Global Online Logistics Community: If You Build It They Will Come, Sometimes
Over the past decade, there has been a focus in the transportation industry on creating new avenues for finding capacity, getting better rates and improving customer service. To this end, a number of online communities have popped up with the promise of freight savings through matching carrier capacity to shipper demand.
However, over the years many of these communities have failed. Here are 5 reasons:
- A focus on spot rates only
- No support of negotiated carrier rates
- No direct connection to carriers
- No sticky factor to keep the shippers coming back
- High barrier of entry to get shippers on boarded
Many online logistics communities were originally established as a marketplace for volume spot transactions. A major reason these communities failed was because they focused on just a small piece of the way companies ship freight. On average, 90%+ of freight is booked via negotiated carrier rates, leaving just 10% or less for volume spot rates. Most communities built around volume spot rates alone failed because they didn’t offer access to the negotiated carrier rates that companies use to ship their freight the vast majority of the time.
Many communities also underestimated the importance of long-standing carrier relationships. However, direct connection to carriers was not possible until just a few years ago when carriers began exposing their APIs for rating, booking and tracking on their websites. Now technologies like Kuebix can build direct connections to carriers, allowing companies to view all their carrier rates, book shipments and track freight on one platform.
Communities also need a “sticky factor” to entice members to join and keep them “glued.” An online logistics community must offer a tool that logistics professionals use every day, like a transportation management system.
Finally, a community must have a very low barrier to entry. Free versions of technology are very appealing for this reason. Think about what would have happened if, when Facebook was started, people were charged to connect to the network and use its features. Because Facebook is free, millions of people were able to join the community without any barriers.
The idea of building a community that offers dramatics savings by matching carrier capacity to shipping demand is appealing, but communities that are not built with shippers’ day to day needs in mind are destined to fail.