Transfix CEO Wants Less Waste, More Competition In Freight Brokerage Industry

Drew McElroy is in the freight brokerage business for one reason only: to eliminate waste. That's a tall order, given the billions of empty-truck miles driven in the U.S. each year, but he's up to the challenge. As CEO and co-founder of Transfix, McElroy has brought together both freight- and data-minded specialists to tackle that inefficiency and streamline the brokerage process.

McElroy sat down with FreightWaves CEO Craig Fuller on the FreightWavesTV show, "Fuller Speed Ahead," to explain his love for efficiency and why he welcomes competition.

Transfix is a venture-backed startup freight brokerage at the forefront in the push to digitalize the industry. The 150-employee, New York City-based brokerage is growing rapidly and has raised $78.5 million in capital to date, according to Transfix.

How best to inform freight operations with data is a common conversation among those in the industry. Transfix shares the spotlight with other digital freight brokerages, such as Uber Freight and Convoy, and Arrive Logistics.

"Companies that are structured like ours entering the market, from a competitive dynamic, changes things," McElroy said. "Five years ago, there were large, publicly-traded brokerages and a lot of privately held smaller brokerages. When you introduce a new capital structure that brings a different perspective of what success looks like on a quarterly or annually basis, it can certainly change the market dynamics. I think we're seeing that."

Digital freight brokerages, however, are having to keep up with established freight brokerage giants like C.H. Robinson and J.B. Hunt, as they've heavily invested in digitizing their brokerages' dealings.

"We all know that sometimes the biggest kid on the playground isn't always the toughest. Sometimes it's about being scrappy," McElroy said.

"This is freight and we've all got pointy elbows. We know how it goes; In good years it's really good, but in down years you have to protect where you are. Otherwise, when the good years come back, you're not in the same place," he added.

In fact, McElroy embraces competition. He said Transfix is waging war with well-armed opponents, but he is up for the fight. He believes competition ultimately benefits all in the industry.

"Legacy doesn't last for too long here. You can't just rest on your laurels and hope to ride it out," McElroy said.

McElroy comes from a logistics family. His father founded Andrew's Express, an LTL carrier, in the late 1970s.

"He would jokingly say that he named the trucking company after me, but the trucking company existed before I did," McElroy said.

Andrew's Express was short-lived, but the McElroy family found success in the 1980s creating Priority Distribution Inc. (PDI). McElroy spent his early years with the medium-size New Jersey-based third-party logistics provider (3PL), eventually reaching the rank of president. His mother remains CEO to this day.

McElroy grew up seeing firsthand the pain and "silliness" that he said historically existed in the industry.

"If I heard my parents say one more time, ‘This is the way we've always done it,' I was going to scream," he said.

McElroy believed efficiency was a problem for the trucking industry and that modern data science could have solutions.

So he and Jonathan Salama co-founded Transfix in 2013: a bringing together of both freight and tech-minded individuals.

"We've always said the right answer is not what the freight guys come up with and isn't what the tech guys come up with," McElroy said. "The right answer is when we collectively get in a room and argue about it together. It's a blended solution."

New York City is an atypical location for freight brokerages. Despite high labor costs, however, McElroy believes setting up shop in America's largest city is advantageous.

"From the very beginning, for better or for worse … our intellectual launchpad was here [in New York]. Our initial engineering, product and data team were all here, and that's just the way it's going to be whether we liked it or not."

Bringing together both freight and data-minded people positions the company for great achievements, McElroy said. Transfix states its goal is to reduce the 65 billion empty-truck miles driven in the U.S. each year.

By cutting down on wasted miles, Transfix believes that shippers and carriers will be able to focus their time and energy elsewhere.

"The competitive forces are forcing us to push the industry forward to make lives better," McElroy said. "The fundamental thesis, at least in our business, is if you eliminate waste, you can give that waste back to everybody, including drivers, truck owners and shippers. If you lower the cost of shipping goods, you lower the cost on shelves."

He continued, "The proof is in the pudding. We continue to deliver results, we compete with these folks head to head. I won't say anything bad about anybody, but I trust us, I trust the product we have, and I trust the customers that are seeing the ROI and growing with us."

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