Trucking Brokerage Meets Artificial Intelligence

In articles and discussions about artificial intelligence (AI), there’s often a concern expressed about whether we humans will control AI or whether these new systems will control us. For brokers and other intermediaries in logistics and transportation, the question is: Can we manage AI or will AI squeeze us out of the historic margins we’ve enjoyed for years?

We have so far seen three waves of technology making an impact on people and processes in logistics execution.

The first wave was electronic data interchange (EDI) that increased the capacity of transportation intermediaries by replacing voice calls and faxes with digital information. If a load could be confirmed by EDI message, there was less transcription, fewer errors and the bill of lading with pertinent instructions could be transmitted to all parties.

We still had to dial-up each other’s systems, but the semi-standardized EDI messages were a way to create a one-to-one connection with some barrier to competition, as the EDI connections took some expensive custom mapping.

I well remember a broker that would give personal computers, modems and printers to clients so that the shipper could simply enter key information and transmit an EDI tender to the office of the broker. In this way, the broker captured all of the shipments of the shipper as that broker had the exclusive control of the software on the “free” computer—simple, painless and profitable.

The second wave began when transportation management systems became tendering tools. The Internet enabled instant communication between shippers, brokers and carriers to fix loads through near real-time tendering using APIs instead of EDI. The brokers dispatching and bidding staff could be much more efficient, and brokers could cut down on staff. Truckers began to use digital “load boards” as bidding for loads was enabled, and the broker was able to increase margins by having a bigger stable of carriers.

More recently, the decision-making AI tools being incorporated in transportation management systems have started challenging the traditional brokers with applications that allow shippers to interface with the market through Cloud-based platforms that have carrier and shipper subscribers.

For those who have tried the broker-owned applications that promise good service at competitive prices via an app, you realize that the situation is much like the broker who provided the free computer—the answer will be a carrier chosen by them and a healthy mark-up.

What AI promises, perhaps together with blockchain, is an open market for spot freight and contracts that is really open to multiple carriers and offers the chance to combine less-than-truckload loads from different shippers in a lane as well as backhauls without an intermediary company taking a substantial margin out of the transaction.

Pricing for these neutral transaction apps appears to be quite reasonable when compared to traditional broker margins. The disaggregation of complex class-based ratings into selectable options for time, value, risk and service level are still in early stages.

However, AI can handle the variations in operations that will enable innovative trip planning. Thus, with the piloting of “digital open markets” underway, we can assume rapid growth. The disintermediation of traditional transport intermediaries seems just a matter of time