- The U.S. trucking market generates $260 billion in revenue, 20% of a $1.2 trillion global market.
- Convoy, founded by former Amazon executives, has raced to a $1-billion-plus valuation, with a plan to make the big-rig market much more efficient, while Flexport extends digital flexibility to all types of shipping.
- The publicly traded transportation industry leaders still dwarf the disruptors: C.H. Robinson and XPO Logistics have between $15 billion and $20 billion in annual sales; UPS has close to $72 billion in revenue.
One of America's enduring folk heroes is the trucker, a heroic and solitary entrepreneur plying the highways and byways, braving weather and fatigue to make deliveries.
In reality, that truck driver is often a struggling small business owner, driving an empty truck nearly half the time, fighting to find business and figuring out the most economical route to the next destination.
Trucking is a huge business, generating $260 billion in revenue in the U.S., 20% of a global total of $1.2 trillion, according to McKinsey & Co. Trucks deliver two-thirds of all products shipped each year, but the business is highly fragmented, with the average U.S. trucking company owning three trucks or less. The process of getting a package from factory to distributor to customer can be fiendishly complicated, involving up to a dozen companies and a bewildering mixture of paper and digital documents.
Inefficiency attracts technology, so entrepreneurs and investors have leaped into the market with technology-driven solutions.
"Trucking is the background noise of America," said Dan Lewis, CEO and co-founder of Seattle-based Convoy, No. 11 on CNBC's 2019 Disruptor 50 list. "Companies like Unilever and Starbucks are moving thousands of shipments every day."
Convoy offers apps that help match trucks and shipments. It enables drivers to bid automatically for loads, submit their bills and get paid quickly. Shippers can post a job, get real-time quotes and track their shipments.
"We're trying to help trucking companies and truck drivers run their businesses more efficiently," says Lewis.
Lewis says Convoy's timing was fortunate. When the company launched its app in 2015, smartphones were just gaining widespread use among truck drivers. He and co-founder Grant Goodale are both former employees of Amazon, where they had a close-up involvement with a massive logistical task. But Lewis says he developed an interest in the transportation process much earlier, while making deliveries around the state of Washington for his grandfather's office-supply business. "It gave me some appreciation of moving things around."
In less than five years, Convoy has grown to 500 employees, raised $265 million and reached a valuation of more than $1 billion. Investors include Alphabet's late-stage venture arm CapitalG, Amazon founder Jeff Bezos and venture capital firm Greylock Partners.
"Convoy's mission starts with getting to a world with zero waste, addressing the 40% of miles driven without a load," said Reid Hoffman, a partner at Greylock and co-founder of LinkedIn. "We believe in that mission and bet on a team with deep logistics expertise who are dedicated to improving the industry."
Some start-ups are offering a wider range of transportation services.
Flexport, based in San Francisco, bills itself as a digital-first freight forwarder and doesn't limit itself to trucking -- the company also manages sea, air and rail delivery and customs processing, using what it calls its "operating system for global trade."
"We're doing this by combining technology, access to physical logistics infrastructure, and industry expertise to build a product that allows our customers to plan, move and even finance their cargo more efficiently," said Flexport founder and CEO Ryan Petersen. The company is ranked No. 24 on this year's Disruptor 50 list.
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Flexport's digital focus helps it stay flexible in the midst of global trade turmoil.
When President Donald Trump announced new tariffs on imports, Flexport's cloud-based software and data analytics platform let the company quickly identify customers who would be affected and begin working with them on mitigation strategies.
For instance, the company asked an industrial materials client based in Hong Kong to identify cargoes that would be hit by the tariffs based on the commodity codes. Flexport prioritized those shipments for loading and rerouting just to avoid the tariffs.
The company recently introduced OceanMatch, a service to help customers identify available space on ocean-bound containers, which ship on average just two-thirds full.
Flexport has 10,000 clients and suppliers in 110 countries, 1,100 employees and reported revenue of $441 million in 2018. Petersen has raised more than $1.3 billion in several rounds, including a $1 billion round in February led by the SoftBank Vision Fund, which is backed by Saudi Arabia and Dubai. The company's valuation was reported at $3.2 billion in its last fundraising round.
The technology invasion into the trucking industry is not limited to start-ups. Uber launched Uber Freight in 2017 and expanded into Europe in March of this year. In its pre-IPO filing, the company reported revenues of $373 million in the unit that includes Uber Freight.
In addition, Amazon recently confirmed to CNBC that it is testing the freight-forwarding market. The current offering is in beta and available only in five Eastern states.
Convoy's Lewis is not worried about competition from his former employer. "It's a big market. There's plenty of space for innovation," he said.
The giants of the logistics industry have little to fear so far from the upstarts. Revenue at the publicly traded industry leaders still dwarfs the newbies. C.H. Robinson of Eden Prairie, Minnesota, reported sales of $16.6 billion in 2018; XPO Logistics of Greenwich, Connecticut, had $17.3 billion in revenue, and Atlanta-based UPS reported $71.8 billion in 2018 sales.
Where big and small companies share a concern is the looming shortage in truck drivers. The American Trucking Associations predicted in 2017 that the industry could be short 174,000 drivers by 2026. While average pay has crept upward of $80,000 a year, the ATA says an aging population of drivers, long stays on the road and stringent driver requirements make recruiting difficult.
There may be a technology solution for that. A number of autonomous driving companies, including Alphabet's Waymo, Embark, Otto and Einride, as well as established automakers like Volvo and Tesla, are working on autonomous trucks. While some enthusiasm for self-driving cars has sagged because of delays and highly publicized accidents, McKinsey says depot-to-depot trips by driverless trucks using major highways may be achievable more quickly, with fully autonomous vehicles hitting the road as soon as 2027.
Could the truck driver become obsolete?
"It's not just about driving," says Convoy's Lewis. "You need a driver's knowledge about a guardhouse or signing documents. The driver's role will definitely change, but he'll be around a very long time."