Transportation Series
The Digital Revolution in Freight Fleets
What Fleet management entails and the landscape
The objective of this piece is to describe the opportunities available in the Fleet space for digitization, the players involved, and trends. My motivation stems from a desire to understand why this space has spawned so many software players and what each of them is looking to really solve.
The Addressable market
The trucking industry in the US delivers 70% of the national freight worth 700 Billion $. If you add the trade between US and Canada, and the US and Mexico, that total goes up to approx. 1.1Trillion $. The total number of trucks is estimated at 15.5Million, and the total number of carrier companies at 1.2Million, of which 97% operate less than 20 trucks. Another key statistic is that carrier companies make a paltry 4.8% margin on a job on average. [4].
As a comparison, the Rental Car business in the US is significantly smaller at 2.25 Million units generating 30B$ annually.
The value chain
Fig. 1 details all the activities that are part of the Trucking Fleet value chain.
Lease/Rent Fleets
Carrier companies lease and rent trucks from Rental Fleet companies. Rentals are usually to supplement their fleet size based on sudden demand. The opportunity to deliver the biggest impact via digitization for Rental Fleet companies is to enable
- Touchless check-out (Vehicle pick up) by Drivers
- Automated and optimized vehicle assignment to reservations
The benefits delivered are the ability to reduce the size of operations teams, make locations operate 24/7, speed up vehicle check-out and do away with any human interaction in these times of Covid.
Maintain Fleets
Fleets need to be maintained — issues that are reported fixed and scheduled and predictive maintenance done. The value delivered here by IoT enabled digital tools is the end to end tracking through the stages of alert generation, vehicles being taken in for maintainece, the repair stage, and finally delivery back to the hub. Many of the digital tools in the market today offer built-in integrations with a large number of maintenance shops.
The benefits of having vehicles maintained in a timely fashion are reduced lifetime cost of maintenance and reduced downtime. Also, 3rd party integrations provide more visibility into when vehicles will become available post-maintenance and enable shopping for the best prices.
Manage Fleet Operations
This part of the value chain involves everything that's part of the actual movement of the vehicles/goods. It involves setting up the task list for the driver, monitoring the driver, vehicle, and goods as they progress to the destination, dashcams for event recording, helping the driver manage the regulatory pieces such as Hours of Service and finally allowing the driver to close out the task with proof of delivery documentation.
Given the razor-thin margins that carriers have to work with, any optimization in Fleet operations that can deliver savings resonates very strongly. Fig 5 below shows the savings that a typical IoT based software platform can deliver today
Receive jobs (Connect Shipper and Carrier)
Going back to the stats above, 97% of all the companies in the US operate less than 20 trucks. Today much of the business is done over the phone using brokers, and this represents a 70B$ market growing at a CAGR of 11% over the last 20 years [5]. This means a massive opportunity to connect supply (all the small carrier companies) to demand (people who want their loads carried) digitally.
In the words of Uber [5], the reason d’etre for Uber Freight, Uber’s solution in this space, can be ascertained from this-> “It can take several hours, sometimes days, for shippers to find a truck and driver for shipments, with most of the process conducted over the phone or by fax. Procurement is highly fragmented, with traditional players relying on local or regional offices to book shipments. It is equally difficult for carriers to find and book the shipments that work for their businesses, spending hours on the phone negotiating pricing and terms. These inefficiencies adversely impact both shippers and carriers, and contribute to the number of non-revenue or “dead-head” miles, which are miles driven by carriers between shipments.”
The landscape
- The dynamics of razer thin margins and every truck needing ELD devices means that Fleet operations is the largest opportunity within the Fleet management space. This explains the Unicorns status of Samsara and Keep Truckin’, both of which started in the Fleet Operations space.
- Leaders such as Samsara and Keep Truckin offer their own Hardware devices/sensors (Telematics units, Sensors, Dash cameras) which allows for greater revenue opportunity and more control w.r.t new feature development.
- Players that started out in Fleet operations also offer some Fleet Maintenance capabilities. This allows them to address the needs of both large and small carriers alike.
Sources:
[1] Samsara -> here
[2] Uber Freight -> here
[3] Brokers -> here
[4] Trucking industry stats -> here
[5] Uber S-1 page 12
