On Monday morning, August 26, Tom McLeod, president of McLeod Software, opened the company’s 2019 User Conference at the Gaylord Rockies in Aurora, Colorado, with prepared remarks.
While McLeod’s talk was ostensibly an overview of the company’s current projects and new offerings, the subtext was that McLeod Software has technology for freight brokerage every bit as advanced and automated as newer digital entrants — and it almost certainly has better data.
McLeod began by noting the diversity of his company’s customers and suppliers and said that McLeod Software was committed to giving them the tools they needed to be successful. He also pointed out the diverse financial and operating results reported by publicly-traded transportation companies for the second quarter. Some companies grew topline while profits shrunk, while other companies did the opposite.
“That means it’s not just the economy,” McLeod said. “Freight patterns are changing — the tectonic plates we rest on are shifting. Things are changing, and change represents opportunity.”
“Change can mean growth and opportunity for your business if you’re prepared,” McLeod continued, “so control what you can control. Set your sails according to which way the wind is blowing so that you can make progress and be better than the competition.”
The theme of this year’s conference is ‘The Transformation of Trucking.’ Much of McLeod’s presentation concerned the advanced technologies McLeod is building to help its customers thrive in an era that has seen the emergence of powerful digital freight brokerages backed by venture capital and private equity. McLeod said that while the fairly slow growth of the current economic recovery seems to have prevented the formation of large asset bubbles, private equity could be in a bubble created by a decade of cheap leverage.
“Be careful, and choose your partners wisely,” McLeod warned.
McLeod spent some time discussing the distinctions between artificial intelligence, machine learning, and deep learning before saying that the two primary areas where McLeod Software is applying those techniques are pricing decisions and load matching. As digital freight brokerages have discovered, other tasks like exception management still require the creativity and problem-solving abilities of human brokers.
I thought McLeod made a useful distinction between automated pricing for contract freight in response to requests for proposals (RFPs) and real-time market-based pricing for spot freight. So far, digital freight brokerages like Convoy and Uber Freight have integrated their pricing tools into transportation management systems like BluJay and MercuryGate, giving shippers visibility into current market conditions.
But a much more complex task is to automate the complicated bids for freight on multiple lanes over a long period of time — up to one year and longer. FreightWaves has heard anecdotally and found through survey data that the cadence of RFPs has accelerated, with contract freight being marked to market more frequently, and mini-bids on lanes becoming more common.
For smaller, relatively unsophisticated freight brokerages, keeping up with the pace of irregular bid cycles is labor-intensive and unrewarding: as competition intensifies, brokers report being awarded a lower percentage of the freight they’ve bid. Automating contract and RFP pricing is arguably a more ambitious, difficult project than real-time price discovery, and we think that it can do a lot to make small and medium-sized freight brokerages more competitive.
Business process automation through McLeod’s FlowLogix offering should also add incremental productivity and drive process uniformity in mid-tier freight brokerages.
One product whose launch was announced at this meeting especially reminded us of a digital brokerage-style piece of technology. McLeod calls it the Driver Choice module. In essence, Driver Choice allows truck drivers to participate in load selection and update their lane preference profiles on the fly. McLeod pointed out that one month a driver may want to stay out two weeks at a time and use long-haul loads to maximize his revenue, while the next month he may have an issue at home and prefers regional lengths of haul. Driver Choice allows him to set those parameters, be shown loads that conform to his preferences, and choose among them.
Driver Choice seems especially suited for asset-light leased operator business models where a brokerage manages a pool of owner-operators. Defending that business model is hard, because the cost of switching to a new brokerage or dispatch service is insignificant. McLeod Software believes that by pushing data and the benefits of machine learning — algorithms, after all, are finding the loads that meet the driver’s criteria — down to the driver, it empowers the driver and makes the brokerage’s operation stickier.
McLeod’s TopMatch product is another characteristic piece of digital brokerage technology: it looks at external capacity indicators and the capacity of carriers a brokerage has done business with to find the carrier most likely to take any given load.
“One individual in an operation can be covering multiple loads at the same time on an automated basis,” McLeod said.
Other topics covered in McLeod’s presentation included autonomous vehicles, cybersecurity, and IQ, McLeod Software’s business intelligence product.
But again and again, I was struck by the similarities between the products McLeod is offering its customers and the platforms that have required hundreds of millions of dollars in venture capital to build. McLeod is thoughtfully designing software solutions — in some cases bit by bit as it adds code to its platform — that will keep its customers competitive for years to come.