If you're a truckload carrier or a private fleet with common carrier authority, a reliable source of backhauls can change red ink into black. Services that offer to match loads with empty trucks have been around for years based on that business premise, but the rapid spread of Internet communications seemed to hold great promise as a cost-effective tool for finding those elusive profit-driving backhauls.
As part of the Internet phenomena, a number of Web-based exchanges sprung up in the mid-1990s, all attempting to generate an open, efficient spot market for freight. As Internet optimism gave way to Internet reality, many of those sites also closed, burning through their investors' money without ever achieving the critical mass of shipments and carriers needed to become a viable, and reliable, source of backhaul freight. A few survived, however, by attracting enough freight to reach that critical mass or by evolving into new types of online freight tendering and management systems.
Subsequently, the term “online exchange” has come to cover a wide range of business models in trucking. It includes sophisticated systems for developing and managing long-term freight agreements (See “Look Out,” FO 11/01, p. 23), and private trading groups that offer e-commerce tools for shipper and carrier partners.
The simplest of these exchanges, however, are Web-based load-matching operations, providing a single core service — online access to a backhaul spot market. Often known as load boards or freight bulletin boards, those that survived the initial shakeout remain among the most well known Web services for the industry.
Popular? Yes. But are they of value to fleets looking to improve productivity with more backhauls and fewer deadhead miles?
“When we started NetTrans (www.nettrans.com) in 1996, we thought our customers would be shippers and mid- to large-size carriers,” says site founder Darren Brewer. “But shippers haven't wanted to use [the load board], so virtually all of our freight comes from brokers. Broker freight is less profitable, and our core carriers tend to be smaller fleets with 10 or fewer trucks and owner-operators because they can't afford a sales staff to generate their own backhauls.”
One load board that attempted to bypass brokers and go directly to shippers for freight failed, recalls Brewer. “Either shippers have established relationships with carriers that handle all of their freight, or they're accustomed to going to brokers for spot freight,” he says.
Shippers tend to agree with that assessment. Logistics.about.com, an active online forum for shippers and others in the logistics community, conducted a recent poll in which most respondents indicated that they'd never even tried a Web-based freight exchange. Although the number of responses was too small to offer statistically reliable projections, comments submitted by a few of the shippers suggest why that community remains reluctant to post loads on the boards, at least directly.
“For me, the biggest reason for not using a transportation exchange is that you don't develop a relationship with the carrier,” commented one shipper. “It's not enough to have low rates, you also need a reliable service provider that knows who you are and knows your business. People that see your cargo day after day are more likely to be motivated to help out when complications arise.”
Echoing the same service concerns, another shipper wrote: “While the potential price savings have seemed positive from some of the proposals we have received, I do not have any immediate plans for entering the exchange markets…. our regular carriers have over time proven to have both the flexibility and the service level that we need to ensure the reliability that is crucial to us…. With a carrier contract you buy service, over time. This is different than buying a product, once.”
In reality, carriers are no different. “Ideally, every fleet wants its own direct customers and doesn't want to deal with broker freight [on an exchange],” says Brewer. “But that's what the spot market is, and that's were a fleet turns when it doesn't have [the load] it needs.”
The Internet Truckstop (www.internettruckstop.com) is another well-established load board that generally connects smaller fleets to freight offered by brokers and third-party logistics providers.
“A freight exchange is a dating service,” says founder and president Scott Moscrip. “We introduce you to people outside your circle. Small fleets [use an exchange] because they don't have a sales staff. They can't afford to pay someone to make those introductions.”
As for shippers, especially large shippers, “they want service, so they go to brokers and third-party providers for one-stop service,” he says, rather than place loads directly with online exchanges.
While the site does have some owner-operators who rely on it for all of their freight, “generally people use it to get out of an area where they don't have contacts,” he says. “That's what it's designed to do, and I hear lots of compliments every day from people who tell me we've cut their deadhead miles by 10%.”
Predating the Internet, DAT Services began load matching services by pinning up printed listings on real, not virtual, bulletin boards located in truckstops, eventually replacing the cork boards with video screens and Internet terminals. Now part of TransCore Inc., the traditional DAT service is still the leader in load exchanges with a monthly subscription base nearing 20,000 users. However, the company has also begun moving beyond simple load matching over the Web to what it calls the TransCore Exchange.
“With a freight board, the carrier identifies a load online and then negotiates rates over the telephone,” says Harrison Peddie, TransCore's vp of business and e-commerce development. “With TransCore Exchange, we use the Internet as the negotiation and confirmation tool. Nearly the entire bill of lading is built online.” Moving to electronic transactions speeds up the process and reduces costs by eliminating redundant data entry and reducing telephone bills, he points out.
More importantly, the TransCore Exchange also addresses the service level issue by allowing brokers and other freight intermediaries to create private trading groups. Instead of a load being posted on an open board, the group structure allows users to simultaneously offer it to all their core carriers.
“Intermediaries can put together a group of trusted carriers and offer them loads that meet their requirements,” says Peddie. If the core carriers pass on a particular load, it can then be offered to all the carriers participating in the exchange or posted on the traditional DAT board in the truckstops.
Since the new exchange is largely an online transaction, it is allowing TransCore to move beyond the traditional small-fleet and broker customer base, according to Susan Little, the company's vp of marketing. Web-based logistics companies, in particular, find additional value in the new exchange structure.
Launched last October, TransCore Exchange already has 200 subscribers, Little points out, including Web-based logistics providers TransPlace, Freight Quote and Click Logistics.
NTE Inc. is another Internet-based service that began as a fairly straightforward freight exchange for LTL shipments and has now moved into private trading communities that add a variety of transportation management functions to core spot market freight transactions.
In the first quarter of this year, the company reported a 60% increase in revenues and a doubling of volume compared to the previous year. Although NTE's open exchange marketplace continues to expand, “the catalyst for NTE's robust growth is the private community,” says company president and CEO Jim Davidson. In April alone, private communities built by NTE for Toshiba International, Dal-Tile International, Direct Logistics and others accounted for nearly 100,000 transactions, according to company press releases.
If your fleet finds itself routinely looking for loads in unfamiliar territory, a subscription to an online load board can offer quick access to backhaul freight. A reputable board will offer a free trial or demonstration to help you determine if its fees and loads make economic sense for your particular operation.
Joining an online private exchange or trading group could offer a step up from spot-market rates and might be a good fit for small- to medium-sized carriers with enough capacity to allow it to routinely bid for freight posted by group members. For carriers, other advantages of the private exchange approach include a higher level of automated online data processing and a longer-term business relationship with those providing the freight. However, that long-term aspect means you'll also be held to higher service level expectations than with a one-shot backhaul.
In either case, the Internet isn't the magic bullet solution for lucrative backhauls, but it has become one more important tool to help you continue cutting deadhead miles and increasing equipment productivity.
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