Freight Transportation

The Problem

Other than the facelift for 18-wheelers or the advent of intermodal containers after World War II, very little has changed in the freight industry over the last century.

In 2016, much of the world’s freight forwarding is still conducted using pencil and paper.

As a result, the opportunities for a few platforms to dominate the freight transportation space is massive. The problem for existing players is that their business is built on outdated processes. These processes are good for incumbents, but they are usually not so good for the consumer. As such, increased transparency and efficiency, particularly when brought on by technological improvements, will hurt the laggards’ bottom lines.

“Confusion creates margins.”

Remove that confusion and remove the competition’s margins, as evidenced by the bankruptcy of the seventh-largest shipping company, Hanjin, earlier this year.

While most freight companies haven’t filed for bankruptcy yet, a number are very close. And on the whole, the industry is seeing severely reduced demand at a time when more and more super-ships are leaving the drydock.

The Opportunity

Freight drives the global economy and, accordingly, there are potentially a number of platform business that will arise. Whether in trucking, where over 90% of the industries companies own fewer than six trucks, or in digitizing container tracking, routing, and load efficiency in open-ocean shipping.

In either case, these businesses would be services marketplaces, in which the consumers would be matched with freight shipping-and-handling services by the platform.

Realistically, vertical markets within freight transportation will only yield one two platform businesses. Already, Amazon is building out its capacity as a freight forwarder and looking at building its own “Uber of trucking.” Amazon’s ultimate goal is likely to build the “Amazon Web Services” for shipping. Additionally, a startup called Flexport, which has raised $100 million, is tackling the industry’s woes and only gaining steam as time passes. For the established freight forwarders and shipping firms, the clock is ticking.

The platforms that win will become the go-to depot for the bulk of the world’s cargo. Currently, the world’s largest freight forwarder, Kuehne + Nagel pulls nearly $20 billion in annual revenue in a very crowded industry. With a platform putting wind in its sails, there’s no doubt Kuehne + Nagel (or any of its close competitors) could eclipse $100 billion in annual revenue in only a matter of years.

The Endpoint

A supremely savvy startup or an existing and enterprising industry giant will most certainly build an online services marketplace for freight transportation.

The platform owner will be in a position to optimize capacity rates for shipping. Today, the average container ship leaves port with around 80% capacity, yet they typically book as much as 120% of their vessels’ capacity due to the unreliability of the market.

Consumers will be drawn to use the platform since it would allow for containers to be easily tracked and redirected. And it would also save them time, since the platform eliminates the need to engage with a broker and wait for them to resolve all of the logistics challenges that arise.

The finish line for the platform looks a lot like the taxi industry post-Uber. The platforms that win become a household name for shipping freight, while the shipping companies that are forced to consolidate and file for bankruptcy.

Let's chat

Read articles by