TORONTO, ON – The so-called Internet of Things is transforming business models throughout the trucking industry. And the recent Surface Transportation Summit offered insight into the way underlying computer algorithms are being used to rethink how rates can be set or loads might be secured.
TransVix, for example, is giving companies a way to offset the risk of a volatile marketplace by introducing a derivatives exchange based on spot rates. “Costs continue to creep up – whether they’re truck costs or driver costs,” explained Chief Executive Officer Craig Fuller, describing the derivatives as “price insurance” to protect margins.
In the financial market, derivatives are securities that base their price on underlying assets. They’re common in the maritime industry, and how insurers underwrite contracts. Of course, one of the most famous examples of them all involved the poorly structured mortgage-backed securities that contributed to the U.S. financial meltdown.
If North America’s trucking industry is worth US $700 billion, Fuller estimated that there is a potential for $2.8 trillion in derivatives.
Trucking-related stocks tend to be seen as an undesirable asset class because of the risk of volatility, but the values could be higher if investors and banks could see consistent pricing, he added.
It isn’t the only way that new business models are being explored. Uber has clearly upended the taxi industry, offering other motorists the chance to share rides, and the model could play a role in trucking as well.
The National Carrier Exchange – officially known as NCX – launched during this spring’s Mid America Trucking Show in the U.S., and was unveiled to Canada during the Surface Transportation Summit.
The free online service offers small carriers a tool to track, dispatch, invoice and manage operations. The site offers a place to upload pictures of signed bills of lading, and a way to locate trucks.
Several types of information are being shared. It’s possible to find out if the drivers who arrive with a load are new to the industry or experienced. It answers questions such as whether there is a pallet exchange or unloading fee. Shippers can drill down into copies of safety records, too.
“Shippers cannot consistently put wheels under their loads,” said Chief Executive Officer Darrell Benvenuto. “If they can’t find a truck, NCX can find them a truck.”
Just don’t call them a broker. “We’re more of an information provider,” he said.
The Uber challenge
As much as an Uber-like model might threaten the traditional market for trucking, Martin Abadi of Fernandes Hearn LLP expects plenty of barriers. The taxi industry is heavily regulated, while Canada’s brokerage industry is not, the lawyer said. There are questions about licensing, and how to protect intellectual property like the related data. “We don’t have right now something that integrates all the different sources of data,” he said.
Shippers want to know about a carrier’s financial security, reputation, equipment, and rates, as well as safety ratings. Then there are questions about freight weights, distances, and pickup and delivery locations.
Still, there is room to change. It can take five hours to locate a carrier or shipper, he said. When he first used Uber, the driver arrived in three minutes. There are clearly opportunities to improve delivery times, particularly when it comes to repositioning empty containers. Profits are lost because of slow responses to fluctuations in demand and surge pricing, too.
“Can the Uber model replace the freight-forwarding model?” he asked. “Unlikely. It may enhance it.”
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