If you want to sell anything, it’s a good idea to find a market, and that’s basically what transportation technology firm Cargo Chief did when it partnered with logistics operator Genpro.
Chicago-based Cargo Chief’s partnership with Genpro points to what may be an emerging trend: High-tech startups in the transportation space hooking up with larger, “legacy” third-party logistics to gain access to a large, scalable pool of shipper customers and carriers they can’t build quickly themselves.
Cargo Chief, founded in 2013 to develop technology tools that help shippers unlock “hidden” truck capacity, has sold its brokerage business to the third-party logistics company Genpro to develop and sell technology to other brokers.
“We’re now a data aggregation company, an integration company,” rather than a high-tech truck freight broker, Abtin Hamidi, co-founder and executive vice president of sales for Cargo Chief, told JOC.com. “These really are totally different businesses,” he said Thursday.
In return, those 3PLs get access to cutting-edge technology that can help them grow. “We will have access to technology developed to help improve our market intelligence, and provide us with best practices for our customer service and procurement efficiencies,” Rob Goldstein, President of Genpro, said in a statement.
Rather than disrupting traditional logistics models à la Uber and the taxi industry, the startups would enhance them, providing tools to help established 3PLs become more efficient. “Large brokerages have an appetite for disruptive technology,” Hamidi said. “They’ve had some experience with technology, they know what it takes to build it in-house or buy it.”
Those brokers would agree. Technology that can be scaled to serve large enterprises increasingly is what shippers want from third-party logistics companies, and those that can deliver will have a strong advantage, Doug Waggoner, chairman and CEO of Echo Global Logistics told JOC.com in an interview in February. “The people who have the advantage are people like us, who have a ready-made market,” Waggoner said. “We’re not building it and hoping they’ll come, we’re taking it to 35,000 shippers and 49,000 carriers.”
“Last year there was a war between technology companies and legacy logistics companies,” Hamidi said. “Now all the guys who said ‘you’ll never make it,’ are saying, ‘explain to me how you plan to make it.’” At the same time, fewer start-ups are saying they plan to succeed by becoming the next “Uber for trucking.”
Privately owned Genpro is much smaller than Echo, but it is much larger than the brokerage operation formerly run by Cargo Chief. The New Jersey-based 3PL has been in business since 1989 and specializes in expedited transportation, particularly for perishable goods. “They’re masters of this chaotic world,” Hamidi said. “What Cargo Chief lacked was the years and years it takes to create well defined processes and (standard operating procedures)” in brokerage.
Cargo Chief also gains the freedom to focus on its original mission: develop technology that will help shippers automate transactional shipping processes and find capacity they weren’t aware was available. “We started our brokerage as a laboratory to apply our technology, and it worked so well that it took over the business,” Hamidi said. “We became consumed with running the brokerage. It’s a time demanding business.”
It’s also hard to sell technology to brokers while competing with them. Several transportation technology start-ups have been criticized for being basically brokers with an in-house tech platform. The sale of the brokerage business takes Cargo Chief outside that circle.
Now, Cargo Chief’s technology won’t just be extended to Genpro, but to other brokers as well. “Initially, this was internal,” Hamidi said. “We were building for ourselves. Now we can build the technology that will help other intermediaries and other customers see the benefits.”
Long-term, Cargo Chief’s goal is to aggregate near-real time data on available truck capacity and use that data to more closely match trucks and freight. “That’s the phase we’re getting ready to roll out” to a broader market, Hamidi said.
Phase two will involve adding pricing algorithms and phase three will automate transactions that don’t require human decision-making, he said. “The point is not to say let’s automate all brokerage, but let us automate the stuff that can be automated, the stuff that nobody else wants to do,” Hamidi said.
As truck freight shifts from contractual to more transactional networks, a change Hamidi sees accelerating the ability to automate routine transactions becomes more important.
“As the market heats back up, we’ll see capacity tighten and shipping get more fragmented and transactional,” he said. “That’s going to help fuel the fire,” he said, for greater automation.