Creative Destruction Comes to the Intermodal Freight Industry
“Creative destruction” is a World War II-era term that’s come to describe how innovation triggers the end of one thing (a business process, an industry), but often the beginning of something new and better.
We’re experiencing creative destruction in the freight industry as large digital freight marketplaces like Uber Freight and Convoy seek to disintermediate human interaction (i.e., brokers) in the freight booking process. According to FreightWaves, venture capitalists poured almost $3 billion into freight tech in 2018 alone.
But this wave of digital innovation has yet to take hold in the intermodal freight industry, where IMCs manage drayage moves to and from railyards in much the same way they did in the 1980s. They continue on this path at their own peril. Freight tech is a formidable force for a reason. It feeds on inefficiency and seeks to eliminate just the type of non-value-added tasks that dominate a front-line freight broker’s day, and cripple IMC productivity.
Calling carriers to source capacity
Calling carriers to check a driver’s location
Chasing carriers/drivers for shipping documents, which are sometimes faxed over or even sent by mail
Compiling manual performance reports that aggregate self-reported data from many carriers
These are the activities of a middleman and it’s simply not a sustainable way of working in the digital age. Yet many IMCs are in full, head-in-the-sand denial that their operating model needs to change. The argument we often hear: “It’s not broken.”
This is inaccurate thinking.
Here are a couple of formerly “unbroken” models we’ve observed in our everyday lives.
Remember when the most important decision during your weekly grocery shopping trip was choosing the fastest cashier line? Today, self-checkout rules, and gives the shopper more options. In the spirit of creative destruction, cashier jobs that may be lost are then replaced by tens of thousands of new jobs building the technology that helps supermarkets increase efficiency and gives consumers a better shopping experience. Creative destruction at work.
Bank teller operations
The automation of cash deposits, money withdrawals and other basic banking transactions has eliminated the traditional bank teller role. Interestingly, the teller position has actually morphed into a new role banks call the “universal teller.” This employee – who is on both the bank’s digital platformand on the teller line – can now access the tools to have more in-depth conversations with customers about money management. Old, non-value-adding tasks destroyed; a newer, more helpful role created.
Getting creative with the IMC’s traditional role
To the extent that the activities of an IMC’s front-line brokers are dominated by chasing carriers for capacity, data and paperwork, they risk disintermediation. But solutions exist to help the IMC evolve its role into something far more strategic to avoid that toxic “middleman” label.
DrayNow, for instance, is the first real-time marketplace for seamlessly connecting intermodal freight with carriers. The platform, which is home to 1,500 experienced intermodal drayage carriers, virtually eliminates the manual back and forth between broker and carrier. IMCs use the platform not only to book loads but to manage the entire process, connecting virtually with carriers for real-time access to driver location, paperwork, and carrier performance data.
Importantly, DrayNow seeks to serve, not displace, IMCs by enabling digital collaboration among these brokers and thousands of drayage carriers.
Today, people don’t need to call the bank to get their account balance. With DrayNow, IMCs no longer need to contact carriers to get shipment data and paperwork.
In the process of creative destruction, there are winners and losers
IMCs are in a precarious position these days. The technology-aided processes that are changing the face of traditional OTR freight have not been widely adopted in the intermodal freight industry. Shippers are noticing and are beginning to question the value of certain IMCs if their role is simply that of messenger between carrier and shipper.
If you are an IMC, the current cycle of creative destruction in the freight industry is forcing a choice.
Do you want to champion the flawed operating model that is destroyed by change, or embrace the creative alternative that brings you out the other side a smarter, more efficient version of yourself?
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