According to a study carried out by the European Commission in 2014, almost a quarter of truck journeys on Europe’s roads are carried out empty. In individual member states, the prevalence of empty running can be even higher: in the UK, for instance, Department for Transport (DfT) statistics put the empty running rate at 30% in 2016, up from 27% ten years before.
Of course, even trucks which aren’t empty are not necessarily full. On average, reports the DfT, the UK’s truck fleet achieves a loading factor of 68% – admittedly an improvement on the 56% of ten years earlier.
The opportunity is obvious. Higher load factors and reduced empty running should cut average cost per mile, improve driver productivity and impact positively on sustainability agendas. Over the years, a number of initiatives have tried to achieve this by matching carriers and shippers in an attempt to build loads, increase load factors and boost truck utilisation.
“Empty running is a huge problem,” notes former TNT executive Brian Bolam, a logistics industry veteran, vice-chair of the European Logistics Users, Providers, and Enablers Group, and an investor in one such initiative, TG Matrix. “It’s not unknown to find empty running even within the same organisation – one truck heading north empty, while another truck heads south empty.”
Traditionally, full-load backhauling has often been the route taken to try and minimise empty running, especially over long-distance trunk runs. Occasionally, these arrangements become semi-permanent: Nestlé, the world's largest food manufacturer, and Pladis, the largest biscuit and snack food manufacturer in the UK, have a still-ongoing backhauling arrangement stemming from a chance conversation between their two logistics managers in 2007.
Game-changerMore recently, though, the internet and the ubiquity of in-cab smartphones have acted as something of a game-changer, making it possible for shippers and carriers to connect in real time – even while carriers’ trucks are on the road – and build loads on an ad hoc spot basis, rather than in the context of regular trunk routes. Conduct an internet search on ‘empty running’, for instance, and it’s not difficult to see a number of providers of such services, bringing shippers and carriers together through either brokerage or exchange-based business models and earning a fee in the process.
[mpu_ad]Founded in Spain in January 2016 and recently established in the UK – where empty running rates are 30%, remember – start-up OnTruck reckons to be a slightly different take on the load-building, carrier-shipper connectivity business. Free to both carriers and shippers, it handles palletised loads of as little as a single pallet, offers instant pricing from its own rate card (not carriers’ bids), and earns its profits from acting as a principal in the transaction, by using smart technology to build groupage opportunities.
“If we’re not delivering efficiencies, we’re not earning money,” sums up OnTruck UK MD, David Jennison. “The carriers earn more than they would otherwise earn, the shippers pay less than they would otherwise pay, and we aim to earn money by combining shipments and routing them more efficiently.”
The basics of the OnTruck offering are easily explained. A shipper with a consignment to send enters its details into OnTruck’s cloud-based portal, specifying the number of pallets, the destination, their pick-up time requirements, and their delivery slot requirements. From its extensive database of freight rates, OnTruck provides an instant price, which the shipper can either reject or accept.
If the shipper accepts the price, OnTruck then makes the job available to a selected number of carriers from its 250-strong panel of pre-approved fleet operators and owner-operators, each of which must have already passed OnTruck’s background checks in respect of issues such as insurance. Once a job has been accepted, the shipper receives a notification, giving the driver’s details, scheduled pick-up time, and scheduled delivery time.
Ask how exactly carriers are selected to be offered the job and Jennison is tight-lipped – simply pointing to OnTruck’s proprietary machine learning algorithms and smart technology. But in essence, he explains, those selected are deemed to be the most relevant for a given job, based on their vehicle type, location and performance rating.
Focus on immediacyCrucially, OnTruck aims to communicate potential jobs direct to carriers’ drivers via its smartphone app, providing them with the shipper’s details in terms of location, number of pallets and collection/delivery times, and the fee OnTruck will pay to the carrier accepting the load. The focus, he explains, is on immediacy – a valuable capability when shippers may well want their consignment picked up and delivered the same day.
“The traditional process for matching shippers and carriers typically seeks bids from three to four carriers – we’re working with 250, which as well as giving us a relatively high level of confidence that we can cover a shipper’s requirements, provides us with the ability to combine shipments and route them more efficiently. The key is our routing algorithm, which matches demand with available supply and optimises routes for each journey. Carriers can complete more jobs in a day, greatly reducing the number of empty miles, and there’s now no need for a carrier to travel 50 miles with an empty truck in order to pick up a couple of pallets, when we can build them a route that picks up multiple jobs along the way.”
"The carriers earn more than they would otherwise earn, the shippers pay less than they would otherwise pay, and we aim to earn money by combining shipments and routing them more efficiently." - David Jennison, OnTruck
It’s that route with multiple pickups – and potentially multiple deliveries – that earns OnTruck its margins, he adds. To help attract business, OnTruck’s freight rates are lower than industry averages, and its proposition relies on building attractive loads and routes that maximise carriers’ earnings while minimising their costs. The greater a carrier’s OnTruck-supplied load factor, the greater will be the profits that OnTruck earns.
“It’s a model that works in Spain, where we started, and so should work here as well,” says Jennison. “We offer good rates to shippers, good rates to carriers, and deliver greater price‑competitiveness and flexibility for those sending freight, as well as better vehicle utilisation and routing for those who deliver it.”
David Jennison, OnTruck UK MD
Digital penetrationSo why the UK for OnTruck’s first international expansion? The answer, Jennison explains, boils down primarily to a combination of potential freight density and technological readiness.
“Digital penetration in the UK is high among both carriers and shippers, 4G coverage is good, drivers are used to smartphones and are likely to have one, population density is high, and there’s a lot of freight being moved. In some ways, the business model may work better in the UK that it does in Spain,” he says. “On the other hand, there’s a greater shortage of drivers in the UK, and commercial terms are tighter.”
Formerly with Amazon and Deliveroo, Jennison freely admits he wasn’t hired for his logistics experience, which is relatively limited. The holder of an MBA from Oxford, his skills, he suggests, lie in “growing successful businesses in highly ambiguous circumstances”. OnTruck, in short, is a technology play – just like Amazon and Deliveroo – and has the same relationship to the logistics industry as Uber does to the taxi business or that Airbnb, Trip Adviser and Booking.com do to the hotel industry.
“It’s all about scale and network effects,” says Richard Wilding, professor of supply chain strategy at Cranfield University’s Cranfield School of Management. “Just as in social networks, where it’s possible to interact with many more people than can be accomplished physically, online marketplaces make it possible to make multiple connections with multiple potential providers, leveraging the network to exponentially increase the range of possibilities.”
“We’re not the first to bring carriers and shippers together,” concedes Jennison. “A number of businesses have tried, including some major logistics operators. But they have conflicts of interest, with temptations to boost their own vehicle utilisation at the expense of third parties. Our business model is different and based on our belief that it ispossible to reduce rates for both shippers and carriers, as well as creating a community benefit.”
Where next?The expansion into the UK, explains Jennison, has so far only embraced London and the south-east. By the end of this year, he hopes, OnTruck will have achieved full national coverage. Expansion into France and Germany will come next, he adds – and as Automotive Logistics was going to press, it emerged the company had just secured €25m ($29.5m) from a group of investors to fund expansion across Europe, as well as consolidating its position in Spain and the UK.
Also on the drawing board are plans to market OnTruck to specific industries which have a requirement for ad hocpallet-based shipments, especially at short notice, says Jennison.
“We believe that we have an attractive proposition for the automotive industry and we already work with automotive aftermarket distributors,” he notes. “We offer scheduled pick-up and delivery slots, high performance levels, and a primary relationship that is with us, not the carrier selected to do the delivery.”
That reference to high performance may provide a clue as to OnTruck’s prospects – not just in the automotive industry, but more broadly. As Cranfield’s Wilding puts it, the most successful online marketplaces are those with some kind of performance rating system, where each party to a transaction rates the other. While still a novelty in the logistics industry, this is starting to happen, he points out.
“An easy-to-use application that delivers a high-quality product is a tough proposition to beat,” he notes. “The race to critical scale will be won by performance and scale, and not just price.”