Special Coverage: Tech companies use collaboration to tackle supply chain problems
Emerging technologies are helping the trucking industry work together in more meaningful ways.
BY ERIC JOHNSON |FRIDAY, DECEMBER 16, 2016
It’s hard to think of a more overused word and more underutilized concept in supply chain than “collaboration.” The word conjures up vague notions of logistics companies helping their customers, or shippers providing forecast data to carriers to help them plan capacity better.
But, in a strict sense, neither of those are examples of true collaboration. They are more accurately described as business relationships, and it shouldn’t take incentives for service providers and customers to work together closely.
A more accurate description of collaboration is when two companies work together despite having little incentive to do so. Examples of this include when two competing companies find common ground, or when two companies that would have never thought about driving efficiencies through a common platform end up helping each other to do just that.
Technology is really the driving force behind this type of collaboration, as exemplified by two new automation platforms - one focused on empty ocean container repositioning and the other on reducing empty truck miles - with this goal at their core.
For years, trucking companies and shippers have dealt with the issue of “deadheads,” empty miles driven while not hauling freight because a truck needs to be repositioned.
In late 2016, the Green Bay, Wis.-based technology provider Lanehub launched with the goal of addressing this very problem.
The idea started when Mark Hackl, a veteran of trucking firms, brokers, and large domestic shippers, realized there should be a technology-based avenue for shippers to cooperate in such a way that they reduce their freight spend, while also helping carriers to avoid deadheads. So he created a platform to allow users to find lane matching opportunities with virtually no risk.
“Lanehub is for strategic procurement professionals looking to source truckload capacity by working together with other companies to partner up and create efficiencies in your network,” Hackl said.
The system works like this: a shipper uploads its contract lanes to Lanehub for free via an Excel spreadsheet saved as a CSV file. If it wants to find opportunities where its lanes match with those of another shipper, it pays a flat fee of $450 per month.
The system then determines which lanes are matches based on constraints set by each user. If there’s a match opportunity, the two parties can interact through the platform to determine if they want to go forward, and the system even allows the two parties to procure jointly with a carrier.
Carriers then log in to Lanehub to view the joint package and agree on a price with the shippers, with the assumption being that carriers would provide a discount on the joint rate package because they’re eliminating deadhead miles.
If the carrier does offer a discount, the system allows the two shipper parties to decide how they want the discount split. If, for example, one of the shippers is providing the leg where carriers struggle to find freight, that shipper might feel entitled to a larger proportion of the total roundtrip rate discount.
Within the system, Lanehub shows users what the going rate on a particular lane is via a database of 60,000 contract rates. Shippers can set parameters for their searches, including the radius of potential matches. The system also provides information on so-called “problem lanes” - i.e. lanes where there’s a higher rate of deadhead miles. Users can add private fleet lanes as well to find potential attractive backhauls for that capacity.
“Think of this as an assistance tool,” Hackl said. “It helps users figure out a good match. Can we absorb deadhead miles and have the carrier still be excited? The software allows them to aggregate volume across lanes in a way that’s more attractive to carriers.”
Hackl’s challenge is bringing sizable shippers to the platform. Because the system relies on matching, it needs density. The more lanes in the systems, the more chances there are for matches, which is why he’s been targeting larger shippers and their bigger trucking networks. Lanehub’s existing customer list includes the beverage manufacturer Anheuser-Busch, brewer of the famed Budweiser beer, among several other brands.
“We need big shippers to get density for small shippers,” he said. “We want Lanehub to grow through the network effect, because it’s low cost and low risk. We’ll grow it through the network effect rather than a big sales force.”
For now, Lanehub is focused on the truckload market and is designed for shippers to collaborate.
“This isn’t a load board, which is spot [rates],” he said. “This is contract lanes. It’s not designed for brokers and the spot market. If freight is under their control (such as in a managed transportation services arrangement) then it would work well for a 3PL.”
Hackl said users don’t have to load all their lanes, but he encourages them to “because they can identify through lane profiling the problem lanes you didn’t even know were problems.”
Users can’t see another shipper’s lanes until they agree to partner, and can “unpartner” someone at any time.
“We monitor who is coming in to see they are legit companies,” said Hackl. “Every company has to consciously decide whether they want to partner, so shippers would be conscious of who they’re partnering with. This gets back to the idea of, ‘let’s compete on the shelf, not on the road.’”
Eric Johnson is Research Director and IT Editor of American Shipper. He can be reached by email at firstname.lastname@example.org.