Drayage Battlefield

Updated: Aug 3


Graveyard of stores out of business

What a wild ride in Logistics over the last years… we saw unprecedented investment into Logistics systems, legacy brokers, or forwarding models with surprising results. The traditional analog logistics landscape is now gentrified with the newbies who re-shaped how we think about Truck power. A broker is now a “digital” broker and “visibility” is no longer a commodity that you get for free when you book a load.


Startups who have re-shaped logistics have valuations with multiples beyond what we might have guessed possible even 24 months prior. These newcomers are here to stay. It really does not matter if they re-shaped old market models in any significant way or not. Fueled by massive investments from Venture Capital, they carved out premium market positions and they are not going anywhere.


Based on this result we are all taking a new look at other legacy market models and wondering.. hmmm… maybe there is another $1b valuation lurking in a dark corner of logistics...


Everyone is seeing the same opportunity at the same time. Drayage is the battlefield.

A simple evaluation of USA Drayage finds a legacy market ripe with complex process requirements and high penalties for failure. This is a market screaming for “digital” something and the Venture Capital is answering the call. But who will succeed?


Amazon joins the Frey


Amazon is famous for dominating. Border Books tried to partner with Amazon and so did Toys R Us. FedEx viewed Amazon as a customer until 2019 when they canceled all contracts. Two years later Amazon exceeded FedEx delivery volume.


2022 is the year that Amazon will quietly surpass UPS for parcel delivery volume. Neither UPS nor Amazon is celebrating. UPS is saying we will be “Better, not bigger” as they get used to their 2nd place status.



Timeline from 1994-2022 detailing closed businesses described in article


The biggest commander on the Drayage battlefield is Amazon. They quietly developed expertise up and into the supply chain. Using the exact same methodology that now dominates parcel. Amazon is moving fast. Since Amazon is not selling Drayage services it is easy to ignore their impact on the market. As far as I know, many global 3PLs are still serving Amazon as their volume is so high there is plenty of work for everyone.


I don’t think it is a coincidence that the new CEO of FlexPort is from Amazon. Eric Johnson wrote an interesting article on this where he surmised there was more to this change than meets the eye. Eric asserts that an Amazon executive stepping into the CEO role at FlexPort … “ups the ante, … for the industry as a whole.”

(https://ericjohnson.substack.com/p/where-does-flexport-go-from-here?)




The Amazon Way or the Highway


The Amazon approach to Drayage is a copy of their approach to Parcel. The parcel delivery vans you see driving around your street are all independently owned and operated, but the technology used to load, optimize, route, and deliver the parcels is all 100% controlled by Amazon. The playbook is clear… use cloud/mobility to manage a wide network of trusted independent contractors.


When we look at the Drayage market, we see a highly fragmented globally situated array of independent contractors who are ready to be organized under a common technology that makes their lives easier. From port appointment to load matching to equipment management. Technology that spans the network is clearly going to give Amazon an advantage.


With an advantage in Drayage, you can bet that Amazon’s competitors (basically all retailers) will demand logistics providers to match Amazon for both data and performance. This is the opportunity for the many digital drayage VC-backed startups to answer the call to arms.


Unite Your Frontlines


The Amazon approach is available to any shipper or 3PL who chooses to gain control of Truck power. Contractual and operational control over a network of independent Drayman is what I would advocate for any of my customers at Clockwork. What is important is the relationship to Truck power. Instead of seeking the lowest cost, take the extra step to include performance monitoring and reward the best Truck carriers with more lucrative contracts. Direct contractual and operational relationships to Truck power is the secret weapon that will prevent the same carnage we’ve seen in Parcel on the Drayage Battlefield.






References:


Amazon Toll Road:

https://ilsr.org/amazons-toll-road/


Amazon Enters Drayage:

https://gcaptain.com/port-of-long-beach-and-amazon-to-collaborate-on-new-real-time-cargo-tracking-platform/

Amazon CEO takes over at FlexPort:

https://www.linkedin.com/posts/dave-clark-3a82684_flexport-activity-6940303825807314944-K8aP?utm_source=linkedin_share&utm_medium=member_desktop_web


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