it wrong.
Owner / operators and small trucking companies are, in some cases, like sharecropping. You don't make premium money, that's taken off the top through a series of intermediaries / brokers. You have to buy sub par equipment, because it's cheaper. You can't pay your drivers as well and often times, you do so in cash, which eventually bites you. And to boot, the business is very capital intensive. If your customer pays you in 30 days, and you run coast to coast, it could costs you 1100 gallons a week (3000 per week) and you don't get paid for 5 weeks (15000). Add to that cost of maintenance, insurance (650-800 per month - physical damage, liability and cargo), truck and trailer payment ($2000 per month for something newer, but not new, that you wouldn't mind living in or), you have to eat, your cell phone, oil changes ($150 per 15-25k miles) and the 1.25-1.35 per mile you earn, doesn't go all that far. But don't worry, if you need an advance on your shipments pay, for fuel, someone will give you up to 50-60% of your cash, maybe even a little more, for 1-2% or more of all the money you're due. And if you want to get paid faster than 30 days, you can get paid a day or 2 after you deliver and turn in the paperwork, for another 1-2% of the total amount you are due.
One truck shops or small companies can't service the needs of most shippers, so shippers choose big trucking companies or 3pls to manage their transportation. By the time a little guy touches a Bill of Lading / rate confirmation, the shipment can be double or triple brokered, each hand passing paper taking 10% off the top.
On top of that, there's huge theft. Gangs steal tires, cargo, trucks and drivers sometimes choose to transport drugs along with whatever you're asking them to haul...if you are in the business long enough, the stories are epic.
That's not a supporting premise for something being badly broken. Amazon has found it hard to make money in retail, as have Walmart and Costco (2% to 3% razon-thin net income margins). Most retailers find it extremely difficult to make money. That's not necessarily because the business is badly broken. It means the margins are being competed away, which is tremendous for other parties (consumers for one). Lots of industries / segments have the same problem and always will.
In the case of Amazon those thin margins are mainly due to massive re-investment expenses to grow capacity, not competition. The question is if or when they might be able to reign back the investment without risking losing competitiveness with rivals.
Next up, they will hit up on the idea of dedicated roads for truck convoys; also, a single engine to pull them all; and finally, the creation of roads with steel rails to put the trucks on.
Trains are very efficient when you need to move huge volumes between industrial centers, ports, metropolises etc. but we still need trucks for the end mile or else good luck laying tracks to every country shop out there.
Travel by interstate sometime, and you'll note that "end mile" trucking is a tiny fraction of the total. Of course this is because of the vast subsidies that truck freight enjoys.
If we get the self-driving thing figured out, I expect that last-mile freight will use fewer actual trucks than are used today. Rather, the typical robofreighter will be quite small. Every time I receive a truck freight delivery, the trailer is basically empty. They use a big tractor-trailer rig because they have to hire a driver anyway, and sometimes they have enough freight to fill the trailer.
I would assume YC, Greylock and others have wide access to deals and have many opportunities to invest. Knowing how VCs operate I am assuming that they looked at the
top companies in the sector before deciding on this company and teams.
It seems like several companies have tried to go after this market with technology, but Convoy has the best backers and most momentum. I wish them the best of luck!
While Convoy Driver app has slightly better reviews than Uber Freight in both app stores (iOS 4.5 stars vs 4.0 stars, Android 4.1 stars vs 3.4 stars), both Uber Freight and Cargo Driver each have 10,000-50,000 installs in the Android Store and Uber Freight has ~2.6x the number of Android and iOS reviews.
The number of installs and reviews for both is especially remarkable because Uber Freight has only been available for about a month, while Convoy Driver has been available for about 1.5 years now.
On the topic of the transforming and optimizing the future of trucking, just last night I watched a so-bad-it's-good movie called "Space Truckers", which was mentioned in the "Crapularity Hermeneutics" paper and that I had to see for myself:
"(This scenario has countless precursors in popular science fiction, including for example Stuart Gordon’s 1996 movie Space Truckers in which the protagonists transport square pigs that have been genetically modified to make more efficient use of limited spaceship cargo capacity.)"
Absolutely true. I kinda assumed the comedy category was added after the fact, but I haven't seen it, so maybe marketing didn't agree on it being a comedy.
I was under the impression YC Continuity existed for the sake of investing in later stage YC companies. Convoy is not YC company. Is YC Continuity just a generic fund now?
>“Like I said, I would rather have [the brokers] go through all of the headaches than me. It’s bad enough what we are dealing with out here on the roads than to be worrying about that.”
This seems to imply that there is something traditional brokers do that Convoy is now putting on the driver. Does anyone know what that is?
A bit of tangent, But i am in the market for the Software that Convoy and CargoFone are building. We have our own FT, LTL and Final Mile Carrier network. We have negotiated custom rates with them.
What i am looking for the Software service through which i send Orders and get updates from these Carriers.
I'm in charge of Product at Freightview (https://www.freightview.com). We work exclusively with companies that have existing rates setup. Would be glad to chat.
Not exactly sure if we have what you want but we have a cloud based order management system. We receive your orders and then route them to the appropriate facilities for shipping. We can also integrate with Carriers for rates. Check out www.snowfalltech.com or email me at jzisk@snowfalltech.com. Thank you, Jeff Zisk, CEO
I don't know about the load boards themselves, (of which there are many), but there are a lot of companies in the logistics space. $62 million isn't that much.
Not saying whether they'll succeed, but saying deep pockets will do it doesn't make sense, IMHO.
The one I remember, though I can't for the life of me remember it's name, was operating around Benelux, mostly Belgium, France and Netherlands.
The truckers I knew mostly used it to find nearby matches for return trips (so they don't make a return trip empty). I don't know what happened to them.
I've seen a few names, but the ones I saw were essentially message boards - proceed at your own risk.
With Cargofone, every driver/company passes background checks, we insure everything automatically (via partnership with a large insurer), and we guarantee immediate payment. The aren't many that do all this.
> It's a hugely complex problem with Djikstra's shortest path being approximated in a distributed system of humans interfacing with phones interfacing with other humans.
The first few comments were about the futility of the funding.
Weighted shortest path algorithms are regularly used in the freight forwarding space in order to calculate the rates paid for routes. Knowing it off the top of my head is how I got a job at a medium-sized commodity trader. Seeing those rooms full of people securing transport for goods we either owned or were moving for others is what makes me think it could be a reasonable idea.
Shipping is only capital intensive if you intend to own the trucks, trains, or ships. Convoy appears to be more of a middleman between owner-operator truckers and shippers or manufacturers.
The problem is that many (most?) of the truckers that own their own rig are middle-aged and older, and getting them to use technology like this may be an uphill battle:
“I think they’re relying too much on computers,” said Brian Larocque, a new driver based out of Connecticut.
Yes on both. I work in tech that services the trucking industry. Getting drivers, (and dispatchers, actually), to truly trust a computer is difficult. They use a lot of apps, but trucking's got a strong culture of self-reliance, and people working in trucking probably care more about single points-of-failure than DevOps do, relying on Convoy would be a pretty big single point of failure, so they'll have to prove themselves worthy of the trust.
However, 82 million should get them there. That's a ton of money to build a business with no capital costs. The big risk for them is the incumbents deciding to move quickly - most of them have the cash, so if they realize their business model is threatened by Convoy, they'll move quickly, and be supported by their existing cash flow.
Uber for Freight only officially launched last month. Check their app reviews (both iPhone and Android), more than 1/3rd are one star, citing various issues.
Just checked both apps in the iOS store and Android Store.
On the iOS Store, 4 stars out of 5 based on 31 reviews for all versions. Not enough reviews for current version. Only 4 are 1-star reviews. That's 12.9%, not 33%.
On the Android Store, 3.4 stars out of 5 based on 139 reviews. 53 are 1-star reviews, so 38%. Many of the 1-star reviews were Uber haters and people complaining about low rates. The latter I expect to become the norm once technology streamlines the industry, whether its Uber, Convoy or some other company that does it. Only a few 1-star reviews actually report a bad experience with the app that isn't related to rates.
Based on both stores, 30% are 1-star ratings, so it's about 1/3 1-star reviews across both stores. I really wish the app stores made an effort to cull obvious haters and fanboys so that only legitimate reviews were left. People gaming app store reviews are just hurting the people who would derive the most utility from choosing the best application for them.
For comparison, Convoy Driver in the Android store has 4.1 stars based on 51 reviews. In the iOS store it has 4.5 stars based on 12 ratings. Several of its 1-star reviews make the same complaint about the same low rates.
Both Uber Freight and Cargo Driver each have 10,000-50,000 installs in the Android Store, and the fact that Uber Freight has 2.6x the number of Android and iOS reviews based on only 1-month of operations versus almost 2 years seems very solid to me. Convoy's first review in the Android store is from all the way back in October 2015.
I've been fortunate to learn about Convoy and speak with employees involved recently. Convoy is the real deal and making this Uber for Trucking idea work. They're backed by Bezos, Reidman, and many other high profile investors. If any company were to crack the 800Bn trucking market, Convoy is looking like the one.
Unlike hailing rides in a taxi, manufacturing and shipping generally holds a regular schedule. If you build a reputation as someone who always shows up on time, you can make a lot of money as a truck driver (more than most programmers). After building a good reputation you cut out the broker and work with the manufacturers directly. All you need to do is find two manufacturers in a high paying industry, (pharmaceuticals, chemicals, specialized plastics) whose pickup and dropoff points are near one another and you can be set for years.
Most poorly run warehouses can be backed up for 4-6 hours before you can begin unloading. Most standard contracts allow 2 hours from the point of arrival to fully unload your truck. We would negotiate our billing like a lawyer. For any additional time after that grace period we would charge in hourly blocks at over $100 per hour. Companies try to abuse their power by wasting the time of drivers by not paying them to sit idle at their warehouses. Amazon and Walmart are notorious for these practices.
I think there is a lot more money to be made using technology to run a high tech fleet of trucks than there is a freight brokerage company. Trucking is an information game for sure but there is too much competition in the freight brokerage space and you can be easily side stepped by savvy truckers.