Market Overview

Uber And Convoy Up The Ante In Freight Price Analytics

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Both Uber Freight and Convoy released new data-driven products last week meant to help shippers understand trends in freight markets. The competition between the two large digital brokerages appears to be heating up and is driving a new wave of technological innovation, creating more transparency and smoothing out information asymmetries. 

On Thursday, Uber Freight released a new shipper-oriented feature, Lane Explorer, which gives shippers guaranteed market rate-based quotes for dry van truckloads up to fourteen days in advance. Shippers can then choose which day is the optimal day to tender their shipments, and even if they wait a few days to build the load, the rates stay valid. Uber Freight is betting that its algorithms can forecast prices for every origin/destination pair in the country two weeks in advance and offer shippers competitive rates and still make a margin.

In our view, Uber Freight's Lane Explorer represents a significant advance in price discovery, predictive analytics, and freight market transparency for the transportation and logistics industry. FreightWaves spoke to Stefan Sohlstrom, Product Manager at Uber Freight.

"It starts with Uber's ride sharing," said Sohlstrom. "Our core expertise was balancing supply and demand—finding the right amount of riders and drivers and matching them together. It's what we're utilizing on the freight side, to make tools like Lane Explorer to create accurate prices and predict the amount of trucks and the cost of trucks."

Sohlstrom said that while Lane Explorer generates quotes for lanes between any two zip codes in the lower 48 states, the granularity of Uber Freight's supply and demand data is actually on a lat-long level. We wanted to know how Uber Freight mitigated the risk of runaway spot market volatility.

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"In terms of calculating supply and demand," Sohlstrom began, "our methodology increases our price to account for volatility. The entire model is built around mitigating risk, and improving on itself. The model is imperfect and makes mistakes, and every single day it learns from its mistakes. Every day, on aggregate, shippers get a more accurate price than the day before."

"We're making a probabilistic bet that we can find you a truck for this [price]. The optimization running is truck cost prediction—that's what it's improving upon every day. We're trying to understand the likelihood of a truck picking up a load for a certain rate on a certain day in a certain place," Sohlstrom said. 

In the past, logistics services offering guaranteed capacity have charged high premiums to shippers, far above market rates, but Sohlstrom said that he has already received anecdotal feedback from shippers that Lane Explorer's "prices are incredibly competitive, especially where we have carrier density." Rather than being the highest-priced option on the routing guide, Sohlstrom said that "the intention is that Uber Freight be the benchmark that shippers go to first. Lane Explorer helps them understand what the market is doing and brings transparency, not just to our rates but to the entire market."

The very same day, November 29, Convoy announced Shipper 2.0, a new wave of releases for its shipper platform that will deliver further transparency and data. So far, the new features are centered around two buckets: the market outlook, which shows shippers current and future trends by region, and the lane network, which gives shippers realtime data about changes in their most important lanes. We spoke to Convoy's Chief Product Officer Ziad Ismail about Shipper 2.0 and the strategy behind Convoy's technology.

"When we first started the company three-and-a-half years ago, the first phase of the company was really about making it really easy for shippers to move freight, with a better experience than ever before: instant price, instant indication of covering or not, and tracking," Ismail said.

"But shippers had a hard time understanding the data in their supply chain," Ismail said. "‘What are the performance metrics in my warehouse?' We realized there's a very powerful thing we could do—make shippers smarter about what's happening in the supply chain. If shippers understand better what the market is doing and what the performance of different carriers in their network looks like, where the problems are, they would allocate more freight to companies with better quality, and that would favor companies like Convoy."

"There's a very deep set of optimizations you can do if you're a shipper," Ismail said, listing key performance indicators like tender acceptance, service levels, and on-time rates. 

In our view, what's most interesting about Convoy's strategy is that where the conventional wisdom seems to be that technology is commodifying trucking capacity—and therefore shippers are more willing to use brokerage services to source capacity — Convoy actually wants to provide enough data and visibility into the supply chain to differentiate itself. In other words, Convoy wants to use data to demonstrate its superior performance relative to other carriers and logistics services in a shipper's routing guide, confident that the enhanced visibility will allow shippers to make objective comparisons of service providers and drive more freight onto Convoy's platform. 

Ismail emphasized that Convoy provided its customers with qualitative commentary in addition to data.

"A forecast that is just numbers is hard to act on. Our internal teams are trying to connect those data points and say ‘here is where our model is going, qualitatively, here are the likely drivers.' We find the combination [of quantitative and qualitative] really resonates with our customers. If we can't explain why it's happening, it's interesting but not useful," Ismail said.

Ismail said that Convoy already built these trend forecast and lane models for its own consumption, but now it wanted to "expose it to our own customers. We want to expose all the information to the shippers, including the market and their facilities."

Reflecting on how tech-based market transparency will affect the brokerage industry, Ismail said, "The industry is so big, you could easily grow a multi-billion company in the America freight industry and it would barely be noticeable. In the short term, impact of digital brokerage is not directly noticeable on any one company. And when the whole market is hot, it hides a lot of people's problems. It's a really big industry with lots of unbelievably interesting and hard problems to go after — we can build a very large company that won't necessarily impact the other large players for many years."

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