Loadboards & Exchanges: Finding the Perfect Match
Shippers seeking capacity and carriers looking for freight find love at first site.
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Shippers and carriers are meeting on electronic loadboards and exchanges, which act as Web-based bulletin boards for the transportation industry. Shippers, carriers, brokers, and third-party logistics (3PL) providers use loadboards to communicate opportunities, whether it's freight to be shipped or a truck to be filled.
"Shippers with product to move have a list of carriers they use regularly," says David Schrader, senior vice president, operations, for Beaverton, Ore.-based DAT TransCore; the company's Network is among the industry's largest loadboards. "But if those carriers are not available, they must find other providers, or give the load to a broker or 3PL, who then has to find the capacity.
"Loadboards provide a marketplace where shippers can post freight; then carriers with capacity can effectively look for freight that matches their specific service—dry van, flatbed, reefer, or specialized transport—moving from the origin to destination they need to travel," he adds.
The spot market's size is considerable. Trucks move about 70 percent of all freight; 15 to 20 percent of that is in the spot or exception market, which is what loadboards handle. "The spot market represents a small percentage of truck freight, but it's a very large number," Schrader says. "We post tens of millions of loads on the DAT marketplace annually."
Loadboards provide more than just a measure of supply and demand. By delivering information on all parties involved, they create a collaborative marketplace that facilitates trade.
"The large number of shippers and carriers using loadboards illustrates just how effective they are in moving freight," says Joe Beacom, chief, safety and operations, at Jacksonville, Fla.-based Landstar Systems, a logistics services and supply chain solutions provider. Landstar hosts its own loadboard to help customers find the best way to move their goods. The board is public, and free to carriers and Landstar customers.
Because shippers in the spot market might be doing business with a carrier they've never worked with before, the loadboard should provide some essential information. Shippers need to know:
- If the carrier has the proper authority to carry the freight.
- The level of insurance the carrier holds, and if it's adequate for the value of the load.
- Safety information tied to Federal Motor Carrier Safety Administration requirements: What is the owner/operator's safety record? Does the carrier have any regulatory or governmental issues?
Carriers need to know:
- If the shipper is reputable.
- Whether the shipper pays within a reasonable time.
Effective loadboards deliver all this information, along with specific load details, when a shipper or carrier conducts a search.
"Both parties want a safe and secure transaction," says Schrader. "Carriers want to get paid fairly and quickly. Freight owners and 3PLs want their freight picked up and delivered on time, and in the right condition. To facilitate the process, we vet newcomers to the DAT marketplace before they become participants."
Choosing a loadboard is a matter of relationships, says Beacom. "Because technology is the lowest hurdle, many loadboards are available. But what makes a loadboard effective is trust," he notes. "Carriers can't go to 100 different loadboards every day, so they go to ones that have established trust with marketplace participants."
Sealing the Deal In the Digital Age
Traditional loadboards operate on a first-come, first-served basis. Matches may happen one or two minutes after a posting lands on the board.
"As soon as a posting hits and contact information is revealed, it's a race to the phone," says Eileen Hart, assistant vice president of marketing and product management at DAT TransCore. Most carriers want personal contact with freight owners before the deal is done; this usually means a phone call, negotiations, then a contract exchange. The dynamic is personal and collaborative, and doesn't happen electronically.
That collaboration makes traditional loadboards similar to a dating service for loads and trucks: shippers list loads, truckers search and find one that fits their needs, then the two parties negotiate price and terms. Posting and searching occur online, and the negotiation and acceptance are completed over the phone. Once the agreement is made between the parties, the rest of the transaction takes place offline.
But even this process is changing as the digital world continues to grow.
"On some electronic load exchanges, the entire transaction takes place online," notes Matt Chasen, founder and CEO of Austin, Texas-based loadboard uShip.
Load exchanges are similar to loadboards in that they display posted loads, and truckers search for ones that fit their needs. Once truckers find the right load, however, they can either take the load at the fixed price shown, or bid on the load in competition with other carriers.
"The goal is to offer a high percentage of loads at a fixed price, provided the shipper or broker does a good job of pricing at market rates," says Chasen. "Bidding only occurs when a load is in an infrequent lane, or the market pricing is simply not known."
The shipper or broker can automatically tender the load to a carrier, or the carrier can take the load through an auto-acceptance process. Once the load is accepted, the remaining processes—such as document exchange, check calls, payment, and shipper and carrier ratings—also take place online. This gives both parties access to load-specific information they can use for routine reporting, pricing, and due diligence.
"Due diligence regarding risk assessment is important to make load exchanges work," says Chasen. "A number of shipper and broker credit reporting and carrier monitoring services aid in the risk-assessment process. But the shipper, broker, or carrier always makes the final decision whether or not to accept a load."
Benjamin Best Freight (BBF) uses loadboards regularly. The West Chester, Ohio-based less-than-truckload (LTL) regional carrier handles and services larger partial shipments on a direct-drop basis, with non-stop service to customer docks. BBF uses FreightConnections, a Menasha, Wis.-based loadboard.
"One employee is dedicated to going to the site daily," says Jeff Bentley, vice president of sales at BBF. "It's a perfect tool to find lanes we need."
In addition to finding loads, BBF uses FreightConnections to manage assets. "If we have a truck on the West Coast, we might take a load on the board at cost to move that truck back to Ohio," Bentley says. "Or if we need to move a truck west, and see a post for a 20,000-pound load going to Portland, we might be very aggressive on pricing to move it."
BBF has been using the loadboard since the first quarter of 2012, and it has been a money saver. "We saw the loadboard concept and jumped on it," Bentley notes. "The key for us is the margin. Our salespeople also call on 3PLs, but going direct to the shipper saves money."
Some shippers use loadboards for more than saving money. American Signature, a Columbus, Ohio-based furniture manufacturer and retailer, for example, uses FreightConnections to expand its carrier base.
"We go to the loadboard to find carriers we don't know about," says Bryan Beam, CEO of American Signature. "We can find carriers servicing particular lanes where we are searching for capacity."
Constantly making new carrier connections is good business practice—the more carriers you are familiar with, the more likely you are to find one that needs your freight for a backhaul. A backhaul can translate to better service and a competitive rate.
"Loadboards provide a collaborative tool to foster direct connections and relationships between shippers and carriers," Beam says. "Because FreightConnections does not allow brokers or third-party freight management companies on its loadboard, shippers can trust that the carriers they deal with through the site are truly asset-based providers."
Arlington, Texas-based carrier and broker Provision Logistics initially tried the uShip load exchange out of curiosity, but it has now become an increasingly important tool.
"We have gotten progressively better at using the site," says Douglas Guy, director, Provision Logistics. "We use it mostly for consumer business—small businesses that frequently buy from government liquidations or auctions. Large carriers often don't have pricing to fit their needs, but we can leverage our rates to serve them. While we also use traditional loadboards, uShip introduces us to a segment of customers we wouldn't have otherwise found."
As an example, Guy cites a recent transaction. A customer in Mexico wanted a 6,000-pound die cutter taken apart at a community college in Pinellas County, Fla., and shipped to Eagle Pass, Texas. The customer couldn't find a carrier to take the load, so it posted on uShip. Provision Logistics found the load, and was able to service the customer—it disassembled the machine, and loaded it on specialized pallets for the move.
"We made a fair profit, but we were significantly less expensive for the shipper than a large carrier would have been," says Guy. "This is a good example of the load exchange dynamic. If this customer had called a large carrier, it would have been left on its own to dismantle, package, and palletize the die cutter. The online exchange is ideal for situations where a shipper needs a solution, not just a shipment moved."
In addition to helping shippers and carriers share more information, electronic loadboards also enable them to act faster and more efficiently. "Loadboards increase the number of access points, as well as the quantity and quality of data," says Ken Harper, director of marketing at DAT TransCore. "Data is becoming actionable information. The spot market business is no different from any other business that uses data to help drive it."
"In the near future, loadboards will feature more analytic tools," adds Schrader. "Being able to see supply and demand on a particular lane at a particular time, for example, gives users insight into how aggressive they need to be in setting rates or conducting negotiations."
DAT has already developed analytical tools such as its Truckload Rate Index, which helps participants benchmark what they are paying or receiving versus where the market is currently priced. The end result is more efficiency.
"One reason we've seen such an increase in the spot market—and loadboard activity—is because it is an efficient way for supply and demand to get together," Schrader concludes.